The Dropping Price of Solar
Analysts suggest that a surge in investment over the past five years in solar power technology and the rapid implementation of infrastructure is likely the reason for solar's recent price drop. In 2015, emerging market economies out-invested member states of the Organization for Economic Cooperation & Development in renewable energy by just under $1 billion.
The dropping price of solar electricity is evident in the competition for private contracts to provide electricity in countries like India and Chile. In January, a contract was awarded to provide solar power electricity in India for $64/MWh and, as recently as August, a contract in Chile was awarded for $29.10/MWh. This puts solar energy at approximately half the cost of coal energy and just below wind energy when analyzing 58 emerging market economies.
To further brighten the outlook, it is projected that 70 gigawatts of photovoltaic energy will have been implemented globally in 2016, which is up from 56 gigawatts in 2015. Of those numbers, it is estimated that China contributed just over 26 gigawatts of photovoltaics.
Capital expenditure on offshore wind energy and photovoltaic energy in 58 emerging market economies. Image courtesy of Bloomberg New Energy Finance.
Growing Energy Demand, Developing Solar Infrastructure
In emerging market economies, the demand for increased energy capacity may outweigh reliability. And, in these countries, environmental stress from densely populated cities also makes solar power energy the more attractive choice.
However, in developed market economies, solar energy competes with the well-established gas, oil, and coal energy sectors in countries that demand the cheapest and most reliable power. Convincing the general public that solar power is worth the investment or has potential to cost the same, or less, than traditional grid power has taken time.
Still, these countries have seen significant progress in the solar energy sector. In the third quarter of 2016 alone, there has been a significant increase in the installation of solar panels across the USA.
The majority of solar panel installations were from large-scale solar farms, which helped contribute to a 39% growth of the overall electricity sector in the USA, and a projected 88% increase in solar power compared to 2015. This equates to approximately 14.1 gigawatts of solar electricity capacity added in 2016 and totals a capacity of 35.8 gigawatts for the entire nation.
The state leading the way in solar power installations is California, which expanded solar electricity capacity by 1 gigawatt in the third quarter of 2016 alone, making it the first state to do so.
Desert Sunlight Solar Farm in California. Image courtesy of the Institution of Mechanical Engineers.
These trends support the projection that cost of electricity generated through solar power will drop by 59% and up to 13% of the world’s electricity will be generated through solar power plants by 2030.
For emerging market economies where solar power is currently the most economical source of electricity, they will likely continue to build and invest on those resources in the future.