Solar Soon to be Cheaper than Coal – 6/28/16

The old argument against renewable energy is getting flipped on its head as plummeting costs boost the economic case for solar power.

falling pv costs

According to industry group Irena, the cost of renewables technology will continue falling for the next decade with the average cost of electricity from a photovoltaic system declining as much as 59% by 2025. The group estimated that electricity produced using solar power is already 58% cheaper than it was in 2010 thanks to technological improvements and increased economies of scale.

Irena also projects that energy from solar thermal power plants will be about 40% cheaper by the middle of the next decade. Offshore wind may see cost reductions of 35%, followed by onshore wind at 26%.

The falling cost of solar is already affecting what new electricity generators come online as seen in the scheduled additions for 2016. New solar capacity additions are expected to surpass even natural gas gains, which have seen an unprecedented boom since the U.S. discovered and began tapping its vast reserves.

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As shown in the graphic from Bloomberg New Energy Finance below, the group’s analysts expect the trend to continue with an increasing plurality of new electricity capacity being utility-PV solar for at least the next 25 years. According to the BNEF, a large driver of the shift to solar will come from falling costs since “by 2027… building new wind farms and solar fields will often be cheaper than running the existing coal and gas generators”.

solar to dominate

The falling cost of electricity from solar power means falling prices for all electricity. If only looking at simple supply and demand, one would not be surprised to see electricity sales are forecast to increase significantly in the U.S. Energy Information Administration’s most recent Annual Energy Outlook (AEO2016).

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Though there are always hidden factors complicating matters, the EIA controlled for the most obvious sources of confusion such as population growth and the current programs encouraging energy efficiency causing the fall in residential sector purchases are expected in the 2020’s.

The EIA also accounted for the effect of distributed PV systems reducing demand from consumers and businesses willing to install panels on-site saying that without distributed solar residential and commercial electricity sales would be 5.0% and 1.7% higher, respectively, in 2040.

Of course, the EIA forecasts are understandably conservative by nature of underlying assumptions about technology and regulations so these numbers will likely see adjustments as major events such as the presidential election come into play.

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