Wind and solar energy are two of the cleanest and most theoretically efficient forms of energy generation available. Relying only on natural resources that are captured (but not consumed), both wind and solar power create energy without any additional impact—the only problems today are the costs of initial installation and the costs of ongoing research to make these methods of energy generation more efficient.
How these forms of energy develop over the next five years could have a strong influence on how quickly these power sources cement themselves in our society. Should wind and solar power continue to develop at a fast rate, they could set a course to overtake conventional forms of power generation within the next few decades. However, there are some key obstacles that could interfere with this potential growth trajectory.
New Information From the US Energy Information Administration
According to a new report by the US Energy Information Administration, renewable energy will, overall, be the fastest-growing source of power generation in the United States through the year 2040. That certainly extends beyond the next five years, and greatly positions both wind and solar energy for fast and continued growth. The momentum from the past decade has been strong, and according to this economic data, the momentum will only continue.
According to Bloomberg’s New Energy Finance, investments in renewable forms of energy generation increased from an initial $9 billion in the first quarter of 2004 to a total of $50 billion for the first quarter of 2015. This investment capital is going to hundreds of individual solar and wind projects, in addition to research and development for new forms and applications of wind and solar energy.
The Problems With Solar Power
Solar energy, while still an exciting and fast-growing industry, is going to face a handful of significant challenges over the course of the next five years. First, the cost efficiency of solar energy systems is still being developed. Depending on the size and scope of the installation, many solar power systems will take decades to pay for themselves. One of the key problems lies in energy storage; there is still no cost-efficient way to capture energy generated by solar panels and store it for future use. Since the sun operates on a cycle, this storage function is essential, and its inefficiency will need to be ironed out before solar systems can become more cost-efficient and practical on a consumer level.
In addition, the solar investment tax credit (ITC), which originally emerged in 2006, may finally be set to expire. The ITC, which was granted a multi-year extension back in 2008, currently offers a 30 percent tax credit to any business or consumer who installs a new solar energy system. To date, the program has attracted thousands of new solar energy consumers, but the coverage of the program is about to change. The ITC itself is scheduled to expire at the end of 2016, at which point the tax credit will drop to 10 percent for businesses and disappear for consumers altogether.
As a result, investments in solar energy may see a spike over the next two years as businesses and consumers race to take advantage of the program, followed by a sharp drop as the program goes away entirely. In anticipation of this potential drop, the ITC may be renewed, but at this point, it’s hard to say which scenario is more likely.
The Wind Forecast
According to a report by the US Department of Energy, wind power currently provides 4.5 percent of the United States’ energy. That number is set to double over the next five years, rising to 10 percent or more by 2020. That number is set to grow even further in successive decades, achieving a reliance on wind power of 30 percent or more in less than 40 years. To achieve this goal, the Department of Energy is making efforts to increase wind energy developments across the country. Many researchers have already calculated that the supply of wind in the world could theoretically supply the entire population’s energy needs with some left over.
The Bottom Line for the Next Five Years
Despite some of the challenges bearing down on solar energy, the next five years look good for both wind and solar energy generation. The United States government is continuing efforts to encourage and enable the development of new energy technology, which will be a key factor in making the next five years a success.
Edited by Stefania Viscusi