Note: This was written in 2007. I like to keep my old predictions around. It tends to keep me humble.

Solar cells have always struck me as the perfect energy source. You just put them out in the sun and they produce electricity anytime the sun shines. They have enormous and obvious potential, but in spite of decades of predictions that widespread use of rooftop solar cells was right around the corner, that hasn't happened. Lately, solar cells have finally gotten serious. I thought that you as writers might be interested in why the early predictions didn't come true and why solar cells may finally be coming into their own. The process can tell you some things about how change happens in a society--how the world actually works. That's important for a writer, and especially a science fiction writer.

Sometimes a breakthrough comes along and change comes quickly The growth of the World Wide Web is an example of that. Other times change takes decades of false starts and inflated predictions. Solar cells have until recently been an example of that kind of growth. Most people have given up on them due to the many highly publicized breakthoughs iin solar cells, and premature predictions that the industry was going to take off.

Behind the hype, a lot of progress is being made in solar cells. The photvoltaic industry has grown 25 to 50% a year for the last several years and has become a $11.2 billion dollar industry. There hasn't been the dramatic price breakthrough that a lot of people predicted back in the late 1970's, but the price of solar cells has remained steady throughout that period. Given inflation, that means that the constant dollar cost of solar cells has dropped 2 to 3% a year for twenty-five years.

Industry cpacity is growing fast, based partly on government subsidies in Germany. Worldwide solar cell production capacity in 2005 was roughly 5 to 7 times what it was in 2003. In one year, 2004, the solar cell industry built manufacturing plants almost equal to all of the manufacturing capability that they had built in all of the years up through 2003. In 2005, production capacity increased at the same rate. In other words, the industry almost tripled in size in 2 years.

Solar cells are still 5 times too expensive to make economic sense on most roofs, and to some extent the boom is artificial, the result of the generous German subsidies. Solar cells do make sense for a myriad of applications where you would otherwise have to run electric lines long distances. So, why has it taken so long? Solar cells haven't matched their hype until lately for several reasons.

The solar cell industry had kind of a chicken and egg situation because traditonal solar cells were made of high-quality semi-conductor quality silicon. That was very pure and very expensive. It would have been possible to make solar cells out of less pure and less expensive 'solar-grade' silicon, but there wasn't enough demand for solar cells to justify the high initial cost of building factories to produce that grade of silicon. Nobody wanted to risk the kind of investment involved on the chance that lower costs would increase demand and justify the investment costs.

Also, investment as a whole in solar cells was inhibited by the prospect of breakthroughts that might make existing facilities obsolete. As an investor, do you really want to put $100 million of your money into a state-of-the-art solar cell factory at a time when half-a-dozen labs are trumpeting advances that could make your brand-new factory obsolete? Then of course none of those breakthroughs actually made existing factories obsolete for one reason or another, though some of them, like amorphous silicon actually made it to market and carved out niches for themselves.

Making matters worse, it became obvious in the mid-1980s that prices of traditional sources of energy like oil and natural gas were actually very demand-sensitive. Demand for energy fell in the mid-80's because of slow economic growth and energy efficiency efforts, and oil prices dropped to about a third of what they had been at their peak for the 1980's.

Now, knock on wood, solar cells are finally ready to take off in a major way. Manufacturers are profitable and expanding. The solar industry spent a billion dollars expanding capacity in 2005. It has raised at least $1.8 billion in the last 12 months for continued expansion. Industry projections call for the addition of capacity equal to all of world production in 2003 every year between now and 2010. Based on the amount of capital raised and the amount of production already in the works, that isn't totally unrealistic.

So does that mean we can forget about the Middle East and its oil in a few years? Unfortunately, no. The solar cell industry is well on its way to producing several multi-billion dollar companies. At the same time it will make almost no difference in the demand for oil or any other major fuel source for at least five to ten years, even given the most optimistic scenarios. I'll explain why in the next issue.