Dive Brief:
- The rapid expansion in solar energy is leading to an equally-sharp decline in costs across the sector, and could mean energy from the sun is poised to become cheaper than coal in some areas around the world.
- According to Bloomberg New Energy Finance, utility-scale solar costs could decline by 36% between now and 2025, and in some parts of the world contracts are being signed for just a few cents per KWh.
- The declining costs come as production of panels and inverters is ramping up; a report prepared by the Solar Energy Industries Association (SEIA) and GTM Research found the solar industry was on pace to add 14.5 GW of capacity in 2016 year, a 94% increase over the 7.5 GW installed the year before.
Dive Insight:
The falling price of solar panels and other components in the clean energy supply chain is having a compounding impact on the industry. According to Bloomberg, every time capacity doubles, the price declines by about a fifth. That's put solar energy on pace to surpass the economics of coal, not too far down the line.
According to BNEF, within a decade the average cost of a 1 MW ground-mounted solar array will decline from $1.14/watt to just 73 cents/watt. Combined with energy auctions around the world that returned startlingly cheap prices this year—less than 3 cents per kWh in Chile, for example—it means solar energy could be cheaper than coal in some regions.
Bloomberh reports the global cost of coal power is about $0.06/KWh.
In the United States, the cost of non-residential solar installations dropped 8.3% to $1.88/watt in the first half of 2016. Residential installations dropped 8.8%, to $3.00/watt. According to another report from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, the total cost of a new utility-scale project fell more than 50% from 2007 to 2014.
According to SEIA and GTM's research, price declines could reach a price target of $1.00/watt by 2020. In the first quarter of 2016, solar developers installed 1,665 MW of solar PV nationwide, adding more new capacity in the United States than coal, natural gas and nuclear combined.
