Home  >  Subjects  >  Transportation / Mass Transit  >  current page My Profile

Questions About Managerial EconomicsTerm Paper

Pages: 20 (4218 words)  |  Style: Let the writer choose  |  Sources: 1

Custom Writing

Solar Power

An Analysis and Discussion of how Solar Prices and Externalities of the Energy Industry Will Influence the Adoption of the Illinois Solar Power Total Output

This research is based on a hypothesis that was constructed relative to identifying the market energy prices that might be needed for local businesses to consider investing in alternative energy sources such as installing solar panels based on purely economic considerations. For example, the average costs of energy can be calculated and there are many sources that compile data relative to these trends that are available for businesses to use decision-making tools such as a cost-benefit analysis. Yet, there are many businesses that make the decisions to integrate solar that are not the result of a pure economic comparison. For example, if the company wants to be perceived by their customers, or potential customers, to be progressive and environmentally friendly in an effort to add a perceived value to their products and/or services, then they may attribute a value to solar power that is much higher than what the markets currently dictate. Furthermore, other models have also tried to integrate the economic externalities that are associated with the costs of pollution, but for the purposes of this analysis, the pure economic market data will be the focus.

Although oil prices have been considerably low in the last year, it is likely that they will rise again in the short-term. New technologies have allowed the extraction of the oil that still remains in the U.S. Offshore drilling and oil reserves that are only accessible by hydraulic fracking represent the two best examples of controversial extraction methods which have revitalized the U.S. oil production which has in turn reduced the dependence on the cartels and Middle Eastern oil (Doshi & Corrigan, 2015). Yet, the use of fracking is a debated political issue that is likely to undergo significant regulations in some areas. Because of increased competition, OPEC has tried to stifle the growth of its competitors by increasing production and lower the global energy price. However, Saudi Arabia has more access to capital that everybody else in OPEC and it plans to continue with its long-term plan to undermine rivals and secure its market share (Raval & Kerr, 2015).

At the same time, the cost of solar technologies has dramatically fallen. However, OPEC's decision to keep oil prices artificially low in the global market also stifles the development of alternative and renewable fuel sources. For example, an investment in solar or wind energy may have made financial sense at $100 a barrel, however at $50 a barrel these investments cannot compete. Yet, McKinsey recently released a report that details that renewables are continuing to show promise despite the low oil and gas prices which indicate a number of changing market dynamics.

"In the first quarter of 2015, many clean-tech funds handily outperformed the S&P. Moreover, the sector did not see a wave of bankruptcies and pullbacks like the one that scarred it a decade ago, when a glut of Chinese manufacturing drove dozens of solar companies into oblivion. In fact, global clean-energy investments increased 17% in 2014, reaching $270 billion, reversing two years of declines. While government policy support remains crucial, renewable companies also did well-raising money in the markets; equity investment rose 54% in 2014. (McKinsey, 2015)"

Therefore, it would be interesting to investigate these developments with respect to the local market. For example, the price of alternative energies could be the independent variable and could be measured in different ways such as the price per watt, the return on investment, and the payback period necessary.

Thesis Statement

This analysis is focused on the role that solar generated energy production can play in efforts to mitigate the ecological degradation that is becoming more salient as the science around such issues continually advances. It is thus investigated whether individual solar power installation will represent a finically viable option for local businesses in the next ten years. Although there will undoubtedly be financial decisions that must be made relative to how to finance the installation of solar PV project, the average cost of solar power is expected to be competitive with traditional methods at some point in the near future.

Although solar energy is far from being cost effective (in a strictly economic sense) as traditionally energy sources that are based on fossil fuels, there are many opportunities for the price of alternative sources to continue falling based on innovation and quantities of scale that can be achieved. This research paper will provide a background about solar power, investigate why this question is important, and test the regression trend of rising energy prices generated from fossil fuels and the total energy consumption of solar power in the state.

Literature Review

Within the last five years, the market for solar powered electricity has gained significant momentum due to the fact that there have been government subsidies provided by many nations trying to maintain their own emission targets that were set in efforts to become more sustainable. However, these efforts have also culminated in an international agreement that has been forged between nations in what is referred to as "COP 21." Parties to the U.N. Framework Convention on Climate Change (UNFCCC) reached a landmark agreement on December 12 in Paris, the largest ever single-day gathering of heads of state in history, as well as an exhausted list of other interested parties including array of "non-state actors," including governors, mayors and CEOs, and the launch in Paris of major initiatives like the Breakthrough Energy Coalition announced by Bill Gates and other billionaires (C2ES, 2016). As French President Francois Hollande summed it up:

"In Paris, there have been many revolutions over the centuries. Today it is the most beautiful and the most peaceful revolution that has just been accomplished -- a revolution for climate change (C2ES, 2016)."

Although the deal that was reached was unprecedented in many regards and was able to overcome many obstacles and boundaries that prevented many generations of previous agreements from being reached (for 21 years actually in regards to COP agreements), many people feel that the deal that was made does not go far enough. Given the drastic implications that climate change presents the state of humanity as a whole, the following four criteria was proposed as a metric of its success or failure (Chivers, 2015):

1. Catalyze immediate, urgent and drastic emission reductions;

2. Provide adequate support for transformation;

3. Deliver justice for impacted people;

4. Focus on genuine, effective action rather than false solutions;

Therefore, there is at least the potential for further generations of international targets to usher in new rounds of more restrictive policies that are more demanding and further restrictive. Any such policy that is enacted in any part of the world will have the effect of increasing prices of energy and fuels produced through the use of fossil fuels by increasing costs related to the production of these goods and services as well as by limiting the supply. There are also many other trends that are also influencing the current energy prices such as the fact that energy prices have gradually increased with the depletion of the fossil fuels that are effectively "easy to get to" (Gordon, Kinsey, Nayaak, & Garboushian, 2010). Oil companies have depleted the sources of fossil fuels that were the easiest to extract long ago. The majority of the remaining sources require new practices and new technologies to extract and are also far riskier in general. For example, offshore drilling in the arctic regions is a clear example of this due to the massive risks that are involved and the inability to be able to provide effective cleanup response should an accident take place.

In the current state of the solar market, there currently exist four overall methods of reducing the overall costs associated with solar powered electrical generation; system innovations, system optimization, system reliability, and system efficiency. Many advances in each of these categories of cost improvements are currently unknown due to the fact solar companies must work within a system based on competition rather than a more collaborative atmosphere. Figure 1 - Sub-System Optimization vs. Efficiency Gains (Gordon, Kinsey, Nayaak, & Garboushian, 2010)

Currently most commercially available PV solar panels are based on inorganic semiconductors-particularly silicon, which is the second most abundant material in the earth's crust; such materials can produce electric and are affordable, yet they are far from efficient in their capacity to capture the power of the sun. Some of the new generations of solar cells and technologies being developed are promising and include the advantages of low-cost materials, high-throughput manufacturing methods, and low-energy expenditure; among these emerging types of PV cells being developed are PEC or dye-sensitized solar cells (DSSCs); organic (molecular and polymer) solar cells; hybrid organic-inorganic solar cells; and colloidal quantum dot (QD) thin-film solar cells (Kafafi, et al., 2015). However, even with all the different advances in solar technologies that have been made, as well as… [END OF PREVIEW]

Download Full Paper (20 pages; perfectly formatted; Microsoft Word file) Microsoft Word File

Managerial Economics - Should I Start a


Managerial Economics Question Set III a Market


Economics There Are a Number of Variables


Managerial Accounting Systems


Managerial Economics Question Set Before Sarah Quit


View 975 other related papers  >>

Cite This Paper:

APA Format

Questions About Managerial Economics.  (2016, July 29).  Retrieved November 20, 2017, from https://www.essaytown.com/subjects/paper/questions-managerial-economics/1122122

MLA Format

"Questions About Managerial Economics."  29 July 2016.  Web.  20 November 2017. <https://www.essaytown.com/subjects/paper/questions-managerial-economics/1122122>.

Chicago Format

"Questions About Managerial Economics."  Essaytown.com.  July 29, 2016.  Accessed November 20, 2017.
https://www.essaytown.com/subjects/paper/questions-managerial-economics/1122122.

Disclaimer