In a win for green technology, solar power is set to become the cheapest power source on earth. So not only is solar power renewable, energy-efficient and eco-conscious, it’s also becoming increasingly affordable. There is now no excuse to switch to solar!
Where is solar power winning out?
Countries all around the world, both developed and developing, are turning to solar power as their new source of energy. In countries like Chile and the United Arab Emirates, solar power is being generated for less than $0.03/kilowatt hour; that’s half of the average cost per kilowatt hour of coal power. In Saudi Arabia, Jordan and Mexico, auctions are being planned to encourage solar power producers to further drop their prices. And in Italy and Ireland, companies Enel SpA and Mainstream Renewable Power are planning to take the solar power experience they’ve gained and spread it around the world.
Why are costs going down?
The main decrease in the costs of solar power is thanks to technological advancements. For example, solar power sources are now using diamond-wire saws and improved cells that increase efficiency and provide more power from the same amount of sunshine.
Another factor driving down the price of solar power is the basic economic principle of supply, demand and competition. Investment in solar power began over a decade ago. In that time, the industry has advanced to a place where it is now competitive with the fossil fuel industry and even within itself from one solar power company to another. Lucky for consumers, competition between producers works to drive down prices.
Because of constantly advancing technology and heavy competition in the power market, solar power developers have begun to submit low-ball bids at power auctions. These companies are submitting low bids, as low as 2.42 cents per kilowatt hour, in hopes of securing a contract away from their competitors and relying on the increasing affordability of technology to make it possible.
Of course, countries along the equator, or sunbelt, are best able to capitalize on rising competition and technological advancements. But weather alone is not enough to make solar power successful.
What’s happening with the price of solar power?
Researchers predict that by 2025, solar power will be cheaper than coal power across the globe. In fact, the price for solar power has been steadily declining since 2009 - current prices are 62% less than they were in 2009. Jenny Chase, head of solar analysis for New Energy Finance, predicts that by 2025 a ground mounted solar power system will cost 36% less than current prices, from $1.14 per watt to $0.73 per watt.
And New Energy Finance is not the only group predicting this downward trend in the price for solar power. GTM Research expects regions in the US Southwest to hit $0.75 per watt as early as 2021. The US Energy Department National Renewable Energy Lab predicts those paying $1.20 per watt currently will only pay $1 per watt in less than five years. The International Renewable Energy Agency is anticipating similar sharp declines in the price of solar energy by 2025. In fact, by their predictions, the cost of solar power in 2025 will be 84% less than the cost introduced in 2009.
Enviromena Power Systems explains this decrease in price as the “Wal-mart effect” - suppliers are able to produce higher volumes at lower margins. These costs savings are then transferred onto consumers thanks to market forces of competition. However, not all countries will receive these lower costs at the same time. In countries where non-renewable energy users pay a carbon tax, like Brazil and many countries in Europe, the lower prices for solar power will come into effect earlier as consumers are more eager to make the switch. In countries with large coal reserves, such as China and India, the switch to solar will be slower and so will the decrease in costs.
Does this mean coal is done?
Unfortunately, officials in the coal industry are quick to point out that 100% reliance on solar power is not yet possible. While solar power is quickly on its way to becoming the cheapest energy source, those costs don’t fully take into account the need to maintain backup power sources. This is particularly concerning for areas of the world that don’t receive much sun. Most modern day economies depend on full-time power; they aren’t able to wait for the sun to shine in order to receive electricity. Because of this, the coal industry feels coal power is still the best choice when looking at total systems costs and dependability. But the ever decreasing cost of solar power coupled with constantly advancing technology could spell the end for the coal industry in the near future. Researchers are confident that solar power will soon win out as the obvious choice, for the environment, for the economy and for efficiency.