Notably, the info below doesn’t even take into account the tremendous health costs of coal and natural gas, which would make them much more expensive “at the register” if actually included in the price.
Solar Power Price Drops
1.5 years ago, GE projected that solar power would be cheaper than fossil fuels (on average) within 5 years. With 3.5 years left, GE’s prediction definitely seems within reach. In fact, GE was putting big money into a solar cell manufacturing plant in Colorado, but in January it pulled the plug on that due to the fast-falling prices of competing solar cells. In other words, solar prices are falling even faster than GE had thought they would (and faster than most analysts and renewable energy followers thought they would).
I’ve shared the following two graphics a few times in the past couple years. They make a rather important point that doesn’t seem to get enough attention: solar power projects go up relatively fast, while nuclear and coal power plants require many more years to get designed, planned, permitted, and built. With nuclear and coal costs rising while solar costs are quickly falling, by the time a new nuclear or coal power plant would be built, its electricity would already be more expensive than electricity from solar (or wind, for that matter):
Solar is cheaper than coal, practically speaking. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
Solar is cheaper than nuclear power, practically speaking. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
In fact, one report from 2010 found that the solar–nuclear crossover occurred a few years ago.
Solar and Nuclear Costs: The Historic Crossover
Now, an assumption in all of these projections mentioned above is that solar prices will consistently drop at a good rate. And that’s exactly what’s been happening. As I just shared a couple weeks ago, here are a few nice graphs of solar PV price drops in Germany:
October 2012
Lest you think it’s only Germany seeing such price drops, below are similar graphs from the US.
This first one shows that the installed price of residential and commercial solar dropped from an average of about $12/W in 1998 to about $6/W in 2011 (~50%).
Similarly, this next one shows the drop in the price of solar modules from 1985 to 2011 (from over $6.5/Wp to about $1/Wp):
Here’s a look at the drop simply from 2009 to 2011:
And here’s one graph published just a few hours ago for the drop from Q4 2011 to Q3 2012 (for solar modules and specific module components):
Wind Power Price Drops
So far, of course, we’ve just been looking at solar, but the other big renewable energy player these days is wind energy. It has followed a very similar path, just a bit earlier than solar energy. It actually hit a big grid parity point last decade… before natural gas prices fell off a cliff:
Note that the figure on the right should be $25-40/MWh.
Without taking too long of a side tour here, it is worth noting that natural gas prices fell off cliff as certain fracking practices became commonplace, and those only became commonplace once Dick Cheney got a ridiculous policy enacted for the fracking industry on his way out of office (and yep, Cheney was previously CEO of Halliburton, the company probably benefiting the most from this policy). What is the policy? Known as “The Halliburton Loophole,” it’s essentially that fracking fluids are exempt from the Clean Water Act (for no clear reason) and companies engaged in the process don’t even have to disclose what chemicals they are using. Needless to say, countless health externalities from the fracking process are not being accounted for in the price of natural gas, and can’t even be calculated by anyone outside the industry. (And, of course, no one inside the industry is going to do that.)
Long story short: natural gas fracking as it is happening today is artificially legal (i.e. should be illegal).
Furthermore, even with things as they are today, many are projecting that the price of natural gas will rise again in the coming years, making wind the cheaper option by far… yet again:
And, even today, wind energy is the cheapest option for new electricity in many, many places.
But, that’s not the end of the story — the price of wind power, like solar, is on a downward trend. Numerous technological improvements are bringing the price of wind down to an absurdly (in a good way) low number:
As we just reported about a month ago, a recent report by Bloomberg New Energy Finance has documented some important technological and other wind power cost reductions over the past four years. Two of the key findings were that:
- O&M costs have been 38% lower in 2012 than 2008.
- The price per megawatt of wind power is down to €19,200 from the €30,906 it was at in 2008.
The report also noted technological improvements and price reductions. Also worth noting is the birth and growth of Chinese wind turbine manufacturing firms, which is driving down prices and increasing competitiveness.
Solar Power Boom
A rapid price drop and an installation boom are naturally going to go hand in hand. As the price falls, more solar gets installed. And as more solar gets installed, the price falls. This is the kind of feedback loop we like. 
Here’s a similar chart for US solar power growth:
Here’s a look at installation data from 2010 & 2011 and installation projections through 2016 (chart just released earlier today):
And here’s a broader look:
Here’s solar PV, wind, and biomass growth in Germany through 2011 (and I know 2012 has added a ton onto that):
Wind Power Boom
Of course, it’s a similar story for wind, with projections that the growth will continue at a fast clip for decades to come:
Installed wind power capacity in the US under the 20% electricity demand by 2030 scenario. (click to enlarge)
Some key stats regarding global wind power are that 1) it had a compound annual growth rate (CAGR) of 25% from 2005 through 2010; 2) by the end of 2011, 200,000 MW were installed; and 3) by 2030, 1,750,000 MW are projected to be installed.
Europe Leading The Way
As a sign of things to come in Europe and many other places, the EU’s new power installation split in 2011 was quite uplifting — as I reported in February, 70% of new EU power was from renewable energy sources in 2011:
Why have I just been focusing on solar and wind energy in this article/presentation? Because solar and wind energy are the dominant renewable energy options these days. You can see in this chart that 96% of 2011 renewable capacity additions were from solar and wind:
And here’s a look at all net capacity changes in the EU in 2011:
You can see in the next chart that wind and solar have come to dominate new power installations in the EU in just the past 5 or so years (note that solar PV is green not yellow in this chart):
Perceptions, Oy…
Despite all of the above, there are big misconceptions about energy. Perhaps it’s because people heard things 10 years ago that they still keep in their heads and think are true today. Perhaps it’s because people hear things that are simply false (from pseudoscience fossil fuel think tanks, utility companies, and misguided media). But the bottom line is that many (or the large majority of) people don’t realize how cheap solar and wind have gotten.
Here’s one look at the difference between perceptions of the levelized costs of wind and perceptions of the levelized cost of coal:
We also have a post coming soon showing that UK residents don’t realize how cheap solar has become, and how much money they can save by going solar. I’m sure the same is true for the US and other countries/markets.
Rooftop Solar PV Competes With Retail Electricity
Something that doesn’t get emphasized nearly enough is that rooftop solar PV essentially competes with the retail price of electricity, not the wholesale price.
If you’re an average Joe considering whether or not to go solar, you don’t compare the price of solar with the wholesale price of a coal or natural gas power plant — you compare it with what you would pay for electricity from your utility. In many places, solar is already cheaper. And in many, many more places, that will soon be the case. (In other words, utilities have something to be worried about).
With the increasing use of “time of use” (TOU) pricing, and the fact that peak power demand (when prices are highest) often coincides with peak solar PV output, this clean technology gets even that much more attractive (i.e. cheap relative to electricity from the grid).
Leading Countries
You can’t give a big picture summary of clean energy without noting which countries are leading the way.
In absolute terms, you can see the world’s current solar and wind power leaders here:
I love rankings and top 10 lists as much as the next guy, but these absolute installation rankings always irk me a bit. Isn’t relativity important these days?
Little Einstein by • Happy Batatinha • (some rights reserved)
Without finding good rankings based on relative solar and wind leadership on the interwebs, I decided to create such rankings myself.
You can find a lot more rankings and info at the links below, but for a quick snapshot, here are a few key “relative leadership” rankings:
Top solar power countries per capita:
Top solar power countries relative to population. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
Top solar power countries per GDP:
Top wind power countries relative to GDP. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
Top solar power countries per TWh of electricity production:
Top wind power countries relative to electricity production. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
Top wind power countries per capita:
Top wind power countries relative to population. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
Top wind power countries per GDP:
Top wind power countries relative to GDP. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
Top wind power countries per TWh of electricity production:
Top wind power countries relative to electricity production. (To enlarge, hold down ‘ctrl’ or ‘command’ and click the ‘+’ key, or click on the image and then click on the link to the image on the next page — that’s the link that indicates the size of the image.)
German Solar vs US Solar
As noted yesterday, German solar and US solar have both been growing at a fast pace for several years now, and the price of solar in both countries has been dropping steadily. However, looking at the solar power capacity of each country in a relative manner, Germany has over 21 times more solar installed per capita than the US (301.47 MW per million people compared to 13.973 MW per million people).
That’s not the only big difference between US and German solar, though. The price of solar power in the US is also a lot different than the price of solar power in Germany. We had an article back in June noting that installed solar power in Germany was at about $2.44/watt, while it was $4.44/watt in the US. The price of solar in both countries has dropped a bit since then, but the general difference remains.
And the difference exists across all solar power project sizes, as this Lawrence Berkeley National Laboratory (Berkeley Lab) chart from November’s Tracking the Sun report shows:
So, why is solar so much cheaper in Germany?
A number of people have looked into the matter in a bit of depth. For example, CleanTechnica contributor John Farrell has produced a chart showing by how much the various costs of solar vary in the two countries, as part of his report on the matter, “Cut The Price Of Solar In Half By Cutting Red Tape.” Here’s that chart:
Here’s another chart on the split, this one from Berkeley Lab:
Some comments from Berkeley Lab: “[1] German installers reported average soft costs of $0.62/W in 2011, which is roughly $2.70/W lower than the average soft costs reported by U.S. installers… [2] Customer acquisition costs averaged just $0.07/W in Germany, or roughly $0.60/W lower than in the U.S.”
Soft costs, red tape, acquisition costs — this is where the party’s happening (or not). But now that we’ve nailed down where the price difference is occurring, how about a bit of reflection on why it’s occurring?
One noticeable cause, I think, is simply that Germany has a much more mature market. (Again, it has over 20 times more solar power installed per capita than the US.) As a market matures, competition increases, there are more economies of scale, and costs come down.
And… if we’re going to talk about creating greater market penetration, we have to look at what policies actually do so. For solar (and other clean energy technologies), nothing has worked better than the rather simple feed-in tariff. As John noted about a year ago, the large majority of the world’s solar power and wind power has come through feed-in tariffs:
Another very interesting factor worth noting is the negative effect subsidies can have on mature or maturing technologies. This is something one of the premier solar policy and finance experts in the world, Jigar Shah, focused on in an exclusive guest article for CleanTechnica a couple months ago. His article, “Are Subsidies Holding Back U.S. Solar Deployment?,” noted that solar subsidies in the US are manipulated by investors in order to get a higher return on investment. In other words, by claiming that solar systems cost more than they do, investors are able to gain more in tax credits.
Jigar noted that “solar is now cost-effective without subsidies for ideal customers in 300 utilities in 30 US states.” Thus, he advises that we cut the subsidies and watch the price of solar fall.
Another thing worth noting is that many people (including schools, government buildings, and nonprofit organizations) can’t take advantage of solar power subsidies in the US. So, it’s imperative that we not inflate the cost of solar for those potential customers with unnecessary subsidies.
I’m sure this is a controversial topic, and there’s a lot more detail to get into on that matter, but we’ll leave this summary at that for now.
Wind Subsidies
Wind power may be in a different boat, since it doesn’t lend itself to decentralized deployment as well as solar. While it is the cheapest option for new electricity in many places, pulling its subsidies or threatening to pull them has resulted in big “bust” years for US wind (and “boom” years right before those bust years). Here’s an Energy Information Administration chart on the matter:
However, I wonder what wind energy developers and investors would do if there was one day no hope of subsidies ever coming back. By bet it that they’d develop and invest a lot more than they do in non-subsidy years. If you’re missing a big tax credit one year but are hopeful it will be back the next year, why not wait it out and invest your capital in more supportive regions or countries in the meantime? (That’s probably what I’d do.)
Dirty Energy Subsidies
I don’t want to focus on this too much, since this is a post on renewable energy, not non-renewable energy (that’s catchy, isn’t it?). But the fact of the matter is, dirty energy sources have a huge bias fiscally because of the decades of massive subsidies they have been granted. This is a matter that I’ve tackled at length on a number of occasions. One key thing to note is that societal externalities (such as$500 billion a year in health costs from coal… in the US alone) are massive subsidies to the fossil fuel industries. But even beyond that, here are a couple charts from one of our Wind Power resource pages that indicate the completely imbalanced government subsidies for various energy sources:
Solar Now 