Solar Energy is currently the amongst the costliest form of energy generation and except in niche  applications is not economic without some sort of government subsidies.However growth in solar energy has been one of the fastest in the past decade upwards of 50% CAGR as costs have declined and technology improved manifold.Solar Energy forms just 0.1% of the the total energy supply of the planet currently and analysts and decision makers don’t think that Solar Energy can form a big chunk in the future as well.However I differ strongly in that aspect.The main reason for my very bullish opinion on Solar Energy is based on the simple fact that Solar Energy is the only form of Energy whose costs are declining rapidly on a secular basis.In a world facing the  prospects of “peak commodity”,solar energy remains vastly abundant and it remains upto human technology to capture it at the lowest costs.That is starting to happen  with around $80 billion to be invested on Solar Energy in 2010 much more than any other form of Energy.A Huge Amount of Research is being performed in private labs around the world as world industrial and technology giants compete with each other to become the most efficient and lowest cost provider.

Solar Energy Cost Curve Declining Continuously

As you can see Solar Energy costs have decreased continuously over the past decades and continue to do so at even a faster pace with powerful global companies like TSMC,GE,Samsung,Hyundai,Siemens,Toshiba,AUO,Honda etc entering the field.Solar Energy can already compete with other forms of energy in high radiation,high electricity places like Italy.By 2015,expect Solar Energy to compete with Fossil Fuel Energy in most places on Earth.Solar prices decline of 10% annually in the  next few years are considered as a base case by large solar companies in their business models.Note I think PV and CPV Technology will beat Solar Thermal Technology in the future because of a variety of reasons.

Why Solar Energy is Being Underestimated

I am surprised by the extent that solar energy growth is being underestimated by analysts and policymakers.Solar Demand has exceeded forecasts by a wide margin in the last 3 years.Despite doomsday scenarios Solar Energy grew by almost 40% in 2009 and should grow by more than 100% in 2010.While this is on a low base,you have to factor in that solar energy is still being subsidized.Think of the growth possibility when solar energy costs decline another 50%.While all countries have underestimate the penetration of Solar Energy,I am taking the example of India which had been praised for its  ambitious plan of generating 22 GW by 2022 .I think solar energy will easily be 3-4x of that capacity by that time as India has a huge potential  in solar energy.Bloomberg one of the most respected analysts in the Green Space has forecast 4.2% of US Energy Demand from Solar by 2020.This again is too low in my view.Once Solar Energy reaches low enough costs,then energy demand as a whole will expand just at the advent of LED lighting will expand the whole lighting market.The Potential of Solar Energy is not restricted to the Global Electircy Demand,it is much higher because it will expand that Capacity.

Summary

I can write a huge amount on this topic but for the sake of brevity,I am restricting myself here.Solar Energy has been around a long time but a particular confluence of Global Warming,Technology Innovation,Reducing Costs and Peak Commodity has brought it on the cusp of an explosive growth.People are constrained in their thinking of solar energy growth by the current world energy demand and past trends.Solar Energy will vastly outperform  even the most bullish growth projection in my view . Energy Storage is a potential problem for solar energy,however improvements are happening in that area also and that constraint will not kick in till a  long time.