The dramatic decline in the cost of solar power — a 90 percent cost reduction over the past two decades — has become a fairly old story. Less well known and perhaps more relevant is that power derived from sunlight has become the least expensive option for adding new power in every U.S. state, as well as in Canada, China and 14 other countries.
That is the analysis from Wood Mackenzie in its latest report, Total eclipse: How falling costs will secure solar’s dominance in power, making the solar power industry “highly investible” because of its growing ability to meet both economic and policy goals.
Wood Mackenzie research director Ravi Manghani put it this way: “As the world strives to recover from the economic slump caused by the COVID-19 pandemic and simultaneously meet the climate and environmental goals of the Paris Agreement, solar is uniquely placed to advance efforts toward a low-carbon, sustainable future.”
Despite the COVID pandemic, global installations exceeded 115 gigawatts in 2020, compared to 1.5 gigawatts in 2006, according to the report. While the growth of solar to this scale was driven partially by government subsidies and environmental goals, solar generation is now attractive based on price alone.
“Solar is becoming so competitive that not only is it a means of decarbonization for corporate buyers, but also a way to lower the cost of energy for their businesses,” Manghani adds.
In the next decade, Wood Mackenzie expects more cost reduction to be driven by growth and development in several technologies:
- Bifacial panels. New solar cell technology allows both sides of a panel to generate power, as much as 15 percent more.
- Larger solar modules. This allows more of each panel’s surface area to generate power, leading to big gains in output.
- Trackers. More solar installations include motorized systems that track the sun’s movement and change the alignment of the panels to increase energy capture.
Wood Mackenzie stressed its outlook only factored in technological improvements that are already well into the commercial development pipeline. The projections do not assume any breakthroughs in next-generation solar technology or other innovations, which could provide further upside to the outlook.
Operating costs are expected to drop as well over the next decade. Technologies that are already widely in use by the wind power industry, such as using drones and thermal imaging for inspections, will make operations more efficient, as will developing technologies such as artificial intelligence.
For all the hoopla, the solar energy sector comes with some risks, the Wood Mackenzie report acknowledges. Investors could pay a price for the technology’s success. As costs drop and installed solar capacity increases, wholesale prices may decline as well, reducing profitability. Still, falling prices should allow solar to displace coal and other more expensive technologies and increase its markets share.
Manghani observes: “Once a niche technology in the off-grid space, solar is now one of the cheapest, most efficient and easily deployable means of generating electricity.”
Mike Consol (firstname.lastname@example.org) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.