Solar power, along with wind power, is a particularly favored renewable energy resource. If wind fails the bird test as hydro fails the fish test, or if wind becomes economically unsustainable in the United States, solar will have to shoulder a greater load. Economic, environmental and scale problems, however, limit solar's potential as an electric utility power source despite improving technology.

Weighing in at 373 megawatts nationally, bulk, or central station, solar power (power generated at a large-scale centralized location and then transmitted on the power grid to multiple users) represents .03 percent -- three hundredths of 1 percent -- of total U.S. generation capacity. Solar generation of 901 million kwh in 1995 was .03 percent -- three hundredths of 1 percent -- of national electricity production, one-fourth the size of the tiny wind industry. As with the wind power industry, solar's long promised commercial viability has not occurred,¹⁶² and potential market share has been grossly overestimated.¹⁶³ A variety of government subsidies, however, has allowed solar's capacity and output to double since the late 1980s.

Solar is less economic than wind as a central-station power source, although its cost fell from around 25 cents per kwh in the early 1980s to a claimed 8 cents per kwh a decade later.¹⁶⁴ Unlike wind power capacity, new solar power capacity is triple the cost of new gas-generated electricity and quadruple the cost of surplus power. Solar power, like most other renewables, is geographically limited for the foreseeable future. In the United States, central-station solar is limited to the desert Southwest and other selected locales, which often involve transmission investments that custom-sited gas-fired plants can avoid. States such as California and Nevada are swimming in 2-cent-per-kwh economy energy, an insurmountable barrier for cost-effective central-station solar under any conditions.¹⁶⁵ Greater potential may exist abroad where power needs are greater (one-third of the world's population remains without electricity), desert areas are more common, electricity is more scarce and natural gas is not indigenous. Yet even then, solar is only a daytime electricity source, and intermittent at that, unless fossil-fuel generation, pumped storage or nuclear power provide backup reliability.

The environmental problems of solar center around the production of mirrors and land impacts. Regarding the latter, central-station solar requires between five and 17 acres per megawatt (see below), compared to gas-fired plants that a decade ago required only one-third of an acre per megawatt and today can be as little as one-twenty-fifth of an acre.¹⁶⁶

The Department of Energy has spent approximately $5.1 billion (in 1996 dollars) on solar energy since FY 1978, more than $12 million per megawatt. This investment per unit of capacity is some 20 times greater than today's capital cost of modern gas-fired plants. Looking ahead, post-FY 1994 DOE funding to attempt to commercialize photovoltaics and solar thermal is estimated to be $1,050 billion, triple the estimate for wind power.¹⁶⁷

The solar power industry can be broken down into thermal solar markets, photovoltaic markets, and micro solar markets. Each is defined and examined below with special attention to economic and environmental issues.