The cost of solar power continues to tumble. According to Bloomberg New Energy Finance, new solar projects in emerging markets are costing less to build than wind projects. Notice the emphasis on emerging markets. In the past 20 years, many developing nations skipped installing the infrastructure for telephone landlines and went straight to cell phones. Now something similar is happening with electricity. Many developing nations have no traditional electrical grid and may never have one except in major cities. Solar and new forms of battery storage are allowing them to build microgrids instead.
A chart prepared by BNEF shows the dramatic decline in solar power costs in 58 emerging market economies, including China, India, and Brazil. Many experts expected the cost of solar to fall and perhaps equal the cost of wind power one day, but few predicted it would happen this soon. In many parts of the world, solar is now the least expensive source of electricity — less than coal, natural gas, nuclear, or renewables like wind, geothermal, hydroelectric, or tidal.
“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 BNEF. “A huge part of this story is China, which has been rapidly deploying solar” and helping other countries finance their own projects.
This year has seen a remarkable run for solar power. Auctions, where private companies compete for massive contracts to provide electricity, established record after record for cheap solar power. It started with a contract in January to produce electricity for $64 per megawatt-hour in India; then a deal in August pegging $29.10 per megawatt hour in Chile. That’s record low electricity — roughly half the price of coal power. “Renewables are robustly entering the era of undercutting” fossil fuel prices, BNEF chairman Michael Liebreich said in a note to clients this week.
BNEF believes that the amount of new installed solar power in 2016 will exceed new installed wind power for the first time. Its analysts predict there will be 70 gigawatts of new solar this year compared with 59 gigawatts of wind power. The 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. But in developing 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,” said Liebreich.
Making electricity from fossil fuels or nuclear will still be a viable option for a while, but BNEF predicts that within ten years, solar will be the dominant source of electricity in most countries, especially those like India that are trying to build strong economies to support its rapidly increasing population.