Solar Energy Costs have been Dropping Fast
The costs of solar energy, both in terms of total installed costs and solar panel costs, have been coming down in the last 20 or so years. The downward trends have been captured in Figures 1 and 2. The downward trend will continue.
The dramatic price drop of solar energy has made solar energy the world’s cheapest source of power currently.
It is no wonder that solar photovoltaic (PV) capacity has increased almost 12 times from 72 gigawatts (GW) in 2011 to 843 GW in 2021.
If solar energy costs could continue to drop and solar energy generation capacity could increase by 12 times in the next 10 years, all fossil fuels could be replaced by solar and other clean energies by 2040.
International Energy Agency (IEA) reported in 2023 that for every dollar investment in fossil fuels – coal, gas, and oil, there are 1.7 dollars of clean energy investments. Investments in clean energy have overtaken fossil fuels.
IEA also projected that solar PV capacity, including both large utility-scale and small distributed systems, would account for two-thirds of 2023’s projected increase in global renewable capacity.
The Remarkable Rise of Solar Power
Figure 3 shows the dramatic increase in global installed solar capacity from 2005 to 2023, with China leading the other nations.
Global cumulative solar photovoltaic capacity has grown continuously since 2000. In 2022, global cumulative solar PV capacity amounted to 1,177 GW.
Figure 4 shows the remarkable rise in solar PV power capacity. In 2010, solar PV accounted for 0.8% of the world power capacity. In 2020, the share of solar PV was at 9.4%. By 2022, the share of solar PV has hit 12.8%.
IEA projected that by 2027, 5 years from now, solar PV would account for 22.2% of world power capacity, surpassing that of both wind (14.4%) and hydropower (14.1%).
Notably, IEA also projected that the total power capacity of solar PV, wind, and hydropower would be more than 50%, pulling ahead of 40% of the total power capacity of coal and natural gas.
Figure 5 shows that many of the largest solar power facilities in the world are located in India and China. Three of the largest solar farms are reported to have a solar capacity of more than 2 GW.
Not yet included in Figure 5 is Abu Dhabi Future Energy Company’s Al Dhafra Solar Farm in the United Arab Emirates. Al Dhafra Solar Farm has a capacity of 2 GW with 4 million bifacial solar panels and was in operation in 2023. There will be more and more large-scale solar farms.
Scaling up Solar Farms to Bring Down Costs
One way to bring down solar energy costs is to scale up solar farms even more to exploit economies of scale.
Golmud Solar Park in China, the world’s largest solar farm currently, has an installed solar capacity of 2.8 GW with 7 million solar panels. Golmud Solar Park aims to reach 16 GW within the next 5 to 6 years.
We would need larger solar farms like 16 GW Golmud Solar Park to exploit the economy of scale further to lower renewable energy costs even more.
Thousands of kilometres of expensive High Voltage (HV) transmission lines are needed to connect far-flung renewable energy zones like solar farms and wind farms to major cities. Grid transformation is justifiable if we scale up solar farms and other renewables.
Bhadla Solar Park in India has a 2.7 GW capacity and covers 160 km2 — that’s equivalent to 10% of the entire surface area of London. Pavagada Solar Park in India has a 2.05 GW capacity and covers 53 km2.
Utility-scale and community solar farm project development involve the use of huge plots of land, and the developer would need to pay for the lease of land over the lease duration typically 20 to 25 years.
Economies of scale are crucial to bringing down the costs of solar energy projects but that is possible only if developers can assemble large land holdings at a reasonable price.
If the alternative use of the land is limited, then the cost of land and in turn the lease will be lower, and this would lead to the lower overall cost of the solar farm project.
Building solar farms on land which has a low opportunity cost, such as on dry land or in the desert will lower the cost, compared to building solar farms on existing farmland, futile land, or vegetated land where vegetation needs to be cleared.
The Middle East and North Africa (MENA) Region
The Global Solar Power Tracker reported that Oman (8th) and Morocco (10th) lead the Middle East and North Africa (MENA) region in capitalizing on the region’s extensive desert landscapes and abundant sunlight.
Egypt, Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, and South Africa are all actively pursuing solar power projects.
We could see 20 GW, 30 GW, or even 50 GW solar power projects in the MENA region in the future.
The World Economic Forum (WEF) believes the MENA region could aggressively pursue renewable technologies to supply up to 40% of the world’s energy by 2050.
Floating Solar Farm
In the search to find space for large solar arrays, many countries are looking to build floating solar farms. These countries are making use of unoccupied lakes and reservoirs, instead of the precious land which could otherwise be used to grow crops to feed the world’s growing population or to plant carbon-absorbing trees. Countries such as Japan and Singapore are investing heavily in floating solar farms because of limited land availability or very expensive land.
Technical experts said the cooling effect of water actually increases the efficiency of floating solar panels and in turn increases their electricity production by up to 15%.
Solar Energy Research Institute of Singapore (Seris) estimated that covering just 10% of all man-made reservoirs in the world with floating solar would result in an installed capacity of 20 Terawatts (TW).
Floating solar farms can be installed above seawater such as the Saemangeum floating solar energy project on the coast of the Yellow Sea in South Korea. Aiming to start operations in 2023, the solar project has a 2.1 GW capacity with more than 5 million solar modules over an area of 30 km². It is a part of a planned 3 GW renewable energy project.
According to a BBC Future Planet report, the floating solar farm market is expected to grow by 43% a year over the next decade.
Rooftop Solar
SolarPower Europe reported that the rooftop PV segment accounted for 49.5% of 239 GW of newly installed solar capacity in 2022 – the highest share in the past three years. The rooftop solar sector in Brazil, Italy, and Spain grew by 193%, 127%, and 105%, respectively. Denmark, India, Austria, China, Greece, and South Africa all experienced rooftop growth rates exceeding 50%.
SolarPower Europe predicts a 35% growth in the rooftop PV segment in 2023.
In Australia, more than 30% of Australian households have a rooftop solar system, with a combined capacity exceeding 11 GW.
Imagine a world where more than 50% of all households would have a rooftop solar system and how huge renewable power capacity would add.
What if these households would go one step further to be “energy-positive” buildings?
Read more about the “energy-positive” building blog.
Agrivoltaic Farming
Agrivoltaic farming is the practice of growing crops underneath solar panels. The practice increases land-use efficiency, as it doubles up land use for both solar farms and agricultural activities.
Many plants and animals can thrive in the mix of sun and shade under solar panels. Solar panels provide the livestock with plenty of shady spots for rest. Crops such as potatoes, tomatoes, corn, lettuce, small fruit trees, and bedding plants can grow well underneath solar panels. A study conducted by Chonnam National University in South Korea found that broccoli growing underneath solar panels has a deeper shade of green, making it more appealing to many consumers.
Another option is installing solar panels on the roofs of greenhouses.
Doubling up land use would indirectly reduce the cost of a solar power project.
The Cheap Solar Energy Could be Even Cheaper
Our scientists, engineers, and researchers have developed many technologies that boost solar panel efficiency. Today’s solar panels capture more sun energy than ever before. Solar panel efficiency would continue to improve.
Manufacturing costs of solar panels, in terms of unit production costs, have been dropping as more and more firms continue to enter the global market to produce more solar panels. Unit solar panel costs would continue to decrease.
As well, scaling up solar farms, floating solar farms, increasing rooftop solar system installations, agrivoltaic farming, and other measures would help to reduce the costs of installed solar power.
Could solar power be so cheap in the future that a new solar project would be more cost-competitive than an “operational” coal or gas power plant everywhere around the world so it would make economic sense to retire all operating coal and gas power plants?
We hope solar PV’s share of world installed power capacity could beat IEA’s projection of 22.2% by 2027, and would continue its dramatic increase beyond 2027.
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