The declining cost of solar power is likely to lead to many knock-on effects. In thinking about this phenomenon, one should first looks at what geographies have a comparative advantage with this specific technology. First, solar panels take up a lot of space and they generate more electricity in areas of high solar insolation. Immediately, North Africa and the Arabian Peninsula come to mind as geographies that fulfill these criteria well. Recently the world’s lowest price solar bid was 5.98 cents per kilowatt hour of electricity in the UAE.

While these regions have excellent solar insolation and vast expanses of cheap and desert land, they obviously suffer from a lack of water. This leads to the second technological leap that, coupled with the declining cost of solar electricity, will lead to a transformation: the declining cost of water desalination. Already, Israel has demonstrated that it can cost-effectively desalinate water at scale. The most expensive input for this process is in fact electricity, which should continue downward in price as solar technology continues to improve. Secondly, desalination also mitigates one quandary with solar electricity production which is electricity storage. As the sun arcs across the sky, the panels in aggregate produce more electricity than might potentially be consumed any one point. However, much in the tradition of industrial customers in the old grid, one could pair the desalination plant production rate with electricity production to mitigate electricity storage costs. In essence the production of water could absorb excess demand, and be reduced on days of low electricity production.

The third technology which also appears to be simultaneously reaching scale maturity is hydroponic farming. While it has best been known in popular culture as a technology for marijuana production, it is starting to reach cost effective pricing at scale when competing with other produce which is farmed in fertile areas and then transported great distances to cities where the calories are consumed. While hydroponic production may not be an effective technique for all agriculture production, it could take significant market share for quickly consumed perishable produce with less waste and less transport costs and faster demand response then far flung agricultural supply chains. New techniques in hydroponic farming through the use of increasingly cheap LED lighting which can use different light wavelengths to increased yield while also being extremely efficient with water can lead to significant competitive advantage. Additionally, with hydroponic farming new algorithms can be created to pair with genetically modified plants to finely tune growing processes. Another factor in favor of hydroponic farming is the elimination of human labor and shift automation in the agricultural space. Lastly, this process has less pesticides and extraneous chemicals that have negative consequences for people who ingest traditional agricultural products.

In essence, lower-cost solar electricity production would lead to lower cost of water desalination which will have the highest return in North Africa and the Arabian Peninsula which will also likely make it cost competitive to intensively farm through hydroponic processes. This could be transformational for a region whose caloric intake largely depends upon imports.