Solar is Cheap. Why aren’t We Using More of It?

February 12, 2021

Popular Science:

Many of us might assume that the reason so much energy still comes from gas and coal power plants is simple economics: those fuels are cheaper. But though it was once true, that assumption has actually been obliterated by a recent decline in solar and wind costs over the past decade.

When it comes to the cost of energy from new power plants, onshore wind and solar are now the cheapest sources—costing less than gas, geothermal, coal, or nuclear.

Solar, in particular, has cheapened at a blistering pace. Just 10 years ago, it was the most expensive option for building a new energy development. Since then, that cost has dropped by 90 percent, according to data from the Levelized Cost of Energy Report and as highlighted recently by Our World in Data. Utility-scale solar arrays are now the least costly option to build and operate. Wind power has also shown a dramatic decline—the lifetime costs of new wind farms dropped by 71 percent in the last decade.

Natural gas prices decreased over that time, too, though by a lesser amount—32 percent—but that’s due to the recent fracking boom and not a longer term trend like that seen in renewables, the article states. The cost of building coal plants stayed relatively stable over the decade.

Solar became cheap due to forces called learning curves and virtuous cycles, the article describes. Harnessing the power of the sun used to be so expensive that it was only used for satellites. In 1956, for instance, the cost of one watt of solar capacity was $1,825. (Now, utility-scale solar can cost as little as $0.70 per watt.)

The initial demand for satellites fueled a so-called “virtuous cycle.” The more panels were produced for satellites, the more their price declined, and the more they were adopted for other niche purposes. As the cost further declined due to technology improvements and the rise of economies of scale, solar was able to eventually debut as a viable general-purpose energy source. Since 1976, each doubling of solar capacity has led to a 20.2 percent average decline in the price of panels.

Fossil fuels, in comparison, can’t keep up with this pace. That’s because fossil power plants have to buy mined fuels to operate. In coal plants, supplying the coal accounts for about 40 percent of total expenses. Sunshine and wind are free, which allows the costs of tapping into their power to decline sharply as technology improves and the industry grows.

Mark Paul, an environmental economist at the New College of Florida, adds that this cycle didn’t happen in a business-only vacuum. “The US government invested serious sums of money into developing modern [photovoltaic] technology during early stages of what we think of as the price curve,” he says. “It drastically improved the efficiency of solar modules, both in our ability to produce them and how much energy solar is able to produce.”

The globe’s energy mix has responded to the bargain prices on renewables. In 2019, 72 percent of new energy capacity came from renewable sources and global renewable power capacity has more than tripled in the last 20 years.

In the United States, renewable power has been ramping up, too. In 2007, wind made up less than one percent of energy capacity, and even less for solar, while coal contributed half. While 2020 estimates are still preliminary, it’s likely that the total output from renewables (including solar and wind as well as other sources like hydropower and biomass) surpassed coal, which only contributed about a fifth of power generated. “2020 … will have been the best year ever for new wind installations in the US and the best year ever for new solar installations,” says John Rogers, an energy analyst at the Union of Concerned Scientists.

But these changes are still not enough to reduce greenhouse gas at the rate needed to curb the worst impacts of climate change.

While coal plants have been shuttering across the country, the fracking boom has brought in a glut of cheap fossil gas. While this abundant and affordable fuel emits up to 60 percent less carbon dioxide when burned compared to coal, it still contributes to climate change, including from the notorious methane leakages from its facilities. . Oil also still accounts for a large share of polluting emissions due to its use in powering cars and trucks. In fact, transportation accounts for more emissions than any other sector in the country.

Despite a massive drop in costs, renewables haven’t replaced fossil fuels at the rate you might expect. That’s because the investments, policies, and very infrastructure of the energy industry as a whole are very much skewed in favor of fossil fuels.

While it is cheaper to build renewables when considering a new plant, that metric doesn’t necessarily apply to running a fossil fuel plant that already exists, explains Ashley Langer, an energy economist at the University of Arizona. Sometimes, she adds, the regulatory structure of utilities actually makes it more profitable to keep a coal or natural gas plant running.

Langer says this is especially true for the state-regulated monopolies that supply power in about half of US states. These investor-owned utilities are guaranteed a certain rate of return on their investments in power facilities, which basically guarantees continued earnings in exchange for running those plants. Even if the actual market costs of their energy sources would make operations costly, these monopolies are set up so that that’s not really a concern.

“The thing that’s really preventing us from rapidly transitioning is what we call the lock-in effect,” says Paul. “We have existing fossil plants where we’ve already paid to build them and the cost of producing one more unit of electricity is cheaper from using existing infrastructure than building new infrastructure in most cases. So given that we’ve already paid the upfront cost of this fossil fuel infrastructure, the economics don’t quite line up yet where we’re going to facilitate a rapid phase out of fossil fuel plants prior to the end of their life cycle.”

That may change soon, though. The cost of building new renewables is becoming increasingly competitive with the cost of adding additional capacity to existing fossil fuel facilities. In the 2020 Lazard analysis, the lifetime costs (when including subsidies) of power are $31 per megawatt-hour for utility solar and $26 per megawatt-hour for wind. The cost of increasing capacity was $41 for coal and $28 for natural gas.

In addition to being already heavily invested in fossil fuels, there is a lot of inertia in the system due to long-term contracts between utilities, energy producers, and mining companies. And since the country’s total energy use is not increasing that much every year, there isn’t much incentive to build new renewables.

Market forces and monopolies aside, there are few other, more tangible barriers to a widespread renewable roll out.

Sun and wind aren’t consistent throughout the day or the year, and sometimes the best places for power don’t actually have many people living there. The windiest parts of the country—often in the interior regions like the Great Plains—have fewer people to use that power than crowded coastal cities. The aging American electrical grid doesn’t currently have the ability to distribute power from renewables over long distances, says Matt Oliver, energy economist at the Georgia Institute of Technology.

These challenges of intermittency and geography are not insurmountable—batteries and water can store energy, and better transmission systems can be built. But the solutions will require massive investments to develop and build the needed infrastructure.

17 Responses to “Solar is Cheap. Why aren’t We Using More of It?”

  1. Sustain blog Says:

    Solar is cheap so we must generate more solar energy. Thank you 😊

  2. “But the solutions will require massive investments to develop and build the needed infrastructure.”

    Oh. Was the cost of massive investments to develop and build the needed infrastructure counted in the cost comparison?

    • jimbills Says:

      Neither was storage or overbuilding. The ‘oversight’ makes comparisons like the top chart meaningless.

      The article does state the most important part:
      “Despite a massive drop in costs, renewables haven’t replaced fossil fuels at the rate you might expect. That’s because the investments, policies, and very infrastructure of the energy industry as a whole are very much skewed in favor of fossil fuels.”

      “But these changes are still not enough to reduce greenhouse gas at the rate needed to curb the worst impacts of climate change.”

      “….there isn’t much incentive to build new renewables.”

    • Mark Mev Says:

      In a way I don’t mind that the cost that infrastructure wasn’t specifically spelled out. Was the the cost of added pipelines and oil tankers added? Either way, added electrical lines (high dc or whatever) to interconnect our disparate grids should be done anyway. Our electrical system is antiquated.

      • redskylite Says:

        Many hidden costs in most types of energy – what about the bad health effects of pollution caused by fossil fuel burning, who calculates and configures that in the equation ?

      • The oil and gas infrastructure took 150 years or so to build out. It isn’t really possible to build out a comparable solar/wind infrastructure in a couple of decades. Eventually, if we don’t lose manufacturing capability due to political/economic chaos and/or natural disasters, we could do so, but the cost would be spread out over several generations of people.

        The main point is that cost is not the main factor holding back widespread solar energy adoption.

    • J4Zonian Says:

      The massive costs of subsidies and externalities (which IMF estimates very conservatively at $5.3 trillion a year, globally) provided to fossil fuels are also not included. What about the costs of the end of civilization and most life on Earth?

      The grid would have to be updated and upgraded even if we decided to use, um…what are the other choices? Not fossil fuels; they’re ending the world. Not nukes; they’re too expensive, too many other things we all know about, even if some people refuse to be aware of them… and only a tiny percent of what’s needed could be built in time. So there are no other choices. Hmmm. So why are we debating whether to use wind and solar PV? Geothermal and solar CSP are needed to complement wind and PV; there’s no rational debate about using them either. But instead of simply doing it–requiring that states or utilities replace their fossil fuels with clean safe renewable generation or having the federal government just go ahead and do it and… oh what’s the point?

      Everybody sane knows it’s insane that our political economic system refuses to do what’s necessary for survival, that those who run it are insane, and those who are insane will never become sane voluntarily. So again, of course it comes down to a question of power. They have it; if we want civilization to survive we have to take it. What else matters?

    • Glenn Martin Says:

      150 years old and the oil industry still “needs” massive subsidies either directly or in regulations they’re exempt from and fees they aren’t required to pay but competing industries are. This will all become moot soon enough. The costs of wind, solar and batteries continue to drop and will soon be low enough that individuals will bypass the grid en masse. It would make sense now for the majority of people to decouple from grid power except that the costs are all up front. The banks aren’t stupid. Their bread and butter are long term loans with low risk. They’ll start financing the process for everyday homeowners at competetive rates and insurance and associated fees will also start dropping as demand grows. Of course, taxpayers will be left on the hook to retire the fossil power industries but that’s no surprise.

  3. redskylite Says:

    And then there is Human rights, politics and policies to consider . . .


    “Solar power’s future could soon be overshadowed”

    “Prices have fallen dramatically: according to the International Energy Agency, the cost of producing electricity from solar energy dropped 80% over the past decade. But a mix of international economic rivalries and human rights issues could hamper the onward expansion of solar around the world.”

    “There have been reports not only about Uighurs and other groups in Xinjiang being forcibly herded into so-called re-education camps, but also of local people being used as forced labour in solar and other industries.”

  4. Brent Jensen-Schmidt Says:

    Meanwhile in the land of Oz and coal. Power companies are refusing to keep old coal power stations operating because of economics. Most likely true. Could be waiting for taxpayer subsidies of course.
    Govnmint report on solar has recommended roof top solar be shut off when over supply destabilizes the grid. Bummer, but not unreasonable. Also recommended removing the input tariffs paid to PV owners which is nasti. Aside. Don’t believe my panels can be shut off and have a 25 year contract to be paid lots for my excess, He he he!
    As for massive investment, what price saving the world? Lot of BS anyway as investment is a constant need regardless and numbers quoted are always compromised by the favored agenda.

  5. John Oneill Says:

    If you go to the source Lazard report, the highest cost electricity, by far, is from residential rooftop solar with storage. Solar thermal with storage is also very high, and is impractical outside areas like the US Southwest and Mediterranean Europe. They also note ‘ This analysis does not take into account potential social and environmental externalities or reliability-related considerations ‘. Further – ‘… direct comparisons must take into account issues such as … dispatch characteristics (e.g., baseload and/or dispatchable intermediate capacity vs. those of peaking or intermittent technologies).
    Costs for nuclear operating plants, as opposed to new build, are on a par with combined cycle gas, and well below peaker gas – and that’s assuming a forty year life for reactors, when most US plants have permits to run for sixty years, and some for eighty.
    Lazard assumes capacity factors for solar ranging from 36% down to 13 %.

    • J4Zonian Says:

      Lazard gives ranges, so residential rooftop PV (which is continually falling in price) is also lower than the lowest gas peaker (which is going up as the industry is about to collapse), lower than the median existing nuke (going up!), and equal to high end coal (going up even as it disappears). Yet somehow, 50-80% (going up) of nuke and coal burners are losing money. Maybe that’s because crystalline (going down) and thin film PV (going down) and onshore wind (going down) are already cheaper than all other sources except efficiency. I’ve read numerous places that solar, wind (and efficiency) are already cheaper than existing fossil and fissile generation in many and ever-more places.

      24/7 solar thermal (going down) with storage (going down) is already less than existing nukes (going up). Efficiency and clothesline paradox energies are (holding steady) but not included in the analysis.. Non-existent nukes aren’t included, since they don’t exist.

      Since Lazard doesn’t count externalities, to reflect reality all its fossil fuel ranges need to be significantly shifted to the right (up) while clean safe renewable prices are busy sliding to the left (down). For “reliability” solar, wind, hydro, geothermal—and all the complementary clean safe renewable energy sources—need to be deployed together.

      Residential rooftop PV is the most expensive solar because it’s done in small batches and every site is a custom job. It needs no transmission, however, so IRL it’s cheaper than it appears in such comparisons.

      Since solar has come down 20% for every doubling of capacity and it will no doubt double at least 3 more times, the price of solar PV will probably drop at least 60% more. Utility PV and onshore wind will probably be the cheapest energy source of all (besides efficiency) for the foreseeable future, but geothermal, offshore wind and CSP prices are still falling. Solar PV, onshore wind, offshore wind, and geothermal could each provide by itself all the energy humanity needs, but combining them is cheaper and more ecological.

      Offshore wind technology continues to advance rapidly and fall in price. It has 2 advantages: its high, still rising capacity factor (higher than US coal or gas); and its proximity to population centers. With GE’s 12 & 13 MW Haliades barely getting going, Vestas’ 15 & 17 MW turbines are already in process, capable of being put out farther at sea—for example, in the North Atlantic, where enough turbines could be placed to power the world—a reason for a Manhattan-style project of sorts to speed development.

      As a less-tried technology, CSP has more price to lose, and an important role to play, not only in the US southwest but in Baja, the Med, a huge swath across North Africa and the Middle East, southern Peru through southwestern Bolivia and the northern half of Chile, the western half of South Africa and most of Namibia, central and Western Australia. Of course those are only the absolute best areas; CSP can be placed in deserts and tropical areas around the world. Those places can connect to other areas with only about 2% loss for every thousand miles of transmission, putting them in grids with substantial amounts of every other kind of renewable resource. Every one of those areas is within 2% of plentiful hydro, more than enough onshore and offshore wind, and an amazing amount of geothermal.

      Wind resources

      Geothermal resources

      Hydro potential
      See: Fig 1. Global map of gross hydropower potential distribution.

      To get an idea of how much this is, look at the mediocre hydro resources of Norway, 98% powered by hydro.

  6. Solar is cheap. Why aren’t we using more of it?

    That question ought to have the most obvious answer in the field of energy. It’s very cheap for the minor fraction of the time when the sun is shining, while backing it up for the rest of the time is prohibitively expensive. Solar actually pairs well with fossil fuels where it reduces fuel usage. Hence you have a big solar boom in Arab oil producing countries. But if you want to use high capacity factor nuclear, solar is superfluous. It just takes up more space and resources along with making electricity more expensive.

  7. HoW cHeAp Is It NoW?

  8. J4Zonian Says:

    Solar is cheap. Why aren’t we using more of it?

    That question HAS the most obvious answer in the field of energy: Because the lunatic fossil-fueled right wing has lied, manipulated, and bought governments to prevent it. It’s cheap all the time, since the prices we go by are not some bizarre machine-hour calculation but price per MWh. Nothing pairs well with fossil fuels, since they destroy life; solar actually pairs well with wind, especially offshore wind, (which has a marginal capacity factor higher than gas or coal) and it pairs pretty well with hydro. We just have to build more of them.

    There’s only a despicable and disgusting solar dearth in “Arab oil producing countries” since they have among the highest solar potential in the world and are using virtually none of it. Of them, Morocco has the largest percent of renewables in its grid—35%. Most of it’s hydro, although it’s building solar PV and CSP pretty fast. Egypt (10% RE) and Saudi Arabia (.5-8%) follow. Most others are between 0 and 2% RE.

    As we increase our use of non-polluting, undangerous, and democratic solar, nuclear is revealed to be superfluous in addition to bad in every other way. Done well, solar uses very little space not already taken up by buildings or macadam or wrecked by fossil and fissile fuels. As anyone knows who can read a chart or a report, solar and wind are making energy cheaper, and lying clumsily about it only destroys one’s credibility if one has any.

  9. J4Zonian Says:

    ERCOT needs to connect better to the grids around it; to the east, hydro and more and more solar and wind on a different weather schedule and in a different time zone; to the north, plenty of wind in Oklahoma, Kansas, Nebraska, Iowa, etc. and to the west. more PV and 24/7 solar CSP, also in a different time zone.

    Solar, which ERCOT needs a lot more of, obviously produces most during the day, when electricity is most needed. Building more than is needed at peak will allow some to be stored for the duck. Maybe in reservoirs, since ducks like water.

    West Texas wind power produces a lot at night, so it will soon produce all that’s needed in Texas at that time. It will also soon be recharging huge numbers of EVs (especially public EVs like rail and buses, we hope). South and East Texas wind produces in late afternoon and evening, when it most helps flatten the duck. Gulf offshore wind will expand that flat in Texas and the Southeast while it gives jobs to former oil and gas employees.

  10. indy222 Says:

    The top graph shows “solar PANELS”, and yet has the gall to put nuclear power on the same graph, when the rising costs of nuclear are nearly entirely political – the cost of funding and then waiting years and years while the NRC has neither then guts to approve, nor the guts to deny, instead leaving projects in expensive limbo, thus skyrocketing financing rates and project insurance. I’ve lost a lot of respect for the promoters of renewables. They may have a carbon-free future as a worthy goal, but when it comes to slip-shod agenda-oriented “damn lies and statistics”, they can be as bad as any fossil fuel shill.

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