Moore’s Law famously postulates that the number of transistors on an integrated circuit doubles every two years. That relationship has held true for fifty years and has led to the rapid development of a myriad array of new electronic devices from calculators to mobile phones. A few years ago, an analogous prediction by SunPower Corp. founder Richard Swanson started making headlines. In an article in The Economist, Swanson’s law was characterized as a twenty percent fall in solar power panel prices for every doubling of capacity.
Solar power advocates point to the impressive fall in solar power panels over the last few decades as evidence of a technological revolution akin to Moore’s law. Unfortunately, Moore’s Law is a technological observation based on physics while Swanson’s Law is simply a restatement of an old axiom in Economics called the experience curve. The experience curve is one of the driving factors behind economies of scale. And to be fair, those economies of scale are a big part of the reason why modern standards of living are so high. Related: The Greenest Oil Companies In The World
An individual who had to make their own ballpoint pen would probably spend hours doing it and still end up with an inferior product. Yet when Marcel Bich took up the task and dedicated a factory in the 1950s, solely to the manufacture of ballpoint pens, the cost of those pens fell to pennies. But today the ballpoint pen is essentially the same as it was 60 years ago, and the price of pen has long since ceased to fall. Economies of scale have a limit which is reached at some point. Related: What Is Holding The Green Revolution Back?
For that reason, Swanson’s Law is unlikely to survive the decades as Moore’s Law has. Solar power today is simply too big a contributor to global energy for it to continue doubling over the long run. Alternative energy sources make up more than 10% of global energy output with solar itself over 2%. Given that, it’s hard mathematically to envision a scenario in which solar capacity can double more than roughly five more times. In light of that, even if Swanson’s Law continues to hold, solar panel costs would plateau at a per watt cost of about $0.25. This sounds great in theory, and it would certainly help to make solar power economical, but the costs of solar panels are only one small part of the cost in an overall solar power system. Related: US Postal Fleet’s $6 Billion Upgrade Could See Switch To EVs
Even today almost 80% of the costs of a solar panel system are not for the panels themselves. Solar power systems cost roughly $5 per watt of which the non-materials portion of the system costs $3.32. Now of course, beyond solar panels themselves, there are many other physical parts that have to be installed in a solar power system. So even if the price of panels themselves fell to $0.25 a watt, it would only lower the cost of the overall system installation about 10%. This level of cost reduction is on par with the cost benefits from cheap financing made possible by low interest rates through current Fed policy. Yet, solar has certainly not displaced traditional energy generation in a meaningful way. Hence it is unlikely that simply lowering panel costs is an effective long-term solution to a solar revolution.
The technological revolution brought about by Moore’s Law and Intel has been about more than just falling prices. It has been about increasing technological capabilities. In contrast, like the ballpoint pen, solar panels today are not substantially more effective than they were a decade or more ago. Until technological advancement finds a way to fundamentally transform the efficiency of gathering solar energy and converting it into electrical power, the solar revolution will probably continue to proceed at a snail’s pace.
By Michael McDonald of Oilprice.com
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