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The Economist’s Solar-Debate: Round 2

The Economist

Swanson vs Peiser: Can solar energy save the world?

Geoff Carr, Economist Moderator: It is significant that both sides in this debate, despite the motion being “Can solar energy save the world?”, have focused their attention on Europe, and particularly on Germany. They have decided that Germany is the laboratory in which the viability of solar will be tested to destruction.

They are right. If solar power can work in Germany, a northern, temperate country, it can surely work almost anywhere that lots of people live. And Germany does provide evidence to support both sides. Despite its climatic disadvantages, solar generates a lot of the country’s power, as Richard Swanson points out. But as Benny Peiser points out, that is at a considerable cost in subsidy, and is the result of a policy developed at a time when the energy landscape looked different. Now, which we did not then, we have shale-fracking for natural gas. The debate is therefore coming down to which of two technologies is more effectively disruptive: solar cells or fracking.

At the moment, the answer is clearly “fracking”, which has changed the economics of power generation and, as Mr Peiser observes, increased known reserves of fossil fuel enormously. But to a supporter of solar, fracking looks like the hare in Aesop’s fable. It has been deployed fast because it gives an instant price advantage in a mature market with an established infrastructure. But it does not give the impression of being a process that is going to become orders of magnitude cheaper over the years. There are certainly lots of places where fracking is not yet used, but could be, so it does have great potential as long as it retains that price advantage. Technologically, though, fracking’s sprint may already be more or less over.

Solar power, by contrast, is more like Aesop’s tortoise. It is getting only gradually cheaper with time, but is doing so continuously. It has already fallen in cost by two orders of magnitude, and plenty of as-yet-unindustrialised ideas for making it better suggest this trend will continue. It might therefore still win the race with fracked gas.

Mr Peiser points out that newly industrialising countries, which will soon be the biggest consumers of energy, will adopt the cheapest sources of supply available. At the moment those sources are, indeed, fossil fuels. If solar power is to become a significant fraction of the supply, it will have to compete on cost. Mr Peiser is sceptical, particularly with the rise of fracking, that this will ever happen. Mr Swanson is not.

That question will probably be decided in laboratory countries like Germany that have been willing to bear the cost of deploying solar cells in far larger numbers than a purely economic calculation suggests is sensible. Their stated reason for doing so is to combat climate change—but in truth, this is gesture politics, for unilateral cuts by a single country (unless that country be America or China) will have little impact. A second effect of this policy, however, is to create a market large enough to support the mass production of solar cells, but competitive enough to encourage manufacturers to improve their techniques and force prices down.

If, therefore, the effect of Germany’s altruism is to make solar cells truly competitive, then even free marketeers (especially those who are not German consumers) should cheer. Market economics will do the rest. But if it proves impossible to bring down the price of solar cells (and that of the associated batteries, or other devices needed to store solar energy overnight) to a point where they can stand on their own feet, Mr Peiser will surely prove correct. Germany is a rich country, and can afford a little altruism. No rising industrial power is likely to take the same line, climate change or no climate change.

Full debate