The sun won’t set on solar

Not long ago, solar energy was the fashionable choice for investors and policymakers seeking the most viable successor to carbon-based energy sources. However, the economic downturn has hit the solar sector hard. Banks that had recently offered financial support to the industry have pulled in their chips, and manufacturers of solar panels have been forced to lay off workers.

The crucial question is whether this represents a long, dark night for the solar industry — or merely a temporary stretch of thick cloud cover. The smart bet is on the latter outcome. While the economic crisis raises obvious challenges for the still-nascent U.S. solar market, the underlying economic and scientific logic behind sun power remains too compelling to ignore.

Simply put, there is perhaps no other energy source that promises so much potential gain, both in terms of power yielded and harms averted. The need for carbon-free energy sources remains as great as ever, and solar power remains among the most attractive of our options.

Yet for all its appeal, solar still needs protective nudges in order to move forward — particularly now, when the economic climate is so dreary. As it happens, we are at a juncture where policy can greatly advance U.S. solar energy. A variety of factors, led by the need for economic stimulus, have created fertile ground for clean-energy expenditure.

Recent history confirms that sound public policy can play a crucial and highly constructive role in advancing solar energy. For example, in 2005 Congress created a two-year investment tax credits program for solar and other renewable technologies. Following the 2005 program’s creation, the U.S. solar industry grew by 45 percent.

In light of this experience, it is tantalizing to think of what President Obama’s massive stimulus plan might do for solar energy in the United States.  

To see the true measure of just how potent good policy can be, look abroad to the surprising places that are furthest along in the advancement of solar energy. For example, famously gray Germany has eight times as many photovoltaic units — which convert sunlight into electricity using panels made of silicon — as the much larger U.S.

The U.S. lags well behind aggressive (and cloudy) pioneers like Japan and Germany — both of which have used public policies such as generous subsidies to promote widespread adoption of solar. The bottom line is that public policy — not the quantity of sunshine on any given patch of earth — will be the main factor that determines the future of solar technology.

And when it comes to policy, there is much more that the federal government can do. To make the U.S. a leader in solar technology, Congress and the Obama administration should enact such measures as capping carbon emissions to create a profit motive for companies to burn less oil and other fossil fuels and encourage more carbon-free alternatives such as solar.

In addition, Washington should craft clearer nationwide standards for homes and businesses that seek to generate their own solar energy and connect to the electrical grid.

However, it’s important to recognize that the growth of solar energy in the United States will ultimately be driven not by government mandate, but by private-sector recognition of the potential and the necessity of renewable-energy sources.

This is already happening. Businesses big and small are getting more serious about solar, be it as producers or as consumers of energy. Small companies, too, particularly those developing cutting-edge technologies that may help lower the price of solar energy, are instrumental in the overall growth of the solar industry.

But the real evidence of solar energy’s market prospects can be seen in the venture-capital sector. In 2007, venture capitalists backed solar companies with over $1 billion. As of last year, according to the Cleantech Group, solar energy accounted for 40 percent of all clean-technology venture investment.

Judging by the amount of money pouring in, plenty of investors clearly believe solar has a huge upside. In October 2008, even as Wall Street was in the midst of a serious crisis, U.S. clean-technology companies received $1.75 billion in venture capital funding in the third quarter; the amount of VC funding for the year surpassed the record set in 2007, despite the unsettled financial landscape.

Solar power has the potential to help improve America’s national security; address the accelerating dangers presented by global warming; and boost the nation’s flagging economy. State governments, entrepreneurs, and investors have begun to demonstrate what a powerful role solar energy can play in the necessary and inevitable transition toward cleaner, more sustainable energy sources.

As impressive as the progress of solar power has been recently, however, its ultimate success is by no means inevitable. Federal policymakers must play a leading role in helping solar power reach the point where it can compete without any government assistance. The time to act is now.

Warren is a freelance energy and environment writer based in Los Angeles. This op-ed is a shortened version of a paper to be published by the Progressive Policy Institute later this month.