Solar Energy

EFB334

Environmental Economics and Policy

Essay: Why is the uptake of solar energy so low?

Solar Energy

Introduction

Solar energy is a vast and abundant resource in infinite supply however despite these appealing characteristics uptake of solar power has been low across all sectors. There are a wide variety of reasons as to why the uptake of solar energy has been so slow and this essay will analyse and discuss the relevant issues to the low uptake of solar energy. This issues impeding and preventing a higher uptake range from government interference, consumer attitudes and awareness to solar energy, imperfect capital markets, lack of Research and Development (R&D), high prices and existing electricity infrastructure (Margolis & Zuboy, 2006, p. 3). The aforementioned issues will be discussed and analysed on their impact to the low uptake of solar energy.

Inefficient Capital Markets

Currently one of the factors that is resulting in the low uptake of solar energy is inefficient capital markets (Margolis & Zuboy, 2006, p.3). Currently capital markets do not reflect negative or positive externalities associated with how the electricity is generated. For example power generated from a coal-fired power station emits harmful greenhouse gases that contribute heavily to climate change and other environment problems. However the price per kilowatt paid by consumers does not include the negative externalities resulting from coal fired power stations. (Owen, 2006, p.639)

On the other hand solar energy is a clean green energy source that is good for the environment. However the price of the electricity is more expensive due to the lack of economies of scale because it is being priced out of the market by inefficient capital markets. Where the market has failed in pricing in negative externalities some form of government intervention is appropriate (Owen, 2006, p. 638). A solution to this problem would be to introduce a tax on carbon dioxide...