Wind and solar energy have both made tremendous advances over the past two decades. What were once pipe dreams and unrealistic ambitions have turned into practical ways to produce energy.
But now, things are changing for these two maturing industries that leave the future of each in doubt.
Solar Companies on the “Solar Coaster”
First, solar energy providers have started to fall on hard times. According to Industry Week magazine, several well-known companies are on the “solar coaster”: an up-and-down ride for an industry that has alternately thrived and struggled over the past decade.
SunEdison, which is the world’s largest company specializing in clean energy, has entered bankruptcy, and Yingli Green Energy Holding Co., the world’s top producer of solar panels, is headed toward default. These two companies by no means represent the entire industry, but the fact that the biggest players are struggling is a testament to solar energy’s struggles.
Case in point: a Bloomberg index of the top 20 solar power companies has fallen by over 30 percent in 2016, performing worse than coal stocks. And investors are shying away from putting more money into an industry against the backdrop of falling energy prices across the board – especially in coal, which means solar energy isn’t as cost-competitive as it would otherwise be.
Granted, that doesn’t mean the industry is facing failure. In fact, developers expect to install 48.4 gigawatts of solar energy by the end of 2020, which would be over twice the amount that will have been installed in the prior five years. Investors may actually see low values for solar equities as a buying opportunity.
With that being said, the road ahead is still fraught with uncertainty. If energy prices stay low for a prolonged period of time, solar could take a hit as the fundamental economics of solar energy change relative to conventional means. Throw in the fact that solar is, so far, a debt-driven industry, and it’s easy to see how a few lean years can cause serious damage.
Wind Power Faces Future without Subsidies
Wind is perhaps in a more precarious position than solar.
Subsidies from the federal government that have sustained the wind industry for years ended on January 1, 2014 – and when they were finally renewed later, it was only for a limited period of time. Anti-tax-credit legislators, such as Sen. Lamar Alexander (R-TN), believe that wind industry has become self-sustainable and no longer needs subsidies or tax credits. Supporters disagree, citing the subsidies as integral to growing the industry, creating more jobs, and further reducing the nation’s dependence on fossil fuels.
Furthermore, production tax credits that have helped develop wind farms across the U.S. will likely be gone by 2020 unless renewed at some point, which means the 2.3 cent per kilowatt hour advantage that wind has enjoyed over the past two decades will largely go away.
Without subsidies, wind energy would have to reduce total costs from $55 per megawatt hour to roughly $35 per megawatt hour from now to 2020 in order to be competitive with other energy sources.
Again, as with solar, this doesn’t mean that the future is dead for wind, or even bleak. As of 2015, wind energy comprised 4.44 percent of all generated electrical energy in the United States. That number should grow; estimated potential for the contiguous U.S. is nine times larger than how much electricity the U.S. currently consumes.
But wind power is entering into an uncertain era, one in which conventional energy prices have dropped and subsidies for wind are on the decline. It isn’t clear whether or not wind will be able to sustain itself, even as more states continue to pour money into wind development.
Biomass Energy Stands to Gain
The turbulent years ahead for solar and wind energy mean more opportunity for biomass energy.
Biomass has one major advantage over both solar and wind: it is capable of sustained electrical generation that can meet fluctuations and spikes in demand. A cloudy day or still winds can tank solar and wind production, respectively, but biomass plants can simply ramp up as needed. Given that reliability has been a major point of criticism from clean energy opponents, this is a huge advantage.
Solar and wind are here to stay, and in a decade, chances are the nation will have a higher percentage of its electricity generated by these two methods. But there will be a rocky road until we get to the point where both industries can stand on their own two feet and not just compete with, but overcome conventional energy production.