Abundant, low-cost solar photovoltaic (PV) technology coupled with rapidly falling battery storage prices will ultimately have three major effects. First, it will displace or render obsolete traditional baseload electricity generation – specifically coal, nuclear, and natural gas. Solar power has become the cheapest source of new electricity in history in most major economies, while fossil fuels are becoming increasingly expensive to extract and burn under tightening carbon regulations. Consequently, coal-fired stations are shutting down early, and plans for new gas turbines are being shelved.
Second, cheap energy storage will transform the transport sector and local power grids. Electric vehicles (EVs), municipal electric bus fleets, and domestic battery systems are fast becoming cheaper to purchase and run than their combustion-engine predecessors, allowing rapid decentralisation of the energy grid.
The third effect will be on supply chains and localized environmental degradation. While a solar-and-battery-powered grid will drastically reduce global greenhouse gas emissions, it demands unprecedented quantities of lithium, cobalt, nickel, and copper. The extraction of these critical minerals is concentrated in a few developing nations where mining operations often lead to severe local water contamination, soil erosion, and human rights violations. This shift swaps a global atmosphere crisis for severe, localized ecological and geopolitical challenges.
Question
With reference to the information provided and your own knowledge, evaluate the possible microeconomic and macroeconomic effects on the global economy of a sustained fall in the price of solar power and battery storage.
