The energy market has always been about finding or extracting raw materials (wood, coal, iron, uranium) and expending their energy by burning or processing them. Solar power follows a different pattern: the energy is already there, and we use technology to harness it. Up to relatively recently, solar power has always been more expensive than other more common energy sources, which therefore meant it sat at the fringes, not really affecting the status quo. But this is all changing.
Because solar is a technology, it will not follow the same sort of cost fluctuations that traditional energy sources like coal and oil do. In fact, what it means is that cost will continually drop as efficiency increases, much like the computer microprocessor market. We will be able to make solar panels more cheaply, while at the same time making them more efficient. This means the value proposition becomes better and better with solar.
In just the next few years, the cost of solar per kilowatt will fall into the same range as oil or coal, and within 5 years or so after that, it will drop even further. We can probably apply a kind of Moore’s Law to the solar panel development market, allowing us to predict this with some accuracy. All of which means, everything we know about the economics of energy markets is about to change along with it.
The final impact of cheap solar, when coupled with advances in battery technology (likely to come from graphene), is to the structure of power delivery. Availability of cheap solar panels and good batteries leads necessarily to more distributed power generation, with individual homeowners and landlords adding power generation capacity to their own property.
Prediction: between 2015 and 2025, the energy market will experience major disruptions as a result of cheap solar energy. First to be disrupted will be pricing, followed by business models.