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Is Solar Affordable without Subsidies?

Solar energy wouldn’t be affordable without the current subsidies in place

Can we afford solar energy without subsidies? In other words will people install solar energy if the current subsidies are withdrawn? Perhaps the question is premature.  Subsidies on clean energy are not going to be withdrawn anywhere in the world in the near future. Most nations have committed themselves to increase the share of clean energy in their total energy consumption. And solar is perhaps the most practicable of the clean energy forms, at least for the households.

But suppose the government does withdraw the subsidies.  Will we still go and buy solar systems? The answer really depends on grid parity. Grid parity means whether the cost of 1 KWh of solar energy is equal to (or less than) cost of 1KWh of energy from the grid. Now the conditions for grid parity are different in different parts of the world. Australia has achieved grid parity already. There are other countries that do not even have any target dates.  Within the United States, certain states are already at parity while others are expected, at the current conditions, to achieve grid parity anywhere between 2017 and 2020.

The variables in favor of an early achievement of parity are the environment friendliness, the falling prices, and increasing efficiencies of solar systems.  A possible ‘setback’ to parity is the falling prices of oil. But experts say oil accounts only for about 5 percent of the cost of generation. A slump in oil prices cannot affect the cost of electricity much.

Also, the UK cut its subsidies on wind power which was the cheapest clean energy source in that country. The wind power industry did not crash. It did not even jerk. There are rumors that UK may cut the subsidies on solar also. You can be sure the government will take as calculated a move this time also as before. And that becomes a proof. Subsidies withdrawn at a carefully chosen time will only stabilize the industry.

There is just one more comment. There are an infinite number of alternatives between continuing the current subsidies and a total cut off. A gradual approach is, perhaps, the best.

Final Note: This debate will continue until the subsidies are finally withdrawn. But solar energy will be there unless we can find a cheaper clean alternative.

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