Solar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.
In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Taking advantage: Companies such as Italy’s Enel SpA and Dublin’s Mainstream Renewable Power, who gained experienced in Europe and now seek new markets abroad as subsidies dry up at home.
Since 2009, solar prices are down 62 percent, with every part of the supply chain trimming costs. That’s help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, solar power may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance.
Better technology has been key in boosting the industry, from the use of diamond-wire saws that more efficiently cut wafers to better cells that provide more spark from the same amount of sun. It’s also driven by economies of scale and manufacturing experience since the solar boom started more than a decade ago, giving the industry an increasing edge in the competition with fossil fuels.
The average 1 megawatt-plus ground mounted solar system will cost 73 cents a watt by 2025 compared with $1.14 now, a 36 percent drop, said Jenny Chase, head of solar analysis for New Energy Finance.
That’s in step with other forecasts.
- GTM Research expects some parts of the U.S. Southwest approaching $1 a watt today, and may drop as low as 75 cents in 2021, according to its analyst MJ Shiao.
- The U.S. Energy Department’s National Renewable Energy Lab expects costs of about $1.20 a watt now declining to $1 by 2020. By 2030, current technology will squeeze out most potential savings, said Donald Chung, a senior project leader.
- The International Energy Agency expects utility-scale generation costs to fall by another 25 percent on average in the next five years.
- The International Renewable Energy Agency anticipates a further drop of 43 percent to 65 percent for solar costs by 2025. That would bring to 84 percent the cumulative decline since 2009.
The speed at which the price of solar power will drop below coal varies in each country. Places that import coal or tax polluters with a carbon price, such as Europe and Brazil, will see a crossover in the 2020s, if not before. Countries with large domestic coal reserves such as India and China will probably take longer.
This article was written by Jessica Shankleman and Chris Martin. You can view the full article at Bloomberg.