NCPA - National Center for Policy Analysis

Distributed Solar Power

July 13, 2011

Producing electricity close to the point of use -- called distributed generation -- eliminates the need for long-distance transmission lines.  Solar photovoltaic technology ("solar") generates power using panels of semiconducting cells that convert sunlight into electricity.  Solar is one of the most widely used distributed generating sources, say Olufemi Olarewaju, a junior fellow, and H. Sterling Burnett, a senior fellow, with the National Center for Policy Analysis.

A key challenge to widespread solar power use is high equipment and installation costs.

  • In the United States, solar power costs two to three times as much as the average cost of electric power in many states.
  • However, unlike a centralized power grid -- power plants linked to distant consumers through transmission lines and transformers -- distributed generation does not require an extensive infrastructure, making it preferable for certain applications such as street lights and traffic signs.

Many developing countries lack modern electrical grids outside of major cities, making distributed solar power an attractive option.  In rural sub-Saharan Africa, for example, 95 percent of the population has no access to electricity.

Cost is one of the greatest barriers to the spread of solar power in sub-Saharan Africa.  Fortunately, in most of these countries, solar prices have declined, the efficiency of solar systems has improved and income has increased.  Consider:

  • A decade ago, a solar system capable of powering a few light bulbs and maybe a small television or radio cost the equivalent of 100 percent to 300 percent of the annual income of a rural household.
  • Today, the cost of a comparable solar system ranges from half the annual income of an average household to approximately 150 percent.

Solar power may not be the best choice for many uses, but it does have a role to play for a growing number of people.  Developing countries, especially, can benefit from the increased use of distributed solar power, say Olarewaju and Burnett.

Source: Olufemi Olarewaju and H. Sterling Burnett, "Distributed Solar Power," National Center for Policy Analysis, July 13, 2011.

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