With trillions at stake, no wonder they’re both so controversial.
Everyone knows AI is changing everything, faster than we can imagine. Why isn’t solar getting the same attention?
Probably because AI is seen as the ultimate profit machine, with a few billionaire winners, and many losers. Whereas solar will have many winners, and far fewer losers.
The two have lots in common though: they’re the biggest deflationary forces on the planet, completely disrupting the markets for labor and energy.
What is deflation?
Here’s a quick explanation of deflation from one of the business stories I wrote for kids a few years ago:
Deflation is what happens when a disruptive new technology scales massively, causing prices to collapse or spiral downward, causing pain for incumbents and setting a new baseline for the economy and productivity.
Examples include the printing press, the Bessemer process (cheap steel), steam power, railroads, electrification, the Haber-Bosch process (cheap fertilizer), semiconductors, container shipping, and the Internet.
But solar and AI may end up being the biggest of them all.
What is AI deflating?
AI’s target is the $50+ trillion in wages paid to four billion workers globally… especially knowledge workers.
The U.S. alone accounts for around twelve trillion dollars per year in wages and salaries. And the lion’s share of that goes to the 90+ million AI-vulnerable white collar workers in fields like these:
- Management occupations (20,906,000);
- Business and financial operations occupations (9,638,000);
- Computer and mathematical occupations (6,502,000);
- Architecture and engineering occupations (3,602,000);
- Life, physical, and social science occupations (1,870,000);
- Community and social service occupations (2,879,000);
- Legal occupations (1,897,000);
- Education, training, and library occupations (9,403,000);
- Arts, design, entertainment, sports, and media occupations (3,478,000);
- Healthcare practitioner and technical occupations (10,099,000).
- Sales and related occupations (5,890,000);
- Office and administrative support occupations (6,163,000);
What is solar deflating?
Solar’s target is the entire global energy market (around $15 trillion annually). The majority of this is fossil fuel production and distribution, and (highly inefficient) consumption.
Fossil fuel extraction, production and distribution is a giant, globe-spanning industry involving:
- 30+ million jobs (oil, gas, and coal)
- 40 million barrels of oil moving by tanker per day (15 billion per year)
- 40,000 supertanker trips per year, plus 6,000 LNG and 15,000 bulk coal
- a trillion dollars in annual investment
- between one and two trillion in annual profit
- tens of trillions in fixed assets (pipelines, refineries, oil rigs, etc.)
And that’s just production and distribution; consumption is a whole other huge target, the ‘fossil fuel economy’: fossil-powered transportation, heating, fossil fueled industrial production, etc.
Has AI-driven deflation already begun?
Yes… AI’s moving way faster than any labor-displacing technology in history.
We’re used to information technology (e.g. phones, software) improving about once a year. AI is improving about once a month. And it’s hit a tipping point (gotten good enough) where it’s starting to deflate the labor market.
Software engineers, for example, account for about $400 billion a year in compensation in the U.S., and $2 trillion globally. Three months ago the world’s leading programmers were using AI for 20% of their code and writing 80% themselves, now they’re letting AI do 80% and doing 20% themselves. That’s how fast Claude Code and its competitors are improving.
Each new AI model release is a new tipping point, where whole new categories of human labor are targeted with displacement. Lawyers, accountants, financial analysts… with each new release, the models are being programmed to do 80+% of the work these professionals do.
When you listen to what CEOs of major business are saying, they’re talking about a world coming soon where they’ll need far fewer people to run their businesses.
This is already showing up in entry-level hiring. Just Google it. Or try these recent pieces in the Guardian (which I recommend supporting if you can) to get started: “Young Will Suffer Most When AI Tsunami Hits Jobs”; “Rollout of AI May Need To Be Slowed To Save Society, Says J.P. Morgan Boss”; “The Big AI Job Swap.”
Has solar-driven deflation already begun?
Yes… solar is moving way faster than any energy technology in history.
We’re all used to energy technology improving maybe once per decade (unleaded gas, fuel injection, turbochargers, fracking etc).
But recent improvements and cost declines have been so swift and steep that solar plus storage is now the cheapest energy source on the planet (see ‘The Electrotech Revolution’ and ‘The Electric Slide’ for details).
Unit costs have plummeted thanks to Chinese mass production (500-watt solar panels have dropped under $50, battery pack prices under $80/kWh), and improved productization is lowering deployment costs.
The result is that solar is quickly pushing aside its fossil competitors. The vast bulk of new power generation added last year worldwide was solar. Solar’s displacing fossil fuels rapidly in places as diverse as Pakistan, Texas and the E.U. To the point that electricity prices are turning negative frequently on these grids, causing some places (e.g. Australia) to even give away electricity free mid-day.
In some segments, fossil fuel displacement is happening even faster. Generators are an example… in many parts of the world, like Africa, a rooftop solar plus storage system which can provide all the electricity you need has dropped to around $5,000, cheaper than the cost of a portable generator plus ongoing fuel purchases and maintenance.
Global oil and gas prices have remained low recently despite geopolitical instability: there’s a glut of oil on the market right now. As solar and electrification continues eating into fossil market share (especially in China where fossil demand has plateaued), this downward pricing pressure will get more intense.
How fast will this all happen?
That’s the question. Things are moving really fast right now. But if anything can slow down AI or solar-driven deflation, it’s that lots of people don’t want it to happen quickly, or at all. Here’s why people will fight both AI and solar:
To protect jobs.
Whether it’s thirty million fossil fuel workers or a billion knowledge workers globally, humans won’t give up their jobs without a fight.
To protect existing investments and profits.
Oil companies and monopoly utilities have repeatedly shown they’ll use every weapon available to try to stop cheap clean renewable energy. So will every single company whose business model is threatened by AI.
To protect national wealth.
AI and solar are re-shaping the existing world order, and some of today’s powers may end up on the losing end. Among the world’s biggest fossil fuel exporters, for example, are the U.S., Russia, Saudi Arabia, UAE, Qatar, Canada and Australia. They stand to lose the most from energy cost collapse.
For security.
AI is a big new security threat, to individuals and countries alike (can it even be controlled?). Similarly, many countries continue to take a 20th-century view that fossil fuels provide the ultimate geopolitical security.
Anti-technology sentiment.
People don’t really like big machines and systems these days, especially big machines owned and controlled by billionaires. AI is the ultimate centralized, opaque, winner-take-all machine, while solar is the ultimate decentralized, simpler, democratized one.
Who will win the deflation race, AI or solar?
In theory, AI should go much faster, because it’s bits, not atoms. And there’s way more money to be made, more quickly, by slashing labor costs than by slashing energy costs.
But because AI accelerates wealth inequality, the pushback against it could be far more intense. Solar actually creates some jobs, and generates savings/wealth that can be retained locally (money not spent on importing fossil fuels).
Perhaps AI will roar ahead and we’ll all benefit from scientific advances and get healthcare jobs or lie on the beach being fed grapes by AI robots. Or maybe the pushback against AI and clean energy will grow so intense that people resort to trying to pull the plug (e.g. on AI data centers). We’ve already seen this with wind power (which has far fewer plugs to pull than solar).
Most likely there will be a political transition where governments try to manage the labor and energy cost collapse (and consequences) with regulation, but must walk a tightrope between populist anger and capitalist pressure. While playing whack-a-mole with technology developers who’ll produce ever more distributed, lighter weight, DIY AI models and solar systems to end-run the regulations.
If you’re wondering why clean energy’s been a culture war target for years, deflation is your answer. The AI culture wars will likely be even more intense.
Good deflation, bad deflation.
This was a challenging subject for me to write about: it’s daunting, scary stuff. So you’ll forgive me for adding the ChatGPT-generated image below… I needed a little humor break (I used to read US Weekly on airplanes).
There’s no ‘deflate it best’ when it comes to AI. Eliminating hundreds of millions of human jobs would be catastrophic in my opinion. Whereas a planet-wide transition away from fossil fuels, driven by solar, would be a great outcome.
So that’s it: my vote’s with solar. I always preferred the rumpled look anyway.
