Archive for March, 2011
Operation Solar Century
The Middle East is churning (for good cause this time) and oil prices are spiking. What a shocker. Isn’t this getting old already? Oil price increases hurt the economy in the US and across the world. It’s effectively a tax hike on all consumers and businesses. Just search “oil and recession” online and you will find an abundance of information about the correlation between oil price increases and the economic impact. Here are just a few recent articles:
CBS Money Watch: Oil Prices and Recessions, 40 Years’ Worth
WSJ Article: Rising Oil Prices Raise the Specter of a Double Dip
NYT Times Article: Why the Disruption of Libyan Oil Has Led to a Price Spike
What impacts economic growth? Most agree that monetary policy (interest rates) and fiscal policy (taxes) are two of the most critical economic inputs. Energy prices are probably in the top five. What’s startling is that we have no control over the supply of such a critical economic input. Imagine the US Federal Reserve, the entity responsible for setting monetary policy, were controlled by sovereign nations unbeholden to our national interests. Who would stand for that? Well this is what’s going on with OPEC. A group of sovereign nations managing their assets to maximize revenue for their countries controls the price of the most important global commodity, and a top five variable that impacts the economy. Since the majority of readily available global reserves reside within OPEC borders, its influence will only grow over time if current trends continue. Furthermore, exogenous events such as revolutions, terrorist attacks and the like continue to pose a stark threat to supply.
Then consider the politics. The US sends over $200,000,000,000 annually to OPEC. Where are those funds going? What type of regimes does this massive transfer of wealth support? And while we don’t trade directly with Iran, our support of the global oil market enables that nation to sell its production at market rates. On the demand side, rising economic powers such as China and India have a seemingly insatiable appetite for petroleum and this new demand is contributing to surging prices. We have fierce global competition for this vital resource.
It must be acknowledged that oil is only one component of the vast, complex and interconnected energy landscape. Electricity is generated from diverse sources (oil continues to be a key fuel for power generation on Long Island). But all fossil fuels have flaws, including severe environmental repercussions. Natural gas is the cleanest burning fossil fuel, and increasing domestic supplies have helped keep the price of that fuel low. Historically its price fluctuations correlated with oil but recently there is a divergence because of new supplies. However, these new supplies have damaging environmental impact. Take a look at this excellent piece in the NYT about the environmental challenges of natural gas drilling.
Every day we grow more confident that implementing renewable energy and energy efficiency solutions is the answer to the energy challenge.
Take solar, our area of expertise. Solar is a highly effective technology that we believe is going to dominate the 21st century energy landscape. Today the technology works incredibly well and because of local, state and federal incentives it is a very smart investment to make by homeowners and businesses.
We are able to reduce or virtually eliminate many homeowners’ electric bills with the technology. Businesses and non-profit organizations are reducing operating costs. Fueling electric vehicles with solar energy is a home run.
Increased demand is leading to decreasing costs. Incentives to go solar are still necessary but have been reduced gradually to promote market transformation. One reason why solar is so promising is that costs should continue to come down over time, and incentives won’t be needed in the future. Consider electronics such as computers and cell phones that are largely made of the same materials and manufactured in similar fabrication facilities. Economies of scale have brought these technologies to the masses.
The potential benefits of solar from a macroeconomic point of view are profound. Prices of this energy technology will come down over time. Think about that. Historically, energy prices have been volatile and risen over time, with occasional spikes that lead to economic misery. Instead we have an energy technology that is going to come down in cost. Replace uncertainty with certainty and all economic participants stand to benefit.
It is our theory that solar, other renewables, alternative fuels and energy efficiency will lead to dramatic economic growth, and growth in per capital income in the US and across the world.
Call To Action
It’s time to launch Operation Solar Century. The goal of this operation is to make solar the dominant energy technology of the 21st century through strategic planning, smart policy and leadership.
We are grateful to solar advocates at LIPA, NYSERDA and in state and federal government, and numerous people and organizations for having the vision and determination to get us this far. Because of these supporters we have a nascent but energized solar industry.
Now we must work together to promote the next generation incentive structure that can drive massive solar growth by providing long term visibility to the industry, and also be smart for ratepayers. Both objectives can absolutely be achieved with the same policy. New York has much to gain by taking a leadership role on this issue. Stay tuned to learn about specific legislation that you can support.
Within time solar will achieve grid parity, at which point it will be competitive with the grid without subsidies. To get from here to there we need smart policy and political leadership. Decisions made today will have great consequence for economic well-being of our state, the nation and the world. With the right leadership, solar will continue to be a wise investment for homeowners and businesses today, and over time will require fewer and fewer incentives to provide the same great economic benefit.
Now we must take the next steps to solidify our gains and make solar the dominant energy technology.
By working together, the 21st century will become known as the Solar Century.