generation, transmission and storage (battery technology) in both the retail and utility areas means future solar power will become cheaper, more flexible, more commoditized and quicker to install. Utility-scale PV is quick to install: one utility-scale PV power plant using well-understood technology was installed in India in a matter of months. It is understandable that the areas with the highest initial solar investment are areas of either high solar irradiance or existing high power generation costs, or both; this means countries like Saudi Arabia, Australia, China, India, Japan, Spain, Italy, Greece, France, Mexico, Morocco and the US, as well large parts of Africa. In addition, countries in sub-Saharan Africa which are importing fossil- based fuels are keen on solar, or should be, as their foreign exchange reserves are negatively impacted by such imports. Countries like China, struggling with high pollution and high import costs, will find solar almost irresistible.


Repercussions for markets If the first golden rule of commodities is that people do what they are paid to do, the second golden rule is that small changes to tight supply and demand balances in commodities result in much larger price movements, either way. What we know is that solar power is much cheaper than carbon capture coal generation as well as some existing coal generation, so any new coal generation will be vulnerable to being displaced by solar, as are any existing oil-fired power generation plants, no matter how large or small. One has to wonder why anyone would build nuclear plants when solar is cheaper and does not produce unquantifiable costs for waste storage for millions of years. Economically, nuclear power investment by governments is akin to selling inflation-proof bonds with a time settlement date millions of years forward. If solar displaces demand in any or all of these power inputs it will change the supply/ demand balance for those inputs, reducing their prices. The greater the switch away from fossil inputs, the bigger the price fall that will occur for those commodities as they compete economically against solar. While at the start solar will compete, rather than dominate, future technological improvements in solar efficiency will continue to lower solar power prices and, with that, fossil energy prices.


Solar-powered vehicle batteries The Third Great Leap Forward will be the development of batteries that will enable retail PV solar power to charge up vehicles for their owners. As electric cars are four times as energy efficient as petrol cars today, this will have a huge impact on future oil prices. Further implementation of energy efficiency design in cars, like the use of carbon fibre, will also increase the energy advantage for solar-


powered vehicles. Biofuels are a really inefficient way to harvest solar power, utilizing premium- quality land in their production. Declines in biofuel usage mean increasing the available acreage for food production and so food supply, reducing food prices. Many governments’ taxation policies will need to be changed, as any big switch from fossil- based fuels to electricity would reduce the tax take not just from car fuel but also from the energy producers. We are likely to see taxes on transport switch from “Tax on Input” to “Tax on Mileage”.


In the ultimately unsuccessful Scottish independence debate, Alex Salmond liked to say that a “Yes vote” would have put the future of Scotland in the hands of the Scottish people. Actually, it would have put it in the hands of an oil market which is about to experience an unavoidable decline in demand and importance. In this situation, countries like Scotland would be particularly hard hit economically. In essence, the technological development of batteries for powering cars will make high-cost oil extraction from the North Sea less economic. On the other hand, when electric-powered, battery-based cars do become endemic, power prices will initially rise due to increased demand, which in turn will both justify and accelerate solar installations. The technology necessary for the third Great Leap Forward is already well underway and will almost certainly be developed in the next few years.


The implications of the age of solar are almost too many to mention but I will try to touch on a few. Solar generation technology is a “disruptive technology” which has democratized electricity production by removing the decision-making process out of the hands of the few and placing it in the hands of the many. Solar will also disrupt the economic assumptions current industries like power utilities are based on. Already there are large-scale companies installing PV installations and selling the installation for a profit, reducing the energy bought from utilities, and so reducing their profits.


These installers are also installing the PV systems on a lease basis. The leases are provided at a rate cheaper than the utility costs for homeowners, and the homeowners therefore do not have to pay “up- front” installation costs. This enables the installer to install “distributed” generation; in effect, they are building their own distributed power generation utility. Increasing efficiency in solar panels will spread geographically their economic installable footprint. Utilities facing a long-term reduction in demand will have to compete in this market or lose too many customers. The utilities will have the advantage of access to cheaper money, better technological awareness and be without the need to generate installation profit which will make them


competitive. This will accelerate the installation of solar as well as changing the economics of existing power generation facilities. Utilities which do not compete will face a contraction of margins, reduction in demand and asset price fall.


Coal, uranium, gas and biofuels All fuel sources will experience negative price pressure. Uranium prices will not experience the rises expected as installed solar capacity will render many new nuclear plant installations in high- irradiance countries unnecessary and increasingly uncompetitive in a falling energy price market. The price of coal will fall as demand from power generation is met by solar. If coal prices fall, electricity prices will also fall, and then electricity will replace major areas of oil consumption like heating oil and train transport demand. Effectively, countries with expensive-to-develop energy sources – an example is the reported A$60 billion spent in Australia on liquiefied natural gas (LNG) from coal methane gas – will find them less economically attractive to develop, and the money will be spent on solar. Companies or countries with large reserves of expensive-to-extract fossil fuels deep offshore or in Arctic oil fields will probably never develop them, or at least they will not make their anticipated returns.


Solar power is potentially irresistible to a variety of governments like China, which spends so much money importing fossil fuel to convert to energy and pollution. Such a development would free China from the necessity of its currently overly aggressive stance on ownership of the oil-rich South China Sea. It will free both China and India from needing diesel-based generators for water-pumping for agriculture or a predominantly high-pollution, coal-based energy supply. While solar is not efficient enough yet to compete with gas on price, it will still replace gas demand from irradiance- rich countries who then either avoid having to buy gas or who can export for foreign currency what they once consumed. This will in turn reduce gas demand and so prices.


A classic example of such displacement of commodity consumption is the ambition of Morocco and other North African nations to generate solar power to supply to Europe, effectively ending Russia’s energy monopoly together with its monopoly-like pricing and political power. Certainly, it will change the pricing of any gas from Russia consumed under long-term contracts by China, making any large investments in this area subject to a poor return margin. As biofuels will be ended by better battery technology for vehicles, Russia’s grain production will also suffer from lower prices, so China the big commodity importer will be a big winner versus Russia the big exporter who will


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