In 1980, AT&T conducted a study to forecast the anticipated use of cell phones over a 20-year period. The survey results indicated an expected 900,000 users. The actual figure? 109 million users. Which, by the way, has grown to about 6.2 billion.
Why did the forecasters undershoot to such magnitude?
- The cost plunged rapidly.
- Quality rose significantly.
- Purchasing decisions were made by individuals.
- Many purchasers had no alternative (no land-line, leaped straight to cellular)
History doesn’t repeat, but it rhymes…
Grid parity is a phenomenon that occurs when an alternative energy source has the ability to generate electricity at a levelized cost (LCoE) equivalent to, or cheaper than, the price of purchasing power from the electricity grid (hence, the name).
You’ve probably read about it in the news or heard about it on the streets…everyone’s talking about solar.
Why? Because solar grid parity, or the cost of installing solar panels at a cheaper cost than purchasing electricity, has massive potential.
The sun provides enough solar energy to the Earth to meet the power needs of the entire world for a full year. And guess what? Costs are plunging.
This is imperative. Monetary incentive is quite plausibly the greatest instigator of change.
In tandem with the irrefutable fact that solar is a cleaner energy source encompassing far less negative externalities than fossil fuels….
…Solar looks pretty attractive.
And here’s why.
Solar-power generation is a technology. Not a fuel. As such, efficiency and price are negatively correlated – and it’s clear which one is on the rise.
Moreover, U.S. retail residential electricity prices look far from appealing. According to the Energy Information Administration, in the first half of 2014 electricity prices rose 3.2% from Q1-Q2 of 2013. This represents the highest YoY growth since 2009.
There is a whole lot of sun to go around. Solar will experience tremendous scale benefits as system costs and customer acquisition costs decline and volumes rise.
Gone are the days when solar was just talked about by “hippies” as part of a green movement. Solar is a logical economic decision. In fact, Al Gore recently quoted that solar power generation has already reached grid parity in 79 countries worldwide.
What does this mean for business?
A lot, actually. Existing utilities markets could be demolished if enough consumers and organizations demand alternative energy. As such, renewables will dominate.
Wall Street has weighed in:
“We believe that solar and storage could reconfigure the organization and regulation of the electric power business over the coming decade”. – Barclays
“Rooftop Solar PV will reach grid parity in 50 states by 2016” – Vishal Shah, Deutsche Bank
“We are expecting the full year figures for 2014 to show a clear rebound in global investment in clean energy” – Michael Liebreich, Bloomberg
…And, in case you didn’t know, Warren Buffet just doubled down on wind and solar in June of 2014.