By mostmeasures, solar energy should be a resounding success. Technical breakthroughs and continuousimprovements in efficiency have driven the price of solar panels from $100 perwatt in the 1970’s to less than $1 per watt today.

Yet solar technology still accounts for lessthan 1% of global energy consumption. For solar energy, as for many otherpromising green technologies, technical progress has not translated intowidespread adoption.

The problem lies in the structure of the market.To understand why, green-energy advocates could take a lesson from a far less glamorous technology:used cars.

The slow adoption of solar energy is usuallyblamed on its expense. Outfitting a single house with solar panels costsroughly $30,000. And, thanks to those lauded efficiency gains, a newinstallation will quickly become outmoded.

But Americans routinely spend $30,000 on carsthat they trade in every four or five years or so. They can afford to do sobecause of the used-car market. The used-car market helps consumers to financetheir next car purchase, while making older, still-serviceable models availableat a deep discount. The ongoing utility and value of used cars creates a vast,stratified marketplace with many options in both features and purchase price.

For next-generation technologies, then, thebarrier to entry is not so much the initial cost but rather the absence of a market for the lastgeneration. The market for solar power would almost certainly expand ifconsumers had the option of purchasing less efficient solar panels (last year’smodel) that cost, say, half as much. Government planners would have no troublejustifying a large expenditure for a long-lasting technology – even one thatquickly becomes outmoded – if they knew that they could recoup some part oftheir outlay in just a few years. Likewise, investors would be more likely tofinance a major deployment of solar panels if the technology’s value persistedbeyond the next tweakin solar-cell design.

Call it the moral of secondary markets: If youare trying to introduce an expensive new technology, make sure that people canbuy it used, too.

The demand for used solar panels is alreadyapparent in the repeated calls for cheaper solar technology. And the idea of recycling a green technologyhas intrinsic appeal. Butthe secondary market for solar-power technology will not emerge until anotherissue is addressed: what could be called the “velocity of upgrade.”

Consider how quick and easy it is to trade in anold car for a newer one. You can drive into the dealer’s lot in one vehicle andleave in another, because all cars run on the same road infrastructure.

Upgrading solar panels, by contrast, isagonizingly slow. Like so many green technologies, solar requires its owndedicated infrastructure, and each manufacturer designs systems with uniquemechanical layouts, mounts, and electrical interfaces. As a result, old solarpanels cannot simply be swappedout for new ones. To upgrade, solar customers do not just have to buythe car; they have to re-build the roads.

Needless to say, this kind of upgrade isexpensive – and not just for the consumer. Because each panel infrastructure isunique, each solar-tech company has to train, maintain, and equip a dedicatedcrew of employees to install and un-install its products. That is a significantfinancial burden for any company, let alone a start-up in a new market sector.

Both the velocity of upgrade and the secondary market for solarpower could be improved by lowering the transactioncosts associated with adopting new solar technology. These costs – one-timeoutlays that are independent of the core technology’s cost – are the real barrier towidespread adoption of green technologies. The lower these transactioncosts, the more rapidly early adopters can upgrade to next-generationtechnologies, and the more readily a secondary market can develop.

For example, the cost of adopting solar energy could begreatly reduced by standardizing solar-panel sizes and mountconfigurations. Such standardization would make it much easier to trade oldpanels for new ones, decreasing the transaction costs of each upgrade from 40%of system cost to nearly zero. Both primary and secondary markets for solarpanels would expand, stratify, and become more liquid.

More generally, governments should invest ininfrastructure that facilitates the deployment of solar and other greentechnologies at lower costs. Such investment would create platforms forinnovation and commerce that yield returns far greater than any singletechnology or industry can deliver. Government investment in roads, trafficsignals, and parking infrastructure built the platform that engendered a globalauto industry, and that today supports continuous upgrades in gas, diesel,electric, and hybrid vehicles. In terms of value for money, such investment wasmuch more effective than subsidizing any one automaker or technology.

A green-tech platform would enable innovators toplan for the long term. As it stands, green entrepreneurs have to choose asingle technology in which to invest; if they do not win enough installationsusing that technology, they are out of the game. They have no opportunity totry another technology, offer discounts on last year’s model, or provide servicecontracts on old equipment – strategies that, in the auto industry, help to smooth out the dips in revenue caused byfluctuating new-car sales. Many solar-energy start-ups have already fallen victim to this“one-and-done” dynamic.

Continued innovation is vital to the future ofgreen technologies, because all of them, including solar, still have technicalproblems that need to be solved. But many are already good enough to sparkconsumers’ appetite. Infrastructure that enables faster and cheaper upgradeswould accelerate their adoption and further development.

Green tech is poised to become the next bigplayer in the global market. It just needs a place to plug in.