Why Cheap Solar Could Save the World : Planet Money : The Indicator from Planet Money In the last fifteen years, the cost of solar energy has declined so sharply that it has recently become the cheapest form of energy in the world. Now, major companies are jumping in to invest, but will the markets follow?

Why Cheap Solar Could Save the World

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UNIDENTIFIED PERSON: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

All right. Here we are.

DARIUS RAFIEYAN, HOST:

This is - this - here we are.

VANEK SMITH: So the other day, Darius, we took a little trip to a huge apartment complex in New York. It is enormous, one of the biggest in the world. It spans, like, 10 city blocks in New York, houses around 30,000 people.

RAFIEYAN: Yeah. And it's known locally as Stuyvesant Town, or StuyTown...

VANEK SMITH: StuyTown.

RAFIEYAN: ...You know, if you're a cool East...

VANEK SMITH: Local.

RAFIEYAN: ...Village cat.

VANEK SMITH: (Laughter).

RAFIEYAN: It's, like, a bunch of sort of giant brick towers - sort of all identical - in rows. And we were there because of an indicator - an indicator given to us by Ben Ho. He's an economist at Vassar College.

VANEK SMITH: Yeah. And Ben says this indicator is a big deal, a milestone. And when this indicator hit this milestone, Ben said he was like, oh, my God.

BEN HO: I thought there should be parades and, like, people cheering.

VANEK SMITH: (Laughter).

HO: And instead, like, there was a few articles in, like, the Trade Press. And people haven't talked about it much. I think that's the contender for the most important indicator of all time.

VANEK SMITH: The most important indicator for all time.

HO: At least for me, you know?

VANEK SMITH: OK. OK. Make your case. This is fascinating. What is this indicator?

HO: The indicator is the cost of solar electricity.

RAFIEYAN: Specifically that the cost of solar electricity has been falling by a lot - falling by so much it's actually now competitive with fossil fuels. It's gotten that cheap.

VANEK SMITH: Which brought us to the roof of a 20-story brick building in February - a roof that is now covered in solar panels. And we were there because this roof is owned by one of the biggest, baddest, most profit-focused companies on Wall Street, in large part because of Ben's indicator.

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

RAFIEYAN: And I'm Darius Rafieyan.

VANEK SMITH: And we are on the roof of a building.

RAFIEYAN: We're here, 20 or so stories above the East Village.

VANEK SMITH: Very cold.

RAFIEYAN: Today on the show, the price of solar.

VANEK SMITH: What changed and why Ben Ho thinks this is so important.

RAFIEYAN: It's a little windy. It's a beautiful view.

VANEK SMITH: It's a beautiful view.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

VANEK SMITH: Back in 2006, Ben Ho was the lead energy economist under President George W. Bush, and he was part of a team looking for energy alternatives.

RAFIEYAN: Economically viable energy alternatives...

VANEK SMITH: Yes.

RAFIEYAN: ...Being the operative word there. The energy source to beat was coal. It was the cheapest source of energy.

HO: And back then, like, solar was almost, like, a joke. At the time, I was looking at the numbers, and coal cost around five cents or four cents per kilowatt hour. Natural gas was also in that range. And solar was, like, a dollar per kilowatt hour.

VANEK SMITH: Oh, wow. So you were just like, this is never going to be cost-effective.

RAFIEYAN: You heard that correctly. Solar power was 20 times more expensive than coal. Solar was just never going to happen. It was a nonstarter. It was a punchline.

VANEK SMITH: And then something changed - actually, a bunch of somethings.

HO: Yeah. A lot of small things took the price down by 5- or 10%.

RAFIEYAN: So for one thing, government subsidies on the state and federal level brought costs down for businesses and residents, got more people to buy into solar, which meant more companies started making solar panels.

VANEK SMITH: And then companies that made solar panels started competing against each other to make cheaper, more efficient panels. As a result, the panels got nearly twice as efficient, and the price dropped from about a thousand dollars per panel to around $150 per panel today.

HO: And so a series of sort of small process improvements over the past 10, 15 years have brought the cost down, like, a magical amount of money.

RAFIEYAN: A magical amount of money. The price of solar dropped by more than 90%, from $1 per kilowatt hour 15 years ago to 4 cents per kilowatt hour today. And that is today's indicator - 4 cents per kilowatt hour.

HO: Which makes it the cheapest form of electricity in the U.S. and also in the world.

VANEK SMITH: Cheaper than...

HO: Cheaper than natural gas, cheaper than coal.

VANEK SMITH: Cheaper than coal.

RAFIEYAN: Mic drop.

VANEK SMITH: (Laughter) Yes, because when that happens it's been everything changed.

RAFIEYAN: And Ben thinks this will take solar power from, like, a fringy source of energy to a major, maybe even the main, source of energy in the world. But at this point, solar energy still only accounts for about 2% of the energy in the U.S.

HO: I think this totally changes at least how I see climate change, right? So before, when, like, solar and renewables were more expensive, it was all about, you know, sort of getting people to, like, sacrifice to do the right thing. And now it's actually just about getting people to save money.

VANEK SMITH: I mean, if we're looking at pure economics, though - I mean, if solar's only 2% and we have these huge entrenched energy companies - some of the biggest companies in the world...

HO: Right.

VANEK SMITH: ...That have a lot of money, a lot of jobs tied up in traditional, like, fossil fuels and those kinds of energies - like, how - I mean, that seems like some daunting economics to overcome.

HO: Right. I think I'm a big believer in markets. Now that solar is actually cheaper, I actually think that the market and capitalism's a pretty powerful driving force to move people toward, you know, the cheapest form of energy. And you see that happening, right? Solar just had the biggest year in history in the United States because of just the falling costs.

VANEK SMITH: Companies like Facebook and Microsoft have started investing millions of dollars in solar energy, and so has Blackstone.

RAFIEYAN: Blackstone, in case you haven't heard of them, is a giant Wall Street private equity firm and hedge fund. Basically, they deal with money - enormous amounts of money.

VANEK SMITH: So much money.

RAFIEYAN: They manage hundreds of billions of dollars.

VANEK SMITH: Yeah. Blackstone - definitely not, like, a hippy-dippy, let's-all-try-to-save-the-planet company...

RAFIEYAN: No, no, no.

VANEK SMITH: ...At all.

RAFIEYAN: This is not, like, reusable-tote-bag, Greenpeace-canvasser-type company. They care about the bottom line. And Blackstone has started investing millions in solar power. Blackstone owns the company that manages StuyTown, the apartment complex in New York with all the solar panels. And Kelly Vohs is the CEO of that division of the company, and he oversaw this big solar project. And he took us out to the roof to check out the solar panels firsthand.

KELLY VOHS: We're standing on the rooftop of Stuyvesant Town, and you're looking at a few of the 9,671 solar panels that we put on our rooftops, to be precise.

VANEK SMITH: And isn't it - that's so precise.

RAFIEYAN: Nine thousand, six hundred and seventy-one solar panels...

VANEK SMITH: Yes.

RAFIEYAN: ...On building after building, just spanning 10 city blocks just laid out before us.

VANEK SMITH: All these buildings, like, as far as we can...

VOHS: All of these buildings as far as you can see.

VANEK SMITH: Like, how many square feet of roof?

VOHS: Twenty-two acres. I'd have to do the math on the square feet on that.

VANEK SMITH: We did the math.

RAFIEYAN: Oh, we did the math.

VANEK SMITH: And it is almost a million square feet of roof, all painted white and all covered in shiny black glass solar panels, all about the size of a foosball table.

RAFIEYAN: Kelly and his team installed the panels last year, and they estimate it will reduce StuyTown's carbon footprint by about 16%.

VOHS: So the project cost 11 million.

VANEK SMITH: That's a lot.

VOHS: A lot.

VANEK SMITH: Will you lose money on it? Is it cost-neutral? Will you make a little money?

VOHS: We will have a return on the investment. It's not significant. It's not a lot of money, but it is definitely not a loss.

VANEK SMITH: If it had been a loss, says Kelly, they couldn't have really considered going solar.

RAFIEYAN: Now that they have these panels up and running, Kelly says, lots of other building managers and businesses have been taking exactly this tour that we took, asking about how they might go solar as well.

VANEK SMITH: What's the biggest question that you get from people who are considering doing it?

VOHS: Did you make money on it? They want to know, is there a return on it? Is it affordable? - all of those things. And the answer for us was yes.

VANEK SMITH: Blackstone was so jazzed about the results of its StuyTown project, it is investing another $850 million in solar.

RAFIEYAN: And this, says Ben Ho, is exactly why he thinks the cheapness of solar is the most important indicator of all time.

HO: And this sort of problem of climate change - I think - yeah, I have a lot of optimism, I think in part because a lot of the worst stories you hear about climate change all assume, like, a coal-based future.

RAFIEYAN: I mean, listen. Climate change is not over as a problem.

VANEK SMITH: No.

RAFIEYAN: I mean, Ben points out there are still significant obstacles to overcome if solar is to become a major energy source for the world. I mean, for one thing, it only works when the sun is out.

VANEK SMITH: That's a problem.

RAFIEYAN: Battery technology that could store solar energy isn't great right now.

VANEK SMITH: Also, the panels would need to get more efficient. For all of StuyTown's 9,000-odd solar panels, solar will still only supply about 6% of the energy for the apartment complex.

RAFIEYAN: Still, Ben says, now that economics is on its side, now that the math works, he thinks solar has a bright future.

VANEK SMITH: No. No.

RAFIEYAN: (Laughter).

VANEK SMITH: No.

HO: I think the biggest hurdle is past, right? I think it's - for me, it's the most exciting indicator. It makes me optimistic about the future.

VANEK SMITH: Today's episode of THE INDICATOR was produced by Leena Sanzgiri, fact-checked by Brittany Cronin, edited by Paddy Hirsch. And THE INDICATOR is a production of NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

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