The Grad Voice

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The constant increase in the demand for oil and subsequent rise in its price have led to increased importance and attention to alternative energy or clean energy sources. Alternative energy sources include nuclear energy, hydroelectric power, wind energy, biomass and solar energy, as well as hydrogen powered fuel cells. A few of the above sources look more promising than others.

Solar energy in particular is the most abundant source of renewable energy on earth. The average amount of solar radiation striking one square meter over a year offers about the same energy content as a barrel of oil. Research has shown that solar energy could supply the greater part of global energy needs.

There are two main ways to harness the power of the sun to generate electricity: photovoltaic (PV) where sunlight is directly converted into electricity via solar cells, and solar thermal power which treats sunlight as a source of heat to drive a turbine in a generating plant. PV cells or solar cells demand high technology manufacturing processes and, therefore push up the cost of solar energy. Most of the PV cells today are made from polycrystalline silicon, but new thin film materials such as cadmium telluride show great promise as a means of cheaper solar cells.

Its wide availability, emission free generation process and technological advances make solar energy a promising source of energy that can end our constant battle for oil and make us self sufficient. Solar power, however, is still a long way from becoming mainstream. The biggest barrier to increasing solar power generation is its cost. It requires a huge investment due to high technology manufacturing processes. The intermittent nature of the energy source means solar energy though available in abundance is available only when the sun is shining. Solar energy is diffuse and hence can be used only if it can be stored. This has led to increased pressure on research related to cheaper methods of energy storage.

In spite of this, investment in solar energy is increasing rapidly. This investment is fueled by a variety of incentives in various parts of the world, which are designed to increase the use of renewable generation generally and solar in particular, in order to reduce reliance on fossil fuels. According to Greentech Media's Venture Power Report, venture capital investment in green energy technologies exceeded $2.8bn in the third quarter of 2008, well above any previous quarter on record. In comparison, the first quarter of this year saw $998m invested and the second quarter $1.3bn. This only confirms the fact that smart money has seen potential and a promising future in the clean energy market.

The main solar technologies are still expensive and for the moment they remain more expensive than most competing technologies. This means that governments support in the form of credits and rebates is needed to incentivize people to use alternative energy sources.

In the 2005 Environmental Protection Act, the U.S. created the first residential tax credits for solar energy and significantly expanded the commercial tax credits. These credits expanded in January 2006 and have expanded the market for all solar technologies. Both the Senate and the House of Representatives tried and failed numerous times this year to extend the tax incentives, which were set to expire at the end of 2008. Success was achieved when in early October 2008, President Bush signed the mammoth bill containing about $18 billion in energy tax credits, part of a large tax package and financial market bailout plan. This provided a major boost to the clean energy sector where new investments were put on hold as the credits were about to expire.

The bill delays tax deductions for U.S. oil and gas production and calls for investment tax credits for solar developments for eight years. The tax credits will go to businesses and residents who invest in renewable energy and will allow utilities to take advantage of the incentives as well. The bill opens up $800 million worth of bonds to pay for power plants using wind, biomass, geothermal, garbage and other sources, and doles out $2,500 to $7,500 rebates for drivers who buy plug-in electric cars and trucks.

Further, the bill eliminates the $2,000 cap on the credits for businesses and residents who want to install solar panels on their properties. The new program also will allow homeowners who install small-wind equipment and heat pumps to take advantage of the credits, but will cap the incentive at $4,000 for wind and $2,000 for heat pumps.

There is little doubt, based on the predictions made that solar energy is going to see major growth in the next decade and that beyond that they will form one of the principal renewable sources of electricity worldwide. Much depends, however, on how the technologies develop in years to come.

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