Solar Energy Revolution | One simple chart shows why an energy revolution is coming
Solar energy is becoming the victim of its own success. With power from utilities, photovoltaic panels are now cheaper than at any point in history, they’re beating out almost every conventional fossil fuel source including natural gas.
Report from Lazard shows how the costs of producing electricity from various sources are changing. Energy from utility-scale solar plants — plants that produce electricity that feeds into the grid — has seen the biggest price drop: an 86% decrease since 2009.
A report from Greentech Media also stated that over the last eight years, the levelized cost of electricity (averaging costs over a generating asset’s lifetime) dropped an average of 15.5% per year for utility solar and 13% for wind, mostly in the first half of that period.
The cost of producing one megawatt-hour of electricity — a standard way to measure electricity production — is now around $50 for solar power, according to Lazard’s math. The cost of producing one megawatt-hour of electricity from coal, by comparison, is $102 — more than double the cost of solar.
The dramatic change is clear in this chart:
The rapidly declining cost of solar is a sign that the world may be on the verge of a dramatic change in how we power our buildings and vehicles. The price drop is likely to spur a shift toward renewable power sources like wind and solar and away from fossil fuels like oil and coal.
Changing our energy system to emphasize those clean sources is the only way to slow the process of climate change since emissions from fossil fuels cause more heat to get trapped on the planet. But analysts have long pointed out the transition will only realistically ramp up once renewable energy sources become cheaper than traditional fuels — which now seems to be happening.
Take utility-scale photovoltaics for example. At $46 to $53 per megawatt-hour of generation, it handily beats coal ($60) and natural gas ($68).
The rise of renewables is apparent when you look at which types of new energy generation capacity are getting added around the world. In 2017, there was more new solar power capacity created than any other type of energy, according to a report from the United Nations Environment Programme.
Renewable energy, including wind, hydro, and solar, supplied a record 12% of the world’s energy needs last year. In 2017 alone, the solar sector attracted $160.8 billion in investment, an 18% increase over 2016, according to the UNEP report.
While solar is getting much cheaper, Lazard notes that these sources of electricity are not a panacea. LCOE as a measurement does not take into account some external costs, like storing solar power for cloudy days, which is one of the lingering obstacles preventing the widespread adoption of solar. (Other sources of electricity like coal or natural gas don’t have the same problem, of course.)
Once very high levels of renewable penetration are reached, storage is added to ensure a stable supply of electricity and deal with peaks. That will be the next great challenge. At the moment, adding storage eliminates renewables’ price advantage.
In the US, solar still only provides 2% of the country’s total electricity needs, according to the Solar Energy Industries Association. But California is trying to change that: The state is seeking to mandate that most new homes be outfitted with solar panels. State lawmakers are scheduled to vote on the proposal on Wednesday.
Storage prices, which include everything from batteries to pumped water reservoirs, will likely keep falling as costs decline through manufacturing and engineering refinements. Better prices should also come as demand grows with regulatory changes, pricing innovations for grid services, and the expansion of renewables. Lazard expects lithium-ion batteries to drop by about 8.5% per year over the next five years. If history is any guide, storage prices won’t drop as fast as renewable prices have over the past decade.