Between 2009 and 2017 prices dropped 76% for solar panels and 34% for wind turbines. Hydro and nuclear struggle to cut costs; as mature technologies, most of the efficiencies have already been squeezed out already. Also, they are difficult to productise and scale; dams (definitely) and nuclear plants (somewhat) are one-offs. In contrast, solar panels and wind turbines are far easier to productise and then mass produce. It’s why wind overtook hydro in 2009 in attracting the most investment. By 2016 solar led the field and in 2017 attracted more investment than all other low-carbon technologies combined. The IMF’s Christian Bogmans goes over the numbers, and predicts that batteries – having the same advantages as solar and wind – will similarly drop in price.
As the April World Economic Outlook shows, solar and onshore wind turbines saw the biggest price declines among low-carbon energy sources between 2009 and 2017.
Prices dropped 76 percent for solar panels and 34 percent for turbines during that time, making them competitive alternatives to fossil fuels and more traditional low-carbon energy sources such as hydropower and nuclear.
Between 2009 and 2017 prices dropped 76 percent for solar panels and 34 percent for turbines
The numbers are based on the so-called levelized cost of electricity, a method of calculating the cost per unit of power that would be needed to recover the investment in building and operating different generating technologies.
Global investment in renewable energy capacity has accelerated in the past decade, as wind and solar have emerged as cost-effective power sources. While hydropower attracted the most investment in renewable energy up to 2008, wind turbines took the lead in 2009, and solar panels became the dominant investment choice by 2016. In 2017, more was invested in solar than in all other low-carbon technologies combined.
In 2017, more was invested in solar than in all other low-carbon technologies combined
While the cost of wind and solar power generation declined, nuclear and hydropower costs rose 21 percent and 9 percent, respectively, during the same period. Unlike wind and solar power, nuclear and hydro are mature technologies that require large investment in structures with low standardisation, similar to other large-scale civil engineering projects such as bridges and railroads. These factors tend to limit the potential for cost reduction for these kinds of projects.
In contrast, research and development in solar and wind technologies, their standardisation, and economies of scale in manufacturing have resulted in increasingly efficient solar panels and larger wind turbines.
While predictions are difficult, the experience with wind and solar technologies may suggest a similar path for the cost of producing electric batteries, whose production could become significantly more efficient with standardisation and economies of scale.
Christian Bogmans is an economist in the IMF’s Research Department (Commodities Unit).
This article was first published on the IMFBlog