It’s Official: Solar Energy is Now the Cheapest Form of Energy Surpassing Fossil Fuels

Image credits : anjanisales

2016 bought a significant transformation in the emerging energy markets. For the very first time, solar energy generated power, became the cheapest form of available energy.

This has happened in the middle and low income countries, giving a major advantage for both government and companies to look beyond coal, oil and gas for renewables.

Based on the average prices of solar energy across 58 emerging nations, including the likes of China, India and Brazil, the graph from Bloomberg New Energy Finance (BNEF) below shows the average cost of solar at US$1.65 million per megawatt during 2016, which only few predicted would go just below wind which stands at US$1.66 million per megawatt.

Solar investment has gone from nothing—literally nothing—like five years ago to quite a lot,” said Ethan Zindler, head of U.S. policy analysis at Bloomsberg.

cheapest energy solar 2016
Disclosed capex for onshore wind and PV projects in 58 non-OECD countries. Image source: Bloomsberg New Energy Finance
WHAT DOES THE DATA SAY

Data from World Economic Forum for the year 2015 mentions that emerging economies contributed the majority ($156 billion) of investment commitments to renewables, China ($102.9 billion), India ($10.2 billion) and Brazil ($7.1 billion) leading the way. Developed countries managed $130 billion. Europe ($48.8 billion),United States ($44.1 billion) and Japan ($36.2 billion) being the top investors.

With private firms competing for massive contracts, prices are also expected to win the day. Solar power is estimated to fall to 50% the price of electricity from non-renewable sources within a decade or two. When factored in the benefit of reducing global carbon emissions, it seems like a no-brainer.

Encouraging results has already been reached in some locales. In January, 2016 a new high was recorded in India with a contract to produce solar power for $64 per megawatt-hour (MW-h).

By August, solar electricity was contracted to energy firm Solarpack in Chile at just $29.1 per megawatt-hour, roughly 60% below prices from a new natural gas plant.

“Renewables are robustly entering the era of undercutting” fossil fuel prices, BNEF chairman Michael Liebreich said in a note to clients.

Exponential technological advancements, both in cost and efficiency, have surely made renewable energy highly competitive in this decade. This, including other factors such as growing investments, rise in green energy policies highlights the reason why solar is booming.

In terms of efficiency, it is only in this decade that commercially available solar panel efficiency rate has shot from 15% to 22% at its highest capacity, that too after a near stagnation period of over 2 decades.

NOT THE CHEAPEST DEAL EVERYWHERE YET

Solar power isn’t the cheapest deal just everywhere yet. The prices largely varies with the labor costs, sunshine availability and government subsidies. Plus, the new solar industry is in tough competition with the existing billion dollar coal and gas plants.

But still, these recent developments are a landmark moment for new energy costs in developing economies, which gives us plenty of optimistic hope for the coming years to follow.

Fossil fuels won’t just disappear overnight, mind you! In the global energy matrix, coal and natural gas still accounts for 62% of total energy production. Also, populations relying on wood burning and kerosene generators for energy requirements, who have no electricity, the shift to renewables and increasingly to solar can’t come soon enough.

Source Bloomsberg World Economic Forum global climate scope

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