By now it is common knowledge that solar energy has been becoming more and more affordable as the technology develops and economies of scale blossom. But a recent report shows just how astronomical the drop in cost has been.
A new report by Our World in Data shows that over the past ten years, the cost of commercial solar power has dropped by more than 89%.
(see image above, click on link to see it in blog article)
Additionally, the cost of another key renewable energy, Onshore Wind, has dropped by 70% over the same 10 years.
This means that both sets of renewable energies are now cheaper and more economical to produce than coal (per Megawatt Hour). In 2019, a Megawatt Hour of coal power costs on average $109, whereas a Megawatt Hour costs just $68 for Solar Photovoltaic (down from $359 over 10 years ago) and $53 for Onshore Wind.
There are a number of reasons for this (including the fact that solar power and wind farms need to fuel to burn), but the primary driver of the cost decline has been scale.
As more companies have invested in renewable technologies, and more governments invest in buying additional renewable capacity, economies of scale developed in a wide range of the supply chains:
- A larger number of skilled workers able to design and produce renewables equipment
- A larger number of skilled workers able to maintain equipment and extend usable lifecycle of the equipment
- Expensive moulding and factories capable of producing equipment cost a lot to build the first time, but then can produce more output in an assembly line fashion
- Repetition and scale of manufacturing enables flaws in the manufacturing process to be found and reduced
- Competition from more entrants into the market as it gains profitability encourages a drive to continue innovating
- Purchasing power increases as the renewable companies grow, enabling them to purchase more raw materials at better prices
- Supply chains and distribution networks improve the more they are used
But the biggest factor has been the positive feedback loop that once the economies of scale caused prices to drop, governments and decision makers could compare the price to existing power generation technologies, and could see an inflection point happening where it would soon be more economically viable to roll out renewable energy than traditional, polluting fossil fuel energy generation.
Today, it would actually be more expensive to build a new coal-fired power plant than a renewable equivalent, so governments with strict budgets can make the decision more easily.
There are still significant challenges to rolling out renewable energy at full-scale, especially when it comes to energy storage and distribution. This is where the next set of innovation in power storage technologies will have to begin scaling up.
But the trend is clear, and it’s moving in the right direction.
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