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Investment in Renewable Energy Decision

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Situation B

Cindy for Situation B, is considering to invest into the industry of renewable energy. She is examining into one segment of the industry to endow in, which is that of contracting the setting up of panels of solar. Cindy is acquainted that businesses and families are saving money by turning to solar for their needs of power. In addition to there are government supported directives to make solar power further assessable to people. For Cindy, she is considering to pass the opportunities of business for installing planes of solar, since this product can decrease pollution and assist to save the environment.

GDP and Solar Energy

In the majority nations of the world and the United States, energy is extremely important in maintaining society secure and expanding. Energy offers the capability to assist in transportation, activities on a daily basis living and employment. In 2013 around $1.2 trillion dollars in the USA, were spent on energy or about 8.3% of the GDP. That converts into a yearly rate of 3,895 dollars for each person was expended on consumption of energy. With the huge impact of environment observed by the energy production, there was been further call, for this forms of renewable energy, as that of solar panels.

The USA does use 19% of the energy supply of the world and a 19% sum of the GDP of the world’s. With the large source of energy needed, companies are looking for innovative means to manufacture this that cost lesser and decreases the impact on environment. Renewable energy consumption is projected to increase annually at a rate of 1.6%, on average, between 2011 and 2040, compared to 0.3% growth in total energy. Solar photovoltaic electricity and cellulosic ethanol are projected to develop best. On the other hand, at these rates renewable would simply offer 13% of U.S. consumption of energy in 2040, evaluated to in relation to 9% at present. Residential consumers can obtain credits of tax equal to 30% of installation and procurement costs for additions of renewable energy to fresh and existing homes. Qualified technologies of renewable comprise solar water heaters, geothermal heat pumps, small wind turbines, solar panels, and residential fuel cell.

Solar Resources are not simply influencing the GDP for power, however in additional areas also. In excess of a millions of water heaters are swapped every year and additional are being replaced by with solar power. The solar power is considered as a prospect to use solar power as the prime source of heating for commercial buildings and homes. This can add to the sum of GDP that is expended annually on solar power and a huge share of the market of energy.

Business Cycle, Unemployment and Inflation

When glancing at Renewable Energy, with a quicker glance at solar energy, there might be a raise in the solar use owing to the recession or a depression in the cycle of business. The decline in renewable energy cost and the raise in the price of further ordinary production of energy, will lead to a raise in demand of solar power. In the preceding few years, when financial system was in a period of expansion, cost of solar power did increase and subsequently did the cost of construction that sourced projects to be discontinued. With the recession, that was universal, decreased the by and large cost for the solar panels construction and made for a fast increase of manufacturing of equipments in Asia. This additional market competition set it extra reasonable to utilize solar power in the USA.

Industry of Renewable energy is assuming a additional grip, owing to raise in the cost of coals and further raw materials that are required to create energy. This industry Renewable energy is looking at a fiscal electricity improvement to promote sales of further panels of solar. With the mandated government targets of renewable energy, there is expectant to be a greater deals of more solar panels demand. In the previous 5 years, the solar panels demand has raised 4 times of the amount, that was observed amid 1996-2008. This was instituted, owing to solar power being 2 dollars lesser a watt hour, than additional fossil or nuclear power sources.

Once of the foremost effects that renewable energy had on the financial system is how it was been adding up to the unemployment rates. From the instance the Clean Air Act was passed, it has eliminated 600,000 jobs in a fifteen year time period. For every one job that was generated by renewable energy, 2.2 jobs in additional areas of energy were lost. This has effected few states, restricting the expansion of solar power in the state.

Rates of Unemployment have as well restricted the consumers spending habits. There has been merely minute quantity of income growth above the precedent ten years of around 0.2% for each year. The deficiency in growth, has effected in consumers having to reduce the sum of money they are capable to devote into solar panels. The normal consumer is having a tough time shelling out for housing, food, and power during the recession. This effect is the lack of ability to save money or move money to spend for additional items external of items required for living. Consumers are searching for ways to decrease cost of power, however are not capable to expend the needed money to have solar panels further to their homes needs.

As for inflation and renewable energy, there have been alterations in this industry with regards to the goods price. There are raise in the sum the solar power charges the consumers, owing to rate of increase of inflation rates. The dollars have become weaker and is not capable to acquire the similar sum of goods, as it was capable to around ten years ago. Solar power, similar to further renewable energies do have the benefit above further types of power. Solar power do have the federal government support, in the structure of subsidies and tax credits. The federal government permits a business or household to subtract 30% of cost of solar power system of federal taxes. This can aid in the payment of having the panels of solar instituted. That is one instance of several diverse government supported programs that will decrease the effect of inflation on the customer when they purchase a product of solar. This decrease with a poor economy, can persuade customer into endowing into solar power.

International and Solar Energy

With solar companies based in US failing, there is additional dependence on dealing with China for the needs of solar manufacturing. There have been accounts that disputes of trade might affect the production of solar panel and provide China the comparative benefit above USA in manufacturing of solar panels. In United States in 2010, solar industry has imported in excess of 278.3 billion dollars of panels of solar from China and delivers 98% of any used solar product in the USA. While conversely, the USA has merely exported 2 billion dollars’ value of products of solar to China. This is significant, for more than a few reasons. China is searching for expanding the quantity of their individual utilization of solar power and is lessening the figure of solar panels that will be sending overseas. With fresh policies of Chinese growing their utilization of solar power, the imported supply to the USA is going to considerably reduced. The decrease in supply, will be the increase the cost of the solar power, in the USA by five times, by 2020. In addition, with the decrease in solar panels, is obviously going to decrease the numeral of companies that are capable to install and sell solar panels.

With China the USA trade deficit in 2012, was around $315 billion and that was upbeat from the rate of 2011 of $295.4 billion. The reason for this trade deficit being subsequently high is the rate of exchange and ability of China to manufacture products at a lesser cost. Many of the companies of USA those are competent to construct solar panels are not capable to produce the merchandise, at the lesser price than of a company in China. The federal government has endeavor to decrease this deficit in trade by striking tariffs and additional actions of trade to assist raise the manufacture of solar panels in the USA, however has not been able to succeed. China does have power over the world’s major amounts of the scarce metals of earth. Devoid of the import of these metals, US companies will not be capable to manufacture the solar panels to meet up the demand. For the US it would take around 20 years to have equipped mines that can manufacture the scarce metals of earth required to manufacture the existing number of solar panels that are exported by China.

With the money exchange rate amid the China and United States, US solar companies are capable to create solar systems aggressive with additional structures of power. Stimulus law of 2009 and a 2008 law signed by George W. Bush, the former President, these regulations lifted a limit on the tax credit of federal for solar-power systems and made it simpler for solar companies to revolve the credit into money.

Monetary Policy and Solar Power

Prior to solar power investments there have to be a perceptive of the monetary policies that might affect the industry of solar. Monetary policy is the administration of liquidity and economy by the central banks. The Federal Reserve will endeavor to control the supply of money to endorse steady prices and add to the employment rates. At present there are several means they are endeavoring to recuperate the economy and will have an effect on the solar industry.

With the recession that commenced in 2007, directed to a depression in the USA and was foremost reason for collapse in economy. The Federal Reserve acted to decrease the short-term rates of interest level to near zero. This provided support to the economy and lessens the rates of interest for business and personal loans. The loss of almost 9 million jobs throughout the recession lead rates of unemployment to ascend from beneath 5 % to more than 10 %. As well, the value of homes in U.S. fell stridently, in a few areas additional than 30 percent. This reduction in activities of economic as well had striking effects on fundamental consumer inflation price, which dropped from around 3 % in late 2007 to 0.5 % in the mid of preceding year.

With endeavoring to increase the solar industry the loans, the federal government, operational with the federal reserve has functioning on maintaining the amount of loan for solar power interest rate lesser, whilst have the guaranteed loans by the federal government.

Fiscal Policy and Unemployment

Unemployment and Fiscal Policy have big effects on the industry of solar power and economy. The federal government has laws, regulation, and policies that are made to assist the companies and people. In the case of solar power, there are more than a few policies that are constructing renewable energy additional accessible to the public of America. Unemployment rate and Fiscal Policy can have an effect on the sum of money that may go to these polices. If the finances are not there, then people may not be able to have the funds for solar power and decrease the number of companies of solar power in the market.

Unemployment has a huge effect on the capability of the federal government to provide finance to the solar industry. When rate of unemployment is higher, the federal government is not capable to produce the funds to sustain programs and decrease activities of economic. The lesser people that are operational, the lesser taxes are produced to shell out to the federal government. As the unemployment rate stays at an advanced rate, people that are operational are not capable to have funds to use on items, similar to having solar power in their house. With the lesser sum of spending, this makes a tough time to endure for any business.

The federal government to advance the solar power industry has passed the fiscal policy to assist in the development. The Production Tax Credit inflation-adjusted, is for power that is produced by solar and additional forms of industry of renewable. Users of Industry and personal get energy of 1.1 cents/wKh that is utilized for power by the consumer. Accelerated depreciation on tax enables a lot of project owners of renewable energy to deflate the preponderance of their investments above a 5-year period for purposes of tax, relatively than depreciating those assets above an era that -very much estimates to the life span of the equipment. The Investment Tax Credit, provide a tax break of 30% on the solar project construction cost. There was also a fresh fiscal policy to provide $600 million dollars to schools of trade to educate people for maintaining and installing solar and additional renewable resources. If these policy stays at the similar rate, these polices might counterbalance the unemployment high rate and assist the industry of solar. If these polices would amend, than it might be a great deal harder to sustain a solar company.


The National Reviewable Energy Laboratory (NREL) established that there was a connection among consumers acquireing solar systems, in which the standard income of household was $150,000 or additional. That denotes that the majority middle class family are not purchasing solar systems and cost has been the major issue. This was establish for household that were acquiring the outright solar panels. With populace that was hiring the solar panels on lease; the revenue for every household was at $100,000. In spite of the lessening of the household average, the majority of the middle class can be eliminated for solar panels leasing.

NREL establish that people yet have a huge sum of money on their power bill, in spite of the individual having to lease the solar panels.


When considering commencing this business, you require having a plan of business for the company of solar energy. This plan of business requires planning for the economy changes, till the economies do not recuperate, people will not buy solar panels. As well, what occurs if or when funds of government for the solar industry stop? Devoid of the subsidies, solar business will not be able to endure with no aid from local or federal government. At the similar time, are companies and households going to be eager to spend into solar, with the tax credits to counterbalance the cost. With the solar panels price being higher in relation to China reducing the imports, do people will need to pay out more in the shorter run, for that benefits of long term. There could be a fall in the solar demand, owing to the cost of the units.

There are additional regions that require to be scrutinized before starting this kind of business. There are bound to be higher requirement for geographic benefits that require to be examined, prior to setting up. Initially, it has been establish that people with revenue over $100,000 are bound to be the target customers for sales to household. This might be vast returns, if the business was capable to acquire contracts with bigger or smaller companies and having the domestic market as a secondary resource of income. The company is bound to be located in a area were solar is extremely popular with the consumer. Subsequent, is seeking subsidies from the government. The federal government will assist the company acquire lesser rate of interest on loans to acquire the business being started. In addition, grants can be utilized to employ staff and their expenditure on training. With being a solar company, there are going to be tax breaks that can assist to support the company with growth and investment. At present the period is right for venturing into solar, however one has to be the aware of things that could change extremely quickly. If backing of government is lost, China do decrease the solar planes number exported to the USA or consumers lose the drive for renewable energy it will be the bottom for the solar energy market.


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