Why Is Solar Power Getting Cheaper?


Predictions see energy consumption increasing from an average of 22,126 terawatt-per-hour in 2011, to 37,000 in 2030 – a rise of 67%. Unfortunately, the more we depend on fossil fuels for our energy production, the more damage the planet takes; electricity production through fossil fuels accounts for over 40% of current man-made CO2 emissions. Fortunately, renewable power capacity has grown by over 85% in the last decade, and the falling prices connected to switching to renewable energy could mean that we’re finally moving away from the age of coal and oil.

The latest data suggests that if prices continue to drop, technology continues to advance, and compliance to changing circumstances grows, we could soon be living in a world where sustainable, natural energy makes more sense economically than reliance on fossil fuels. Clean solutions for energy such as solar and wind are becoming more accessible and affordable, becoming ever-more valuable investments for electricity producers, utilities, and consumers alike. But what are the factors that have contributed to this shift? Why is solar power becoming cheaper?

Solar Panel Technology (PV) is cheaper

The installed cost of PV solar panels is continuing to decline, as experts discover new, less expensive ways to design materials for solar purposes. Today, module prices for solar panels make up less than half of the price associated with completed utility-scale solar deployments. This means that the bulk of the prices associated with solar come from “soft costs”, which includes labor to install panels, DC-AC inverters, connection to the grid, and so on.

In spite of this, solar energy is still set to become the cheapest electricity source in many parts of the world over the next decade as the cost of photovoltaics continues to decline. A report released by a German think tank: “Agora Energiewende” suggests that although there are still advancements to be made in the technology used for solar energy, the next ten years should see solar becoming the cheapest source of electricity for many countries. A report by the company suggests that there’s no end to the decline of costs for photovoltaics, provided that the technology continues to improve. In fact, prices have already dropped by 80% since 2008.

However, while the production costs for solar hardware will continue to fall regardless of geographical and local conditions, the regulatory and financial environments of certain areas will play a role in the overall price drop. Stable regulatory conditions will be essential to keep the cost of solar power down. While it’s now obvious that the cost of solar modules is falling significantly, pushing solar forward in the coming years will also rely upon driving down other, non-panel costs – a step that is already taking place.

Energy Production Costs are Falling Too

2015 and 2016 have brought with them some major shifts in the generating costs associated with solar power, reducing the gap between fossil fuel prices, and renewable energy. A detailed report developed by Bloomberg New Energy Finance, known as the “Levelised Cost of Electricity Update” (LCOE) was published late 2015 – and suggested that the future could hold prices for renewable energy that are equal to, or lower than a gas-fired power plant. The research update, based on thousands of different data factors associated with various projects and deals across the world, showed that crystalline silicon photovoltaics, and onshore wind have both lowered costs this years, while costs for coal-fired and gas-fired energy generation have risen.

The study developed by BNEF found that the “LCOE” for wind energy production had fallen to $83 per megawatt-hour by the end of 2015, compared to $85 in late 2014. At the same time, PV solar costs have fallen from $129 per megawatt-hour to $122. While the numbers may not seem huge yet, it’s a clear sign that prices are gradually getting lower. The opposite is happening for fossil fuel energy: at the same time, the LCOE energy production through coal saw an increase from $82 to $105 in Europe, and $66 to $75 in America.

The US Energy Department predicts that the cost of solar energy will fall by 75% by 2020. By that point, the average costs of paying for solar will have dropped to as little as $1 per watt for solar farms, and $1.50 per watt for homes. Thanks to lower financing costs and the falling costs of new technology, clean energy is on the fast-track to becoming our main source of electricity generation. Solar panels are no longer expensive novelties; instead they are realistic options for a sustainable future.

The Future for Affordable Solar Power

The cheaper that solar power becomes, the more investments will surge. According to BNEF, between now and 2040, we will have seen at least a $3.7 trillion investment in solar technology, and solar could account for over a third of the world-wide power capacity. Of course, there’s a lot to think about if we want to ensure that cheap, renewable energy becomes a persistent reality. For example, it’s worth noting that the costs of electricity and the production of energy are dependent on the region of the world, and the natural energy assets in that location.

The carbon policies that are currently in place throughout countries like Germany and the UK make the move to solar a more viable option, as solar and wind energy is quickly becoming cheaper than electricity from fossil fuels. Still, this doesn’t mean that solar is not tempting all parts of the world. The founder and CEO of EnergySage has even suggested that millions of Americans are actively pursuing the market for solar today, and predicts that solar panels could hit 1 million homes this year.

So Why Is Solar Getting Cheaper?

The answer to “Why is Solar Power Getting Cheaper?” is simple: the world is moving towards a more sustainable and clean approach to energy. The combination of cheaper technology and physical solar panels, matched with the falling prices of producing clean energy, is making solar power into one of the most competitive sources of energy in the world.

We’re leaving the industrial age of coal and fossil fuels behind to embrace a new world filled with affordable, environmentally friendly energy options.

Sam Alkass is a firm believer in solar power and its valuable impact on the future of our planet. Sam helps others generate their own clean, green energy while minimizing environmental pollution. For more solar news and tips, follow his Facebook.