By Michael Gabrellian '17Low fossil fuel prices have typically been poor indicators for renewable energy sources. Why pay more money for electricity generated from solar or wind power when you can get the same level of energy from fossil fuels at lower prices? For decades, this conundrum has plagued the renewable energy business, despite the support by government subsidies and tax breaks. With oil prices hovering around $80 due to weak global demand and natural gas prices near all-time lows, many economists would think renewable energy should continue to stagnate.By 2016, however, according to a Deutsche Bank report, solar electricity will be as cheap or cheaper than the average electricity bill prices in 47 U.S. states. While this is assuming that the federal government maintains its 30% tax credit on system costs, this marks a milestone in the expansion of renewable energy. Solar has already reached price parity with conventional electricity in 10 states. In a September report, the International Energy Association (IEA) announced that solar power could be the top source of electricity by 2050, with solar photovoltaic (PV) systems generating up to 16% of the world’s electricity, and solar thermal electricity (STE) providing an additional 11%. Today, solar power still only accounts for less than 1% of total production.Traditional fuel sources, particularly oil and natural gas, will continue to make up the majority of energy consumption in the next few decades. The vast infrastructure and capacity in place, economies of scale, and still advantageous cost structures make fossil fuels much more dominant than renewable energy. Since solar panel’s share of the market is so small today, regardless of how quickly it expands, the fuel source will not account for a large portion of the nation’s electrical output anytime soon. Also, because of solar panel’s limited capacity, the dropping price of the energy source will have a very small immediate impact on the prices of fossil fuels.Going forward, state and federal policies will have a large impact on the further development of the solar power industry, as well as the expansion of other renewable energy sources. The only reason these fuel sources control any piece of energy’s market share is because of very generous state and federal subsidies and tax breaks. Any change in policy could significantly alter the economics of the industry. Throughout the 2014 election cycle, however, not many unique statements were made about the industry. The debate and outcome of the 2016 presidential elections will more likely provide some more clarity on what direction governments will take regarding continued subsidies and support for renewable energy companies.At the moment, solar still provides less than 1% of total global electricity production. That number is unlikely to substantially change within the next decade, even with projected exponential growth. The fact that prices have dropped to the point of being competitive with traditional fossil fuels, however, indicates that solar will gradually eat away at the market share of companies engaged in traditional fuel businesses. With prices dropping, and as long as the government continues to provide its generous subsidies and tax breaks to these companies, solar energy will likely continue growing as a share of total energy output in both the US and the world.Sources:http://www.bloomberg.com/news/2014-10-29/while-you-were-getting-worked-up-over-oil-prices-this-just-happened-to-solar.htmlhttp://uk.reuters.com/article/2014/09/29/us-solar-iea-electricity-idUKKCN0HO11K20140929http://www.iea.org/http://www.realclearpolitics.com/topic/in_the_news/energy_policy_2014_midterms/