InvestMacro

By Mojtaba Akhavan-Tafti, University of Michigan 

U.S. consumer demand for renewable energy continues to grow, with more solar panel capacity installed in 2024 than in 2023, which saw more than in 2022. But U.S. trade policy is in flux, and high tariffs have been imposed on imported solar panels, which may cause shortages.

I am a scholar who studies the Sun, as well as an entrepreneur who is working to harness its power here on Earth by creating new designs for generating solar electricity. As part of that effort, I’ve studied market trends and manufacturing capabilities in the U.S. and abroad. Right now, U.S. manufacturers do not produce enough solar panels to meet the nation’s demand, but industry investments and federal tax incentives have been making progress, though recent federal moves have created uncertainty.

In 2024, U.S. installers put up enough solar panels to generate 50 gigawatts of electricity – enough to power New York City for a year.

U.S. manufacturers made only a small fraction of that – 4.2 GW of solar modules in the first half of 2024. That was a big boost, though – a 75% increase compared with the same period in 2023. And the prices were roughly three times the cost of imports.

A look at recent imports

In 2024, the U.S. imported far more panels than the country needed, suggesting developers may be stockpiling panels for future projects.

Most of those imported panels were made in Asia, particularly Malaysia, Vietnam and Thailand. In fact, nearly all of the U.S.-made panels used at least some components from overseas. China currently makes about 97% of the world’s supply of photovoltaic wafers, which are building blocks of solar panels.

The effects of proposed U.S. trade policies on the solar industry remain unclear. Through 2024, manufacturing continued a yearslong ramp-up to take advantage of government policies favoring domestic manufacturing. And imported panels seem slated to suffer from ever-increasing tariffs, which drive up costs.

Domestic production rises

Since 2010, U.S. solar panel production has increased about eightfold. But U.S.-made panels are more expensive than imported alternatives. In 2024, U.S.-made panels typically cost 31 cents per watt, but imported panels, even including tariffs that existed before President Donald Trump’s second term, cost about one-third of that: 11 cents per watt.

But domestic manufacturers are bringing costs down by ramping up production while relying on the government to maintain or increase tariffs on imports, which may make U.S. panels more competitive domestically in the future.

Reliance on overseas sources

Despite that increase in domestic production, U.S. demand for solar panels has grown even faster. To meet demand, the U.S. imports a substantial portion of its solar photovoltaic modules.

Tariffs, including a 30% tariff on solar cells and solar panels starting in 2018, aimed to boost domestic manufacturing.

But those tariffs and falling global prices made solar installations more costly in the U.S. than in the rest of the world. The average global cost of installed solar systems dropped from $1.15 per watt in 2012 to $0.72 per watt in 2016, nearly half that of U.S. installations.

The 2018 tariffs, as well as earlier rounds in 2012 and 2014, have shifted the source of U.S. imports of solar panels – from China and Taiwan to Malaysia and South Korea. Manufacturers are also building solar panels in Singapore and Germany to maintain access to the U.S. market. And Chinese companies are even investing in U.S. solar manufacturers to take advantage of federal incentives and avoid tariffs.

New tariffs emerge

Trump’s proposal for new tariffs on foreign-made solar goods, including panels and components, particularly target Chinese-owned companies in Southeast Asia.

They could include a potential 375% tariff on Thai products – nearly quadrupling prices – and a 3,500% tariff on products from Cambodia.

In contrast, U.S.-made solar panels will be cheaper. But a reduced supply of solar panels will raise prices even of domestic-made panels, at least until U.S. manufacturing can catch up with the demand. Some developers have begun to delay or cancel solar installations to address rising costs.

Domestic investment

Due in large part to the Biden administration’s Inflation Reduction Act, enacted in 2022, the U.S. solar panel industry has seen significant investments.

Since the law’s enactment, more than 95 GW of manufacturing capability have been added across the solar supply chain in the U.S., including new facilities that in a year can construct enough solar panels to produce nearly 42 GW, beyond existing manufacturing levels. This growth in manufacturing capabilities is largely located in Texas and Georgia.

Still, the new administration’s shifting priorities and trade policies make the landscape uncertain. Before Trump began discussing various solar-related trade policies, the industry projected it would install an average of 45 GW of solar panels every year for the next decade.

About the Author:

Mojtaba Akhavan-Tafti, Associate Research Scientist, University of Michigan

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Erin Baker, UMass Amherst and Paola Pimentel Furlanetto, UMass Amherst 

The Trump administration is working to lift regulations on coal-fired power plants in the hopes of making its energy less expensive. But while cost is one important aspect, utilities have a lot more to consider when they choose their power sources.

Different technologies play different roles in the power system. Some sources, like nuclear energy, are reliable but inflexible. Other sources, like oil, are flexible but expensive and polluting.

How utilities choose which power source to invest in depends in large part on two key aspects: price and reliability.

Power prices

One way to compare power sources is by their levelized cost of electricity. This shows how much it costs to produce one unit of electricity on average over the life of the generator.

The asset management firm Lazard has produced levelized cost of electricity calculations for the major U.S. electricity sources annually for years, and it has tracked a sharp decline in solar power costs in particular.

Coal is one of the more expensive technologies for utilities today, making it less competitive compared with solar, wind and natural gas, by Lazard’s calculations. Only nuclear, offshore wind and “peaker” plants, which are used only during periods of high electricity demand, are more expensive.

Land-based wind and solar power have the lowest estimated costs, far below what consumers are paying for electricity today. The National Renewable Energy Lab has found similar levelized costs for renewable energy, though its estimates for nuclear are lower than Lazard’s.

Upfront costs are also important and can make the difference for whether new power projects can be built, as the East Coast has seen lately.

Several offshore wind farms planned along the Northeast were canceled in recent years as costs rose due to inflation and supply chain problems during the pandemic. Construction costs for the two newest nuclear generators built in the U.S. also rose considerably as the projects, both in the Southeast, faced delays.

Reliability and flexibility matter

But cost is not the whole story. Utilities must balance a number of criteria when investing in power sources.

Most important is matching supply and demand at every moment of the day. Due to the technical characteristics of electricity and how it flows, if the supply of electricity is even a little bit lower than the demand, that can trigger a blackout. This means power companies and consumers need generation that can ramp down when demand is low and ramp up when demand is high.

Since wind and solar generation depend on the wind blowing and the sun shining, these sources must be combined with other types of generation or with storage, such as batteries, to ensure the power grid has exactly as much power as it needs at all times.

Nuclear and coal are predictable and run reliably, but they are inflexible – they take time to ramp up and down, and doing so is expensive. Steam turbines are simply not built for flexibility. The multiple days it took to shut down Japan’s Fukushima Daiichi Nuclear Power Plant after an earthquake and tsunami damaged its backup power sources in 2011 illustrated the challenges and safety issues related to ramping down nuclear plants.

That means coal and nuclear aren’t as helpful on those hot summer days when utilities need a quick power increase to keep air conditioners running. These peaks may only happen a few days a year, but keeping the power on is crucial for human health and the economy.

In today’s energy system, the most flexible generation sources are natural gas and hydro. They can quickly adjust to meet changing electricity demand without the safety and cost concerns of coal and nuclear. Hydro can ramp in minutes but can only be built where large dams are feasible. The most cost-effective natural gas technology can ramp up within hours.

The big picture, by power source

Over the past two decades, natural gas use has risen quickly to overtake coal as the most common fuel for generating electricity in the U.S. The boom was largely driven by the growing use of fracking technology, which allowed producers to extract gas from rock and lowered the price.

Natural gas’s low price and high flexibility make it an attractive choice. Its rise is a large part of the reason coal use has plummeted.

But natural gas has its challenges. Natural gas requires pipelines to carry it across the country, leading to disruptive construction. As Texas saw during its February 2021 blackouts, natural gas equipment can also fail in extreme cold. And like coal, natural gas is a fossil fuel that releases greenhouse gases during combustion, so it is also helping to cause climate change and contributes to air pollution that can harm human health.

Nuclear power has been gaining interest recently since it does not contribute to climate change or local air pollution. It also provides a steady baseload of power, which is useful for computing centers as their demand does not fluctuate as much as households.

Of course, nuclear has ongoing challenges around the storage of radioactive waste and security concerns, and construction of large nuclear plants takes many years.

Coal is more flexible than nuclear, but far less so than natural gas or hydropower. Most concerning, coal is extremely dirty, emitting more climate-change-causing gases, and far more air pollution than natural gas.

Solar and wind have grown rapidly in recent years due to their falling costs and environmental benefits. According to Lazard, the cost of solar combined with batteries, which would be as flexible as hydropower, is well below the cost of coal with its limited flexibility.

However, wind and solar tend to take up a lot of space, which has led to challenges in local approvals for new sites and transmission lines. In addition, the sheer number of new projects is overwhelming power system operators’ ability to evaluate them, leading to increasing wait times for new generation to come online.

What’s ahead?

Utilities have another consideration: Federal, state and local governments can also influence and sometimes limit utilities’ choices. Tariffs, for example, can increase the cost of critical components for new construction. Permitting and regulations can slow down development. Subsidies can artificially lower costs.

In our view, policies that are done right can help utilities move toward more reliable and cost-effective choices which are also cleaner. Done wrong, they can be costly to the economy and the environment.

About the Author:

Erin Baker, Distinguished Professor of Industrial Engineering and Faculty Director of The Energy Transition Institute, UMass Amherst and Paola Pimentel Furlanetto, Ph.D. candidate in Industrial Engineering and Operations Research, UMass Amherst

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Dan Kotlyar, Georgia Institute of Technology 

NASA plans to send crewed missions to Mars over the next decade – but the 140 million-mile (225 million-kilometer) journey to the red planet could take several months to years round trip.

This relatively long transit time is a result of the use of traditional chemical rocket fuel. An alternative technology to the chemically propelled rockets the agency develops now is called nuclear thermal propulsion, which uses nuclear fission and could one day power a rocket that makes the trip in just half the time.

Nuclear fission involves harvesting the incredible amount of energy released when an atom is split by a neutron. This reaction is known as a fission reaction. Fission technology is well established in power generation and nuclear-powered submarines, and its application to drive or power a rocket could one day give NASA a faster, more powerful alternative to chemically driven rockets.

NASA and the Defense Advanced Research Projects Agency are jointly developing NTP technology. They plan to deploy and demonstrate the capabilities of a prototype system in space in 2027 – potentially making it one of the first of its kind to be built and operated by the U.S.

Nuclear thermal propulsion could also one day power maneuverable space platforms that would protect American satellites in and beyond Earth’s orbit. But the technology is still in development.

I am an associate professor of nuclear engineering at the Georgia Institute of Technology whose research group builds models and simulations to improve and optimize designs for nuclear thermal propulsion systems. My hope and passion is to assist in designing the nuclear thermal propulsion engine that will take a crewed mission to Mars.

Nuclear-powered rockets could one day enable faster space travel.
NASA

Nuclear versus chemical propulsion

Conventional chemical propulsion systems use a chemical reaction involving a light propellant, such as hydrogen, and an oxidizer. When mixed together, these two ignite, which results in propellant exiting the nozzle very quickly to propel the rocket.

These systems do not require any sort of ignition system, so they’re reliable. But these rockets must carry oxygen with them into space, which can weigh them down. Unlike chemical propulsion systems, nuclear thermal propulsion systems rely on nuclear fission reactions to heat the propellant that is then expelled from the nozzle to create the driving force or thrust.

In many fission reactions, researchers send a neutron toward a lighter isotope of uranium, uranium-235. The uranium absorbs the neutron, creating uranium-236. The uranium-236 then splits into two fragments – the fission products – and the reaction emits some assorted particles.

More than 400 nuclear power reactors in operation around the world currently use nuclear fission technology. The majority of these nuclear power reactors in operation are light water reactors. These fission reactors use water to slow down the neutrons and to absorb and transfer heat. The water can create steam directly in the core or in a steam generator, which drives a turbine to produce electricity.

Nuclear thermal propulsion systems operate in a similar way, but they use a different nuclear fuel that has more uranium-235. They also operate at a much higher temperature, which makes them extremely powerful and compact. Nuclear thermal propulsion systems have about 10 times more power density than a traditional light water reactor.

Nuclear propulsion could have a leg up on chemical propulsion for a few reasons.

Nuclear propulsion would expel propellant from the engine’s nozzle very quickly, generating high thrust. This high thrust allows the rocket to accelerate faster.

These systems also have a high specific impulse. Specific impulse measures how efficiently the propellant is used to generate thrust. Nuclear thermal propulsion systems have roughly twice the specific impulse of chemical rockets, which means they could cut the travel time by a factor of 2.

Nuclear thermal propulsion history

For decades, the U.S. government has funded the development of nuclear thermal propulsion technology. Between 1955 and 1973, programs at NASA, General Electric and Argonne National Laboratories produced and ground-tested 20 nuclear thermal propulsion engines.

But these pre-1973 designs relied on highly enriched uranium fuel. This fuel is no longer used because of its proliferation dangers, or dangers that have to do with the spread of nuclear material and technology.

The Global Threat Reduction Initiative, launched by the Department of Energy and National Nuclear Security Administration, aims to convert many of the research reactors employing highly enriched uranium fuel to high-assay, low-enriched uranium, or HALEU, fuel.

High-assay, low- enriched uranium fuel has less material capable of undergoing a fission reaction, compared with highly enriched uranium fuel. So, the rockets needs to have more HALEU fuel loaded on, which makes the engine heavier. To solve this issue, researchers are looking into special materials that would use fuel more efficiently in these reactors.

NASA and the DARPA’s Demonstration Rocket for Agile Cislunar Operations, or DRACO, program intends to use this high-assay, low-enriched uranium fuel in its nuclear thermal propulsion engine. The program plans to launch its rocket in 2027.

As part of the DRACO program, the aerospace company Lockheed Martin has partnered with BWX Technologies to develop the reactor and fuel designs.

The nuclear thermal propulsion engines in development by these groups will need to comply with specific performance and safety standards. They’ll need to have a core that can operate for the duration of the mission and perform the necessary maneuvers for a fast trip to Mars.

Ideally, the engine should be able to produce high specific impulse, while also satisfying the high thrust and low engine mass requirements.

Ongoing research

Before engineers can design an engine that satisfies all these standards, they need to start with models and simulations. These models help researchers, such as those in my group, understand how the engine would handle starting up and shutting down. These are operations that require quick, massive temperature and pressure changes.

The nuclear thermal propulsion engine will differ from all existing fission power systems, so engineers will need to build software tools that work with this new engine.

My group designs and analyzes nuclear thermal propulsion reactors using models. We model these complex reactor systems to see how things such as temperature changes may affect the reactor and the rocket’s safety. But simulating these effects can take a lot of expensive computing power.

We’ve been working to develop new computational tools that model how these reactors act while they’re starting up and operated without using as much computing power.

My colleagues and I hope this research can one day help develop models that could autonomously control the rocket.

About the Author:

Dan Kotlyar, Associate Professor of Nuclear and Radiological Engineering, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Bruce Huber, University of Notre Dame 

Fossil fuels are the leading driver of climate change, yet they are still heavily subsidized by governments around the world.

Although many countries have explicitly promised to reduce fossil fuel subsidies to combat climate change, this has proven difficult to accomplish. As a result, fossil fuels remain relatively inexpensive, and their use and greenhouse gas emissions continue to grow.

I work in environmental and energy law and have studied the fossil fuel sector for years. Here’s how fossil fuel subsidies work and why they’re so stubborn.

What is a subsidy?

A subsidy is a financial benefit given by a government to an entity or industry. Some subsidies are relatively obvious, such as publicly funded crop insurance or research grants to help pharmaceutical companies develop new drugs.

Others are less visible. A tariff on an imported product, for example, can subsidize domestic manufacturers of that product. More controversially, some would argue that when a government fails to make an industry pay for damage it causes, such as air or water pollution, that also amounts to a subsidy.

Subsidies, especially in this broader sense, are widespread throughout the global economy. Many industries receive benefits through public policies that are denied to other industries in the same jurisdiction, such as tax breaks, relaxed regulations or trade supports.

Governments employ subsidies for political and practical reasons. Politically, subsidies are useful for striking bargains or shoring up political support. In democracies, they can mollify constituencies otherwise unwilling to agree to a policy change. The 2022 Inflation Reduction Act, for example, squeaked through Congress by subsidizing both renewable energy and oil and gas production.

Practically, subsidies can boost a promising young industry such as electric vehicles, attract business to a community or help a mature sector survive an economic downturn, as the auto industry bailout did in 2008. Of course, policies can outlive their original purpose; some of today’s petroleum subsidies can be traced to the Great Depression.

How are fossil fuels subsidized?

Fossil fuel subsidies take many forms around the world. For example:

• In Saudi Arabia, fuel prices are set by the government rather than the market; price ceilings subsidize the price citizens pay for gasoline. The cost to state-owned oil producers there is offset by oil exports, which dwarf domestic consumption.
• Indonesia also caps energy prices, then compensates state-owned energy companies for the losses they bear.
• In the United States, oil companies can take a tax deduction for a large portion of their drilling costs.

Other subsidies are less direct, such as when governments underprice permits to mine or drill for fossil fuels or fail to collect all the taxes owed by fossil fuel producers.

Estimates of the total value of global fossil fuel subsidies vary considerably depending on whether analysts use a broad or narrow definition. The Organization for Economic Cooperation and Development, or OECD, calculated the annual total to be about US$1.5 trillion in 2022. Tche International Monetary Fund reported a number over four times higher, about $7 trillion.

Why do estimates of fossil fuel subsidies vary so dramatically?

Analysts disagree about whether subsidy tabulations should include environmental damage from the extraction and use of fossil fuels that is not incorporated into the fuel’s price. The IMF treats the costs of global warming, local air pollution and even traffic congestion and road damage as implicit subsidies because fossil fuel companies don’t pay to remedy these problems. The OECD omits these implicit benefits.

But whichever definition is applied, the combined effect of national policies on fossil fuel prices paid by consumers is dramatic.

Oil, for example, is traded on a global market, but the price per gallon of petrol varies enormously around the world, from about 10 cents in Iran, Libya and Venezuela – where it is heavily subsidized – to over $7 in Hong Kong, the Netherlands and much of Scandinavia, where fuel taxes counteract subsidies.

What is the world doing about fossil fuel subsidies?

Global leaders have acknowledged that subsidies for fossil fuels undermine efforts to address climate change because they make fossil fuels cheaper than they would be otherwise.

In 2009, the heads of the G20, which includes many of the world’s largest economies, issued a statement resolving to “rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption.” Later that same year, the governments of the Asia-Pacific Economic Cooperation forum, or APEC, made an identical pledge.

In 2010, 10 other countries, including the Netherlands and New Zealand, formed the Friends of Fossil Fuel Subsidy Reform group to “build political consensus on the importance of fossil fuel subsidy reform.”

Yet these commitments have scarcely moved the needle. A major study of 157 countries between 2003 and 2015 found that governments “collectively made little or no progress” toward reducing subsidies. In fact, the OECD found that total global subsidies nearly doubled in both 2021 and 2022.

So why are fossil fuel subsidies hard to eliminate?

There are various reasons fossil fuel subsidies are hard to eliminate. Many subsidies directly affect the costs that fossil fuel producers face, so reducing subsidies tends to increase prices for consumers. Because fossil fuels touch nearly every economic sector, rising fuel costs elevate prices for countless goods and services.

Subsidy reform tends to be broadly felt and pervasively inflationary. And unless carefully designed, subsidy reductions can be regressive, forcing low-income residents to spend a larger percentage of their income on energy.

So, even in countries where there is widespread support for robust climate policies, reducing subsidies can be deeply unpopular and may even cause public unrest.

The 2021-22 spike in fossil fuel subsidies is illustrative. After Russia’s invasion of Ukraine, energy prices surged throughout Europe. Governments were quick to provide aid for their citizens, resulting in their largest fossil fuel subsidies ever. Forced to choose between climate goals and affordable energy, Europe overwhelmingly chose the latter.

Of course, economists note that increasing the price of fossil fuels can lower demand, reducing emissions that are driving climate change and harming the environment and human health. Seen in that light, price spikes present an opportunity for reform. As the IMF noted, when prices recede after a surge, it “provide[s] an opportune time to lock in pricing of carbon and local air pollution emissions without necessarily raising energy prices above recently experienced levels.”

About the Author:

Bruce Huber, Professor of Law, University of Notre Dame

This article is republished from The Conversation under a Creative Commons license. Read the original article.