MD DC DE VA Solar Energy Industries Association

The Decline of Solar Investment


Oct 13


Solar Investment

There is constant news about improvements of solar power, either with a new method of production that lowers costs, or a new design that that significantly improves the efficiency of a solar cell. So why is there a growing decline of investment in this rising industry?

While the production of solar cells grew by 10% in 2012, there was a 9% drop in investment that year compared to 2011. Most recently, an annual report has shown that there has been a 14% drop in investment in the third quarter of 2013 compared to the quarter before, and a 20% drop in investment compared to that of the same quarter last year. “The latest setback reflects policy uncertainty in Europe, the lure of cheap gas in the U.S., a leveling-off in wind and solar investment in China, and a general weakening of political will in major economies.”2 Within the U.S., the growth of shale drilling and the cheap gas that comes with it have lured the potential solar investors away. Another reason for the decline in investment in recent years may also well be the fact that the efficiency of solar power, and therefore the cost of the electricity produced, has dropped significantly. The “Worldwatch Institute says that technology cost reductions are largely responsible for the reduction in investment, rather than significant slowdown in capacity development.”4

These falling investments occur even as the production of photovoltaic cells have been going up for the past couple years. Significant improvements have also been made in the reduction of cost, making electricity produced by solar power cheaper than that produced by natural gas. Even as the investments in the solar industry, and renewable energy industry in general, have dropped, there has actually been a growth in the installations of these renewable energy systems. “Electricity production from PV modules has already proved that it can be cheaper than current conventional consumer electricity prices in many countries.”1

As the solar industry continues to cut the cost of production, it grows more competitive to other sources of electric production, like natural gas and coal. Governments and investors around the world will have to turn their heads back towards alternative energy as the answer to reducing our carbon emissions.