It was bound to happen, and apparently it has: utility-scale solar-generated power, certainly in sunny parts of the world, appears to be cheaper than wind and both are cheaper than fossil-fuel generated power, writes Fereidoon Sioshansi, president of Menlo Energy Economics and publisher of the newsletter EEnergy Informer.
The headline news – long awaited by renewable enthusiasts – is based on a number of recent competitive auctions in sunny deserts of Chile and the Middle East resulting in record-cheap solar prices. (Read the fine print for details of when, where and under what conditions this applies.)
According to the latest data from Bloomberg New Energy Finance (BNEF), unsubsidized large-scale solar is beginning to beat not only wind but also coal and natural gas at current prices. If true, and if the same begins to apply elsewhere, it will be a turning point in global electricity markets making solar-generated power the cheapest form of electricity generation.
The BNEF’s accompanying chart, which shows the average cost of new wind and solar from 58 recently completed projects and/or auctions in places such as China, India, and Brazil suggests that the solar’s steep price drop since 2010 has caught up with wind – which has more or less held steady in the recent past.
“Solar investment has gone from nothing—literally nothing—like five years ago to quite a lot,” said Ethan Zindler, head of BNEF’s US policy analysis, who attributes “a huge part” of this to China, which has not only been rapidly expanding its own solar capacity but actively promoting and/or financing other countries to do the same. As the biggest manufacturer of solar panels in the world, there is a lot at stake in how fast solar capacity is installed beyond China’s own borders.
BNEF reports on several competitive auctions in 2016 where private companies seeking to win massive contracts to provide electricity, have offered record low prices to deliver solar power. It started with a contract in January 2016 to produce electricity for $64/MWh in India followed by much lower prices in August at $29.10/MWh in Chile. That is roughly half what it costs to generate power from a coal-fired plant these days – even with today’s depressed coal prices.
Heralding the new age of solar, BNEF’s colorful chairman Michael Liebreich declared, “Renewables are robustly entering the era of undercutting” fossil fuel prices. He said he was basing his statement on numerous solar projects completed in 2016 with more to follow in 2017.
When the data are tallied for the year, it’s likely that the total solar PV capacity added globally in 2016 will exceed that of wind for the first time. The latest BNEF projections call for 70 GW of newly installed solar compared to 59 GW of wind for 2016. What is stunning about these figures is that both are significant, but solar appears to have overtaken wind.
Two important caveats apply:
- First, neither wind nor solar runs dependably around the clock, 24/7, as a coal- or gas-fired or nuclear plant normally does. Hence, while the 3 cts/kWh solar price may be half that of a coal or gas plant, it must be backed up in one form or another so it is an apple and orange comparison.
- Second, the low prices most apply to developing countries where new capacity is needed and can be added at scale, which results in lower prices.
BNEF’s Liebreich acknowledges that, “… the overall shift to clean energy can be more expensive in wealthier nations, where electricity demand is flat or falling and new solar must compete with existing billion-dollar coal and gas plants,” adding, “But in countries that are adding new electricity capacity as quickly as possible, renewable energy will beat any other technology in most of the world without subsidies.
Another turning point, acknowledged by the International Energy Agency (IEA) in its Nov 2016 World Energy Outlook is that globally, more renewable capacity is coming on line than coal and natural gas combined. BNEF, and others, are projecting that peak fossil-fuel use for electricity generation may be within reach within a decade, if not sooner.
1 MW of new solar every 32 minutes
According to a report released by GTM Research and the Solar Energy Industries Association (SEIA), US shattered all previous quarterly solar photovoltaic (PV) records in 3rd Qtr. 2016 by installing 4,143 MW – or 1 MW every 32 minutes. 4.8 GW is expected to have come online in the 4th Qtr. breaking the record yet again. The report notes continued growth in the residential sector with around ½ GW added each quarter, suggesting a slowdown from its peak growth periods. The report cites new challenges and increased uncertainties resulting from proposals to reduce or eliminate generous net energy metering schemes in a number of states. For the year as a whole, it is estimated that the US would have installed 14.1 GW, an 88% increase over 2015. The numbers reported by GTM do not match those of the IEA – we shall know the definitive answers once 2016 data are finalized.
In a report called Climatescope, BNEF profiles emerging markets for their ability to attract capital for low-carbon energy projects including China (Box on page 4), Chile, Brazil, Uruguay, South Africa, India and others – countries with significant demand growth who are increasingly embracing renewables.
Not surprisingly, BNEF concludes that emerging markets have taken the lead over the 35 member nations of the Organization for Economic Cooperation & Development (OECD) in renewable investment. In 2015, the former invested $154.1 billion compared to $153.7 billion by OECD members, a trends that is likely to gather momentum. The lower costs of renewables and the need for new capacity additions makes renewables a good fit for rapidly growing economies. Climate concerns and the Paris Agreement to cut down emissions is mere icing on the cake.
BNEF, like the IEA, says coal and natural gas will continue to play a key role for some time to come, but if the trends of the past few years continue, their ultimate role will – eventually – diminish to that of providing backup to renewable generation. And that is certainly good news if one is concerned about the climate.
This article was first published in the February 2017 issue of EEnergy Informer, the international energy newsletter published by Fereidoon Sioshansi of Menlo Energy Economics in the US, and is republished here with permission. To get a subscription to this newsletter, click here.
Math Geurts says
Far from the equator, like in Europe, wind is cheaper than solar and will stay cheaper for many years.
I’ve been reading news sites make this same claim about once per week for the last five years. And we’ll continue reading it on a weekly basis for many years to come.
Meanwhile solar growth is at a crawl while natural gas booms in the US. I don’t see that changing anytime soon.
@Jeff, do you have any reference that solar should be cheaper than wind prior to 2015? If so, please give teh reference.
In US according to Lazard, the cost is falling faster for solar comparded with wind, see page 10 in https://www.lazard.com/media/438038/levelized-cost-of-energy-v100.pdf
In the US the last two years the additional capacity for solar, wind and NG is about 1/3 each, see http://www.eia.gov/todayinenergy/detail.php?id=29492
That’s a misleading way to talk about additional electricity the last couple of years in the US. In fact 400 times more electricity was added from natural gas compared to solar and 40 times more natural gas than wind in terms of actual generation. Source: http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_1_02_a
As you can read from the official EIA stats: 116.4 million megawatts of new natural gas generation was added in 2015 compared to 2014. 0.27 million megawatts of new solar electricity was added in 2015. 2.7 million megawatts of new wind electricity was added in 2015. Natural gas increases dwarf solar increases.
Your claim is true but widely misunderstood due to the language. Most people think “additional capacity” means the same thing as “additional electricity”. The problem there is not understanding capacity factors and not understanding that natural gas can be ramped up without new facilities. That’s why dishonest claims can be made which are factually true but don’t come close to representing the reality of new electricity generation which is overwhelmingly natural gas.
David Sanderson says
Yes. Solar load factors in northern Europe are around 10%. Even in the best climates it is not more than about 20%.
Gas has done the most damage to coal, but Low wind and solar prices are very recent. The price of wind dropped by 66% and solar by 85% in the last 7 years. In the US they are usually, but not always cheaper than gas now. Past prices do not predict future installations. The current, or future expected prices do. So expect higher renewables installations because of improved pricing.
Yes I do expect increased wind and solar installations but still not a significant amount relative to the total energy market. The US EIA doesn’t expect that either as shown in their energy outlook through year 2040 and 2050. Wind and solar will contribute on the margins while fossil fuels will continue to power industrialized society. Unfortunate but true.
Historically, the eia’s predictions about renewables installations have been so bad, you would have been better off with nothing.
Electric cars allow oil to be replaced by renewables, and if those cars become robotaxis, and rides become cheaper, and as fast as driving your own car, then we could end up with much faster change than eia predicts.
I hear your point on past forecasts by the EIA. Its true their projections have underestimated wind and solar growth. But not in a way that matters.
Solar grew much faster than forecast by EIA but didn’t grow into anything significant in the energy market. Solar PV grew from a fraction of one percent to a slightly bigger fraction of one percent. In that regard — the big energy picture — EIA got it right. Only with a microscope can you find the missed forecast on solar. You won’t see it when looking at the big picture.
Math Geurts says
It is right that EIA underestimated growth of renewables. Greenpeace and other NGO’s underestimated demand growth and still do that. So, at the end?
You have still not given any references from 2015 or before that shows that someone has claimed that solar is cheaper than wind (and actually the claim I have read is that the investment capacity is lower, not LCOE)
For the other information; yes there are lies, damned lies, statistics and alternative facts.
Thank you for the lesson between capacity, capacity factors and production. But I would like to add this to the lesson: For trends the most important ist he capacity increase. You still have to invest in new capacity before you can get any production from something. And the capacity increase one year (2016) will not be fully shown for the production the same year since all capacity has not bee utilized fully, see also below. So comparing production and capacity increase for the same years will never match.
Your refer to Table 1.2.A. Net Generation by Energy Source: Electric Utilities, 2006-November 2016
May I point out the following:
1 You are comparing for UTILITIES.
2 The unit is MWh not MW.
3 You are comparing 2014 with 2015, look instead at the bottom: Rolling 12 Months Ending in November (ie November 2016)
The more relevant table isTable 1.1. Net Generation by Energy Source: Total (All Sectors), 2006-November 2016 , Rolling 12 Months Ending in November (ie november 2016)
1 The gas increase is 60 TWh to 1394 TWh – yes still large increase and largest numbers
2 The sun has increased from 11 TWh to 35 TWh – very different numbers from your, but yes still lower than the gas increase.
3 The ”other” mostly wind increase is 38 TWh to 303 TWh.
(4 The coal decreased 177 TWh to 1210 TWh)
I’m looking forward for the coming years tables. Thank you for the lesson to read tables!
I disagree that capacity additions are the important factor. The important factor is actual power generation added. That’s natural gas orders of magnitude greater than solar and wind.
In fact the EIA historicals AND outlook show natural gas as the big gainer by a very wide margin through 2040 and beyond. Wind and solar bit players in the US energy market. Source http://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf
About finding articles touting solar cheaper than wind, and wind and solar cheaper than fossil fuels prior to 2015 that’s hard to find with a google search because it prioritizes the most recent articles. This from Reuters 2013: “Recent manufacturing data show that average selling prices for solar panels, or modules, are now lower than wind turbines per watt in some markets. For example, one of the world’s leading turbine makers, Denmark’s Vestas, reports average selling prices for the first quarter of this year at 1.04 euros ($1.34) per watt. That compares with solar module prices among leading manufacturers at $0.7-$0.8 per watt last year. The pace of module price falls means that these will also rival wind turbines in lower-priced Chinese markets this year. (See Chart 3)”
Math Geurts says
“And the capacity increase one year (2016) will not be fully shown for the production the same year since all capacity has not been utilized fully”
It is true but this will also be the case for the previous year (2015)
I have a misstake in point 2. It should read:
2 The sun has increased 11 TWh to 35 TWh – very different numbers from your, but yes still lower than the gas increase.