The Incredible Shrinking Cost of Solar Energy Drives Mega-Projects around the World

Rob Wile uses a graph to point out the obvious, the dramatic fall in the cost of solar power generation. In many countries– Italy, Spain, Germany, Portugal — and in parts of the US such as the Southwest, solar is at grid parity. That means it is as inexpensive to build a solar plant as a gas or coal one. The pace of technological innovation in the solar field has also accelerated, so that costs have started falling precipitously and efficiency is rapidly increasing. By 2015, solar panels should have fallen to 42 cents per watt. says that the best Chinese solar panels fell in cost by 50% between 2009 and 2012. That incredible achievement is what has driven so many solar companies bankrupt– if you have the older technology, your panels are suddenly expensive and you can’t compete. It is like no one wants a 4 year old computer. Conservatives shed no tears when better computers drive slower ones out of the market, but point to solar companies’ shake-out as somehow bad or unnatural. No wonder US solar installations jumped 76% in 2012. The reductions in cost over the next two years are expected to continue, at a slowing but still impressive 30% rate:

Construction has begun on the world’s largest solar plant. MidAmerican Solar and SunPower Corp. are building a 579 megawatt installation, the Antelope Valley Solar Project, in Kern and Los Angeles counties in California. That is half a gigawatt, just enormous. It will provide electricity to 400,000 homes in the state (roughly 2 million people?), and reduce carbon dioxide emissions by 775,000 tons a year. The US emits 5 billion metric tons a year of C02, second only to China, and forms a big part of the world’s carbon problem all by itself. We just need lots more of the Antelope Valley projects.

Important new research also shows that hybrid plants that have both solar panels and wind turbines dramatically increase efficiency and help with integration into the electrical grid. Earlier concerns that the turbines would cast shadows and so detract from the efficiency of the solar panels appear to have been overblown. Because in most places in the US there is more sun in the summer and more wind in the winter, a combined plant keeps the electricity feeding into the grid at a more constant rate all year round, which is more desirable than big spikes and fall-offs.

That Germany, then China, then the US are the world’s largest solar markets is no surprise. But that number 17 Japan will increase its solar installations by 120% in 2013 and so may be the second hottest solar market, just after China, this year, would mark a big change. Japan may well have 5 gigawatts of solar installed by the end of this year, even though the relatively new prime minister, Shinzo Abe, is no particular friend of the renewables. In my own view, if Japan made the right governmental and private investments, it could overtake China in the solar field and reverse its long post-bubble stagnation.

ABB has been commissioned a large solar electricity generating plant on the edge of the Kalahari Desert near Cape Town, South Africa. It will supply the electricity needs of around 40,000 persons and reduce annual emissions by 50,000 tons of carbon dioxide. South Africa emits 500 million tons of carbon dioxide annually, and is third in the world for per capita emissions. (Still, it only emits a 10th as much over-all as the US). But they just need a thousand more plants like the Kalahari one, and voila! South Africa is also imposing a carbon tax, which will hurry things along. (At the moment, South Africa is far too dependent on dirty coal plants, which not only fuel climate change but also spew deadly toxins such as mercury into the atmosphere, whence it goes into human beings.

Because of South African and Israeli demand in particular, demand for solar panels in the Middle East and Africa has risen over 600% during the past year. Saudi Arabia’s announced plans to save its petroleum for export by going solar at home will add a great deal to regional demand if it sticks to those plans. (In most countries, petroleum isn’t used much for electricity generation as opposed to transportation, but in oil states such as Saudi Arabia it often is used in power plants; but that cuts down on foreign exchange earnings.)

The two Indian states of Gujarat and Rajasthan are emerging as the solar giants in India, with each having now passed half a gigawatt in solar electricity generation capacity. The two account for some 88% of all of India’s solar power. But Rajasthan may soon outstrip Gujarat, given the state’s solar-friendly commitments, its ample amounts of scorching sunlight, and its vast deserts.


10 Responses

  1. In the first paragraph citing solar power costs you report that solar panels could be about 42 cents per KWH by 2015. Sounds really optimistic. From what I have read about there is about 1KW per square meter in sunlight. It would require one meter of area to produce 1KWH at 100% efficiency. Current efficiencies are a lot less than that. Maybe 10-20% tops. That’s 5-10 sq meters of panel. That much copier paper costs more than 42 cents. Solar panels are more complex than copier paper. When they can do a KWH for 42 cents I will be the first on my street to cover my roof with solar panels. Love your blog. Try to read it every day.

  2. Coincidently, today’s Washington Post has an article on an experimental plane that runs on solar power. The developer plans to pilot it across the United States on a test flight soon. The developers have named it “Solar Impulse.” It weighs in at 3,500 pounds, has 12,000 photovoltaic cells that form the top of the wing, a series of batteries behind the planes four engines, the wingspan of 747, can reach an altitude of 28,000 feet, and can operate day and night. At this stage, it has a crew of one–the pilot, who sits in a small, confined space. But it is a beginning.

  3. Very interesting post. However, “grid parity” does not mean it is as cheap to build solar as it is to build gas or coal. Grid parity is when the cost of solar power on your own roof can match the price of power from the grid including transmission, taxes and profits.

    There is a big difference. The raw production cost of large-scale “classic” power sources can easily be as low as a third of a country’s typical grid price including transmission. Any person who acts on grid parity thus, in essence, beggars his neighbors by contributing less to taxes and grid infrastructure. Even more so if it the installation is subsidised, of course.

    Also, unfortunately, neither Japan nor anyone else can improve their sluggish economies by increasing the cost of their electricity production. Having said that, coal is nasty business and should be taxed out of existence.

  4. Professor,

    Have you ever noticed that whenever the subject is a county with higher per capita emissions than the US, you change the subject to total emissions, and whenever the subject is a country with higher total emissions, you change the subject to per capita emissions?

  5. It’s happening little by little, but the old model reigns supreme in the hearts of the investor class until it is violently overthrown. Think of decaying Britain, trying to switch from a coal empire to an oil empire at the last minute, while America was defining new industries and lifestyles that required cheap oil and exporting them around the world.

    I.e., until there is a “Solar Empire” that can bully and overawe other countries, no one will abandon their status quo in sycophantic emulation. Since solar doesn’t create the spectacular concentrations of wealth and power that fossil fuels did, people will be slow to recognize the need for change.

  6. @Super390: Empires, violent overthrows and a single-minded investor class? Do you really think our economies works like that?

    Competition in the marketplace is fierce. The “investor class” doesn’t collude to keep any specific modes of production. If there are better ways, then obviously lots of investors are going to dive right into it and outcompete the rest. It has happened thousands of times before in all kinds of industries, and it will keep happening.

  7. I think solar power is a get rich slow scheme. It is something that every person would have if they knew what it was.

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