Do energy forecasters underestimate solar because it behaves like technology?
Core argument: Actual global solar installations have run as much as three times higher than the International Energy Agency predicted five years earlier, and the agency has revised its solar deployment forecasts upwards every year this decade.
Every year this decade, the International Energy Agency has had to revise its solar deployment forecasts upwards. And not just by small amounts. Actual installations have been as much as three times higher than the agency predicted five years ago. Part of the confusion may lie in the fact that energy is transitioning from a commodity to a technology. Consistently improving technologies have historically followed predictable heuristics such as Wright’s Law or Moore’s Law. This is also happening in energy as evidenced by solar PV, wind, and batteries, where costs have fallen by around 10% per year for decades. Commodities such as fossil fuels, however, exhibit entirely different patterns – prices tend to be volatile in the short term, but show mean reversion over longer periods, making them more amenable to autoregressive forecasting models. In fact, the inflation-adjusted prices of fossil fuels are essentially the same today as they were 140 years ago.