BE2C2 Report; Jan 3, 2017 — Solar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.
In nearly 60 lower-income countries, the average price of solar energy dropped to $1.65 million per megawatt in 2016, just below wind at $1.66 million per megawatt. That means new energy development projects will focus on solar energy rather than wind power — even coal.
In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Some analysts say solar prices for large-scale utilities may further drop in Asia and the Middle East.
It started with a contract in January last year to produce electricity for $64 per megawatt-hour in India; then a deal in August pegging $29.10 per megawatt-hour in Chile. That’s record-cheap electricity—roughly half the price of competing coal power.
According to a report, when all the 2016 completions are tallied in coming months, it’s likely that the total amount of solar photovoltaics [PVAs] added globally will exceed that of wind for the first time. The latest BNEF projections call for 70 gigawatts of newly installed solar in 2016 compared with 59 gigawatts of wind.
Since 2009, solar prices are down 80 percent and wind energy has dropped by 30% in the last three years, with every part of the supply chain trimming costs.
By 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance, a research and analysis organization for those investing in the energy industry.
The International Renewable Energy Agency anticipates an additional 84 percent cumulative decline in solar costs by 2025 — beyond 2009.
The speed at which the price of solar will drop below coal varies in each country. Countries with large domestic coal reserves such as India and China will probably take longer. Eventually, by 2030, fossil fuels such as oil and coal and even gas may become ‘stranded assets’ , some experts argue.
In China, the biggest solar market, will see costs falling below coal by 2030, according to New Energy Finance. The country has surpassed Germany as the nation with the most installed solar capacity as the government seeks to increase use to cut carbon emissions and boost home consumption of clean energy. Last year, China invested $103 billion in solar projects, more than the US ($44.1 billion), the UK ($22.2 billion), and Japan ($36.2 billion) put together.
Sunbelt countries are leading the way in cutting costs, though there’s more to it than just the weather. The use of auctions to award power-purchase contracts is forcing energy companies to compete with each other to lower costs.
An August auction in Chile yielded a contract for 2.91 cents a kilowatt-hour. In September, a United Arab Emirates auction grabbed headlines with a bid of 2.42 cents a kilowatt-hour. Developers have been emboldened to submit lower bids by expectations that the cost of the technology will continue to fall.
According to a report, Abu Dhabi renewable energy company Masdar is looking to invest in Pakistan this year. It does not specify solar/wind/ or both.
“We’re seeing a new reality where solar is the lowest-cost source of energy, and I don’t see an end in sight in terms of the decline in costs,” said Enviromena’s Khoreibi.
BE2C2 Report is a content production & management service by BE2C2 – a business unit of Irshad Salim Associates.
(Based on reporting in Bloomberg, Reuters and DailyKos)