You have to look at it from both the oil company's and utility's perspective.
With oil companies, they have so much historical data, they can use very sophisticated statistical models to calculate their future expected value of drilling in a particular area. So although they have low margins, the can calculate a profit even without subsidies, which makes it worthwhile for them to drill.
Now with utilities, they can calculate that without subsidies, a new solar farm won't be profitable. That is why it is no lie when they say that solar projects are literally on the line without the subsidies being renewed this year.
Both of these industries do their cost/benefit analyses and then determine whether to invest. It's really as simple as that.
As I've said, I think that within 10-15 years, the solar and other alternative energy industries will have reach a sufficient scale and technological efficiencies, that they too can be profitable without subsidies. And at that point, we will have a diversified energy supply, which allows us to flex over to the cheaper source when one commodity's prices rise. And our country will benefit greatly from having a new industry with hundreds of thousands of new, high-tech jobs. |
