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Solar energy that reaches the Earth is either absorbed, or reflected back into space. Water or clouds reflect the energy, and about 30% of all the sunlight that hits the Earth is reflected away.

Of the solar energy, that is absorbed, some of it becomes heat, and some of that is re-radiated into space at night. This is why clear nights are often so cold; the Earth's heat is being radiated back into space. On cloudy nights, the heat is trapped between the surface and the clouds, keeping things warmer.

Some of the sunlight/heat goes into evaporating water from lakes or rivers, and the water vapor falls as rain later on. Some of the rain is trapped in reservoirs, or runs through dams and turbines, so hydroelectric power is actually solar power.

Some of the sunlight is absorbed by plants, and the living cells of the plants use photosynthesis to convert other matter such as soil and water into wood or plant matter. If we burn the wood, we're actually releasing solar energy back into the environment.

Plants die and fall to the ground, and eventually decay. Over the course of millions of years, the decaying organic material becomes fossilized, compressed, and transformed; it becomes coal, or oil, or natural gas. Those "fossil fuels" are actually million-year-old trapped solar energy!

The energy balance of the Earth is maintained because if the Earth heats up much, the heat helps evaporate water that forms clouds; the clouds are reflective, and more sunlight is reflected away.

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