Introduction The energy and economic crisis has intensified the search for viable alternative power source. The search has opened the door for new business opportunities, for instance; the development and installation of wind turbines; electric vehicle charging stations; and a myriad of solar business opportunities. There are several solar industry opportunities to choose from; retail and wholesale distribution, after-market products, installation and repair, and other service oriented businesses. To aid in our entrepreneurial decision making in entering the solar industry, we have researched the following macroeconomic areas; GDP growth rate, interest rates, level of unemployment, business cycle, fiscal policy, monetary policy, international trade, and demographics.
GDP Growth Rate
Graph 1
Graph 1 For over fifty years the most widely accepted measure of a country’s economic progress have been the changes in the Gross Domestic Product (GDP). GDP is a calculation of market output, adding together the price of all final goods and services that are produced and traded for currency within one year. It is measured by combining the nation’s personal consumption expenses, government expenditures, net exports, and net capital formation (GDP, n.d.)
Graph 2
Graph 2 The United States by far is the GDP leader in the world with a GDP of $16.8 trillion in 2013, ahead of China’s $9.2 Trillion and just below the entire European Union with an estimate $17.4 trillion GDP. This is an important comparison because although the U.S. has the highest GDP on the planet, however, it ranked 20th in solar power countries per capita during 2012. The huge gap between the leading country, Germany, and the U.S., shows how much potential growth there is in the solar industry in the United States. This fact has not gone unnoticed; in 2013 the U.S. surpassed Germany for the first time for the most new Graph 3
Graph 3 installations in a year (Shahan, 2013). This has been aided by Federal and State energy efficiency rebates and credits. However, there is a long way to go before the U.S. can substantially narrow the gap with Germany. The ideal GDP growth rate for the U.S. is between 2-3%, for 2013 the rate was 1.9%, a decline from 2.8% the prior year. The solar industry alone may not have a large influence on GDP, however, as a whole, renewable energy may have an effect on GDP (Taverberg, 2012). Since 2010 the GDP rate in the U.S. has been 2.5, 1.8, 2.8 and 1.9 respectively, a stable and suitable average. Caution, too much growth can have a dangerous effect because it will most likely come with an increase in inflation.
Interest Rates Interest rates play an important part in decision making, whether it’s a new business owner requiring a loan or an established business trying to maximize its profits. High interest rates can eat into profits, delay borrowing for capital projects and prevent hiring new employees. Falling interest rates on the other hand means that consumers will have more money in their pockets to spend. The increase spending will increase the demand for goods and services. To keep up with the increased demand, businesses will borrow to improve capabilities. The current low interest rate is another reason why the time is favorable for solar industry expansion.
Graph 4
Graph 4 Graph 4 shows the relationship between the interest rate and inflation rate, the rates are linked. The Federal Reserve controls the interest rates, the lower the rate, the more people are able to borrow. With more money to spend, consumers cause the economy to grow; however if the economy grows too quickly inflation may increase. In contrast, as interest rates are increased, consumers will have less money to spend. Thus the economy slows and inflation decreases (Hubbard, 2013).
Graph 5
Graph 5
Level of Unemployment
Graph 6
Graph 6 The unemployment rate is reported as the percentage of the labor force that is counted as unemployed. Like interest rate, unemployment is linked to inflation. However, unlike interest rates, were the two simultaneously adjust to each other, unemployment rates tend to lag behind inflation. As we can see from graph 5 it takes time for businesses to feel the effects of the economy. According to the U.S. Department of Labor, the unemployment rate for July 2014 was 6.2, the lowest it has been since September 2008. This is another good sign of the improving economic times and business growth.
Business Cycle Business cycles occur for many reasons and all the macroeconomic factors we mention in this research play their part. Furthermore, disturbances in the economy push and pull the factors that control the many facets of the economic mechanism. Wars, weather, political upheaval around the world are also participants in directing the direction of economic flow. As history tells us in graph 6 above, there is no certainty as to when the cycles begin or end, just that they happen. If we use history as a guide in our decision making, we can assume that the upward trend may continue for the near future (Romer, 1999).
Fiscal Policy Fiscal policy is a broad term used to identify tax regulations and federal government spending. The way the federal government adjusts tax rates and spends money plays a big role on economic performance and macroeconomic conditions. Through fiscal policies, the federal government has the power to not only control the economy, but also to improve unemployment rates, control inflation and influence interest rates (Board of Governors of the Federal Reserve System, 2014). The key priority of the Presidents 2014 fiscal budget was clean energy. With the intent to make the United States “the leader in the clean energy sector and bring about a clean energy economy with new companies and jobs” The President set out $7.9 billion for solar energy funding’s. The President also called for a permanent tax incentive for renewable energy production as well as tax credit for advanced energy manufacturing (Staff, 2013). Looking at the President’s and the federal government’s fiscal budget for 2015, there are a number of policies and actions listed with a continuous attempt to improve economic and environmental conditions. The 2015 fiscal budget puts emphasis on stronger growth and job creations through advanced manufacturing. The federal government also plans to strengthen the manufacturing base by investing in 45 manufacturing institutes, which will leave room for potential manufacturing of solar panels and create thousands of new jobs. In addition, the 2015’s fiscal budget prioritizes domestic energy production and the development of clean energy alternatives as well as promotion of energy efficiency (Office of Management and Budget, 2014).
Monetary Policy Fiscal policy refers to the tax and spending decisions of the federal government, monetary policy refers to actions implemented by the central bank. However, both policies are used to influence economic performance. An effective monetary policy is generally expected to improve the economy’s rate of growth typically measured by the country’s GDP (Board of Governors of the Federal Reserve System, 2014).
Graph 7
Graph 7 In recent years, the cost of producing solar energy has decreased significantly. Over the past 2-4 years the price of solar power has decreased by up to 20% per year, leading to the projections that in 2016, some solar power will be cheaper than existing coal power. The dramatic fall in solar energy prices are likely to cause demand of alternative energy sources such as coal and gas to fall, either short term or long term which could lead to lower coal and gas prices due to excess in supply. While some firms may be leaving the industry as a result of this, other coal firms may respond to this by lowering their prices beneath the price of solar power. These competitive actions could then lead to lower energy prices for consumers (Sankowski, 2013). In addition, the growing industry of solar power could play a large impact on other industries. If solar energy replaces natural gas, the energy could become a lot more democratic and decrease the dependencies on fossil fuel. The EU would be less dependent on natural gas import from Russia, and the U.S could depend less on oil imports from the Middle East. Ultimately, the growth of solar power will hold significant environmental advantages over traditional sources of energy and could give us more clean energy as well as economic growth (Pettinger, 2014).
International Trade
Graph 8
Graph 8 International trade refers to the exchange of goods and services between countries. The Solar Energy Industries Association (SEIA) has recognized that the growth of solar energy worldwide can benefit both manufacturers and consumers in all economies through free trade and fair competition. However, increased tariffs on solar energy goods, and dumping acquisitions, propose challenges to a growing industry (SEIA, 2014). The United States and China, two of the world’s largest economies are currently responsible for one of the world’s major trade relationships regarding solar energy products; however, it is a rocky relationship. A major trade dispute between the countries sparked up during an American investigation in late 2011, regarding charges that Chinese manufacturers were illegally dumping solar energy products on the American market at prices much lower than the cost of production. As a result the U.S enforced stiff tariffs of billions of dollars of Chinese solar products; the dispute is still ongoing. In July 2014, the World Trade Organization (WTO) ruled that the U.S overstepped its boundaries when imposing the duties on Chinese solar energy products and urges the U.S to reconsider its tariffs. Jigar Shah, CEO of the Coalition for Affordable Solar Energy (CASE) believes that these tariffs will hurt American solar energy workers and prevent the solar energy industry from growing. In conclusion of this matter, the parties involved should negotiate a win-win settlement that supports growth of solar energy since the advantages of international trade in solar energy are significant in a fair and transparent international trade system (Runyon, 2014).
Demographics
It is easy to assume that the users of solar panel energy are those who prioritize environmental benefits. However, studies show that green benefits are not the driving force amongst solar panel demographics. Although solar energy is a cleaner alternative to traditional energy, the majority of homeowners who switched to solar energy based their decision on the economic benefits with environmental concern being second. According to a statistical study, nearly three out of four homeowners said that they would not have made the switch for the environmental benefits alone (Hess, 2012). While one study showed that purchasing solar panels mainly attracted households who earn an income of $150,000 or more, a business development that allows homeowners to lease the panels rather than purchasing them gave room for a new demographic. As a result, statistics shows that the new average household income of solar power energy falls in between $76,000 to $100,000 per year (Scanlon, 2012). Another study conducted by women’s marketing expert Marti Barletta, the key residential costumer of solar energy is more likely to be a female rather than male. Barletta says that women initiate 80% of home improvement projects and care more about the environment as well as cutting down bill payments than men (Francescato, 2014). The rapidly falling cost of solar power has made this source of energy a significantly appealing investment for American companies. Today, solar energy is also heavily adapted amongst large corporations who wants to increase profits and lower operating costs through energy savings. Companies who use solar energy include: Walmart, Costco, IKEA, McGraw Hill, Johnson & Johnson, FedEx and Macy’s (SEIA, 2013).
Conclusion/Recommendations
Graph 9
Graph 9 The US and China are investing in solar, but in comparison with other countries these two giants fall short when we compare them to other country’s population and GDP. We have identified who is really leading the world with aggressive solar power policies and government incentives. In addition, we recognized the great entrepreneurial opportunity the industry presents. Over the past few years we have seen the electric power consumption of the United States decline slowly. However, the U.S. by far consumes more than twice as much electric power per capita than the nearest competitor, the European Union. This shows that the energy hungry American culture provides vast opportunities for suppliers of cheaper forms of energy and the materials needed to produce that energy. The inflation, output growth, government incentives and unemployment levels are at suitable levels for entrepreneurs to take advantage of the business opportunities solar power presents.

References
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