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Today’s primer will be devoted to the rise of renewable energy. This is, of course, a deeply politicized subject: Donald Trump and his officials hate, just hate wind and solar power, and there are many people who still refuse to believe that renewables can be practical even as renewables keep growing around the world, in fact accounting for the bulk of growth in electricity generation. But I’ll leave detailed discussion of where those attitudes come from for the next primer.

For today I want, instead, to focus on the economics of renewable energy. How did energy sources that a generation ago were widely dismissed as hippie fantasies become a major source of electricity? What are these sources’ future prospects, and how will their growth be affected by policy?

Beyond the paywall I’ll address the following:

1. How much has renewable energy grown, and why?

2. Why did the cost of renewables fall so much, so fast?

3. What role has policy played in the rise of renewables?

Today’s primer is intended as the first part of a two-part series. Next week I’ll ask, among other things, why there’s still so much U.S. political opposition to green energy; whether that opposition can stall the energy transition in America, and how this will affect geopolitics as China races ahead. I’ll also need to talk about whether renewables are driving up electricity prices and how we will (or won’t) cope with the extraordinary energy demands of generative AI; and more.

But first, a short course in energy miracles.

The growth of renewables

Renewable energy in general isn’t new. People have been using biomass since cavemen started cooking their kills over wood fires. The early Industrial Revolution was powered by waterwheels, not steam engines, and hydroelectric power remains an important part of the energy mix to this day. Wind power has played an important role in some places for centuries:

![A group of people standing next to a windmill

AI-generated content may be incorrect.](https://substackcdn.com/image/fetch/\(s_!zPZq!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F78f06f8d-c55c-44ac-a2db-b9e9b739fcd3_1038x1600.jpeg) But the modern rise in renewables has mainly involved something new: large-scale electricity generation from wind turbines and solar panels. My sense is that many people still think of solar and wind as marginal, more woke environmentalist aspiration than serious parts of the global energy supply. This was still somewhat true a decade ago, when solar and wind produced less than 4 percent of the world’s electricity. But renewables have grown explosively since then. In 2024 solar and wind produced 15 percent of world electricity, and growth in solar and wind accounted for 63 percent of the *growth* in electricity production since the eve of Covid: s_!PySg!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F247fe8e5-0c9a-4192-aa41-69e91c8dd39e_960x600.png)

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Solar and wind play an even bigger role in some places. Denmark gets 58 percent of its electricity from wind and another 12 percent from solar. The UK gets 30 percent from wind and another 6 percent from solar. Within the United States, California gets 40 percent of its electricity from renewables, mainly solar, while Texas gets 30 percent, mainly from wind. Iowa gets 63 percent from renewables, overwhelmingly wind.

Why have solar and wind become serious business, in fact almost dominant when it comes to global electricity growth? Government subsidies have played a role, but fossil fuels get subsidies too. The key, clearly, has been an astonishing fall in costs. Here’s the levelized cost of electricity — the average cost over a new facility’s lifetime — for the major renewable energy sources:

![A graph of energy consumption

AI-generated content may be incorrect.](https://substackcdn.com/image/fetch/\(s_!mWNV!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdb8ad45f-59ff-4f8e-8d07-79fa043ac2c2_1660x1222.png) [Source](https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2025/Jul/IRENA_TEC_RPGC_in_2024_Summary_2025.pdf#page=7.09) At this point solar photovoltaic and onshore wind — the yellow and gray lines at the bottom of the right of the chart above — are clearly cheaper than coal, and possibly natural gas, even without subsidies. With even modest subsidies, renewables clearly have the edge, which is why solar and wind dominate the construction of new generating capacity. But wait: what happens when the sun doesn’t shine or the wind doesn’t blow? Way back in 2011 I wrote an enthusiastic column — titled, inevitably, “[Here comes the sun](https://www.nytimes.com/2011/11/07/opinion/krugman-here-comes-solar-energy.html)” — about the plunging cost of solar energy. I got a lot of pushback, including from energy economists, who argued that I wasn’t putting sufficient weight on the problem of intermittency (the sun doesn’t always shine etc.). But intermittency is turning out to be much less of a problem than most people thought, because there has also been an extraordinary decline in the cost of batteries: s_!bOei!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F3c9d3c3c-6873-4cc3-8ed1-0d325066d13c_1024x576.png)

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Inexpensive, powerful batteries transform the economics of solar power, making it possible to store up power during the day in huge battery farms then draw it down at night. As I mentioned, California now relies on solar for much of its electricity. Here’s what an average day in June looked like:

![A diagram of solar energy

AI-generated content may be incorrect.](https://substackcdn.com/image/fetch/\(s_!gzga!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ffe425058-f0b6-4c1c-8e5f-d88fb9cfc7d8_2462x1434.png) [Source](https://ig.ft.com/mega-batteries/) All of this amounts to an enormous technological revolution. Less than 20 years ago there seemed to be no realistic alternative to powering our civilization with fossil fuels. Today we seem to be on an unstoppable path toward relying mainly on renewable energy. And I do mean unstoppable. Yes, the Trump administration is deeply hostile to both wind and solar and is trying desperately to prop up coal. But even if it succeeds, America is not the world. In fact, we account for only [14 percent](https://en.wikipedia.org/wiki/List_of_countries_by_electricity_production#Total_production_MATHPH0XEND) of world electricity production (China accounts for 32 percent.) The energy revolution is happening; U.S. policy won’t stop it, all it can do is determine whether we choose to be left behind. But what’s behind this revolution? The cost of renewable energy has plunged. But what has caused this plunge? *Why did the cost of renewables fall so far, so fast?* The renewable energy revolution is being driven by radical cost reductions in three areas: · Solar power, mostly photovoltaic panels · Wind power, mostly huge turbines · Energy storage, mostly giant batteries What strikes me about this list is that from a technological point of view solar, wind and batteries don’t seem to have much in common. It’s hard to think of a big idea that is common to all three sectors and is driving rapid progress. To see what I mean, compare progress in renewable energy with progress in information technology. I think it’s fair to say that the IT revolution really does flow from one big idea: integrated circuits printed on chips. Gradually exploiting the potential of that big idea has led to rapid progress over time: [Moore’s Law](https://ourworldindata.org/moores-law?ref=sweetlightning.eco) famously says that the number of transistors that can be printed on a chip doubles roughly every two years, which translates into a gigantic increase in computing power and a gigantic fall in the cost of computation over the half century for which the law has applied. Figuring out what you can do with vast amounts of incredibly cheap computing power has given us everything from personal computers to smartphones to large language models. But the integrated circuit on a chip is the big idea that started it all. If there’s a comparable big idea behind the renewables revolution, I don’t see it. All three key technologies are quite old; silicon photovoltaic cells, the newest of the three, were demonstrated by Bell Labs in 1954. Nor do the technologies have much in common. Persuading photons to dislodge electrons, which is how photovoltaic solar works, is completely different from persuading the wind to turn giant turbines. And while batteries, like solar panels, do stuff with electrons, that seems to be the extent of overlap between the technologies of energy storage and solar power. So why have we seen transformative progress in three seemingly unrelated technologies? The answer almost certainly involves “learning curves.” Before the technology for producing a good has fully matured, costs tend to fall rapidly as producers gain more experience with production. Progress may be incremental and, often, prosaic — for example, bigger, taller wind turbines reduce costs because wind speeds are a lot higher several hundred feet up than they are close to the ground. But the cumulative effect of learning can be huge. Surprisingly, progress through learning is relatively predictable. [Wright’s Law](https://ourworldindata.org/learning-curve) says that in any given industry costs fall by about the same percentage for every doubling of cumulative production or installed capacity. A 2022 study found that over the long term every doubling of installed wind capacity has led to a 15 percent decline in costs, while every doubling of solar capacity has led to a 24 percent decline in costs: s_!BafB!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F03b985d3-c365-4095-9698-576cedea85c1_1429x708.jpeg)

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Lithium-ion batteries appear to benefit from a similar learning curve, with costs falling about 18 percent for every doubling of cumulative production.

If technological progress in renewable energy is driven by learning, we can see the renewable revolution as the result of a virtuous circle. Renewable energy production has been growing rapidly because of rapidly falling costs; costs have been falling rapidly because of rising cumulative production.

What got this virtuous circle going? The details are complex, but it seems clear that policy played a crucial role.

What role has policy played in the rise of renewables?

By the first decade of the 21st century the United States, Europe and China were all providing significant subsidies for wind and solar power. These subsidies were partly motivated by concerns about energy security, a desire to reduce dependence on Middle Eastern oil. They also reflected environmental concerns: Even leaving climate change aside, the air pollution caused by burning fossil fuels has large health and economic costs.

Still, the subsidies wouldn’t have led to large-scale solar and wind development if renewables were wildly expensive. However, by that time technological progress had reduced solar and wind costs sufficiently that they were no longer too expensive for anything beyond niche applications like powering satellites. They were still, at first, more expensive than fossil fuels: “Renewable energy costs,” declared the Cheney report, “are often greater than those of other energy sources.” But the subsidies were enough to cause significant adoption. And then the virtuous circle kicked in, to the point where today it’s economically foolish not to rely heavily on renewable energy.

One could say that the rise of renewable energy is an example — possibly history’s most spectacular example — of a successful “infant industry” policy. The infant industry argument, originally formulated by none other than Alexander Hamilton, was that sometimes a nation should give certain industries special treatment until they reached sufficient scale and acquired sufficient experience to stand on their own two feet.

Hamilton was thinking about manufacturing in general, and getting U.S. manufacturing going in the face of competition from established industrial powers, especially Britain. But the same argument applies to getting renewable energy going in the face of established, fossil-fuel based energy sources. And we did, in fact, get renewable energy going.

At this point it’s almost funny to read screeds from 14 or 15 years ago about how green subsidies were a waste of money, an attempt to promote technologies that were doomed to fail. Or it would be funny if officials in the current U.S. administration, from the president on down, weren’t using almost exactly the same rhetoric as anti-Obama Republicans circa 2009 or 2010. I don’t know whether they’re unaware of or just unwilling to acknowledge the fact that large-scale adoption of renewable energy has turned out to be eminently doable, and that at this point people trying to get us back to burning coal are the ones engaging in impractical fantasies.

The question one can still seriously argue about is whether we should continue to subsidize green energy. I would say that the answer is a clear yes, for two reasons: We’re still on a steep learning curve, and environmental reasons to move away from fossil fuels are more compelling than ever.

It’s possible that America will ignore these considerations, trying (and failing) to restore the age of coal. As I said, however, we are not the world, and green energy will continue to grow even if we try to opt out, with important geopolitical implications: China is racing ahead.

It’s also important to understand how energy policy will interact with generative AI, which (if it doesn’t implode) will be a huge additional source of energy demand. And miraculous as it is, is the rise of renewables enough to avoid climate catastrophe?

But all of that is for next week.