Abstract
Sharp declines in cost per kilowatt-hour of electricity generated by wind turbines and solar panels have opened up major shifts in cost and supply of electricity. Using elasticity of price and income to analyze scenarios of much cheaper electricity reveals economic impacts well outside the range that has dominated the debate until now. The methods and computations give a wide span of impacts, and those methods led to unexpected and provocative implications
Highlights
Technological improvements in wind turbines and solar panels are making electricity much cheaper
The cost reductions have already reached “grid parity” in many regions[2] and, if cost reductions continue, the price of electricity coming from new installations might fall enough to have pervasive effects beyond the electric utility industry
It will be worthwhile to speculate about the knock-on effects, as the cost reductions ripple through the broad economy
Summary
Technological improvements in wind turbines and solar panels are making electricity much cheaper. We exclude liquid fuels from our analysis, except to note that reductions in demand for liquid fuels might occur as electricity from wind and solar gain market share. For the scenarios with costs per kwh of 4 cents and 2 cents, we conduct what physicists call a “thought experiment” and our experiment takes, as a starting assumption, that wind and solar become cheaper than power from traditional generating plants and, gain market share.
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