#1 cleantech news, reviews, & analysis site in the world. Subscribe today. The future is now.


Clean Power

Published on February 26th, 2015 | by Joshua S Hill

17

New Study Shows Solar Energy Soon To Be Cheapest Option

February 26th, 2015 by  


Solar power is set to become the cheapest power source in many parts of the world by 2025, according to a new study by the Fraunhofer Institute for Solar Energy Systems commissioned by Agora Energiewende.

The independent think-tank of 18 experts conclude that by 2025 the cost of producing power in central and southern Europe will have declined to between 4 and 6 cents per kilowatt hour, and by 2050 to as low as 2 to 4 cents.

The study is based entirely on “conservative assumptions” about the future of solar development, excluding any potential breakthroughs that could theoretically make solar even more effective. But we’ve already seen the cost of solar drop dramatically over the past, and such is expected to continue.

Agora-1“The study shows that solar energy has become cheaper much more quickly than most experts had predicted and will continue to do so,” says Dr. Patrick Graichen, Director of the Agora Energiewende.

“Plans for future power supply systems should therefore be revised worldwide. Until now, most of them only anticipate a small share of solar power in the mix. In view of the extremely favorable costs, solar power will on the contrary play a prominent role, together with wind energy – also, and most importantly, as a cheap way of contributing to international climate protection.”

As mentioned by Agora, solar power is already considered to be relatively cost-effective. In Dubai, a recent power purchase agreement was signed for 5 cents per kilowatt hour, and in Germany, solar plants are providing energy at 9 cents per kilowatt hour.

And for the ever-helpful comparison, electricity from new coal and gas-fired plants costs between 5 and 10 cents per kilowatt hour, and nuclear plants as much as 11 cents.

Cost of electricity from new solar power plants in Southern and Central Europe 

Agora-2Cost of electricity from new solar power plants in North America, Australia, India and Mena region* 

Agora-3Unsurprisingly, as with many such studies, one of the major conclusions is that “electricity generation costs for solar power are highly dependent on financial and regulatory frameworks, due to the high capital intensity of photovoltaic installations.” As such, political certainty and backing is necessary to allow solar the opportunity to flourish in those countries where it can do the most benefit.

“Favorable financing conditions and stable legal frameworks are therefore vital conditions for cheap, clean solar electricity,” said Dr. Graichen. “It is up to policy makers to create and maintain these conditions.”





Tags: , , , , , , , , ,


About the Author

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.



  • Gradually rising fossil costs should not be forgotten. Humanity is still pulling coal, oil and gas out of the ground at close to their highest rates ever, meaning depletion scenarios remain relevant. Not because any of these energy sources are about to run out, but because the most easily-extracted resources go first, leaving higher-cost resources for the future.
    Once electric vehicles become able to address large chunks of the market (SUV’s, minivans, light trucks, etc etc) with multiple competitive offerings, oil price shocks will just speed the transition to battery-powered transport.

    • Jenny Sommer

      Fuel prices can be kept very stable by just lowering taxes.
      When transportation transitions to electricity fuels will suddenly get very cheap.

      • On the tax side, governments (US, China, now Brazil) are starting to commit to reduce carbon emissions. It’s reasonable to expect that fuel taxes may be ratcheted upward occasionally, but will not fall. Concentration of oil production in the middle east makes fuel subsidies more painful for countries whose own production is waning, e.g. Egypt and Indonesia. Increasing availability of electric vehicles will reduce the political imperative to make gasoline cheap.

        Under normal supply and demand conditions, reduced demand would certainly lead to a reduction in price. For oil, the world price is that of the most-expensive-to-extract barrel required to satisfy a given level of demand. Reduced demand tends to increase the proportion of oil coming from the middle east and decrease the fraction coming from tar sands, fracking wells and other rich-country sources. Rich country politicians are less inclined to give tax breaks to import foreign oil.

        If demand sinks to a level that can be satisfied by old middle eastern supergiant fields for $30 / barrel, first world politicians will be falling over each other to impose $40 / barrel carbon taxes.

  • RSMills

    ” complexity of numbers can baffle the PV buying public” Bottom line solar fuel cost are going down faster than fossil fuel prices ie $0.00 for sunshine.

  • vensonata

    What I would like to know is: What is the price of installation that translates to 4 cents kwh? Many of the green sites casually quote the “Levelized cost of electricity” from the U.S. government agencies as if that was satisfactory. Or the PVWatts site. Then there is the cost based on “displaced electricity”. Mostly they seem to be arcane products of the economists mind. The same mind which brought you the extraordinarly flawed concept of “GDP”. (A car accident increases GDP!) My own feeling is lifetime production of the panels is the only “real” number. “The cost of money” HA! …when the crazy unpredictability of money’s value over time makes it seem hard to keep a straight face when you talk about that applied to PV panel purchasing. Imagine talking about the price of bread in Germany in 1928 and then having to fill a wheel barrow full of hyper inflated Marks to the bakery to pay for a loaf.
    The Rocky Mountain Institute is questioning all these numbers, as they should. Remember there are a lot of vested interests that know, because of complexity of numbers they can baffle the PV buying public with distorted numbers which they are pulling out of their…mmm…hat!

  • Will E

    Solar is now today the cheapest energy.
    cost of solar PV panel 1 dollar a kwh, search the net. install cost 20 cent a kwh.
    so Solar is 1 dollar 20 a kwh installed.
    divided by 30 years production you get a kwh price of 4 cents.
    get your info on the www. that is solar ray index 1.
    when the solar ray index is 2 again divide 4 cents by 2 and Solar kwh price is 2 cents.
    that is the situation today
    Why is the statement 2025.
    I have Solar PV installed for three years now and this is what it is
    of my own experience.

    • Ulenspiegel

      Could it be that you have forgotten the capital costs, or did you get your panels from the Salvation Army? And do you assume the inverter will work for 30 years? And you do not pay any insurance for you PV, do you?

      • vensonata

        Yes, inverters last 30 years now. Micro inverters come pre installed and have the same waranty as the panel. Large string inverters are in the 15-20 year range. This may suddenly change in February 2016 when Google announces the winner of the one million dollar inverter prize for a household inverter “the size of an ipad”!! Inverter prices will fall by half, shipping costs by 90%, and installation by 60%. So this inverter might be a 6 kw inverter about the size of 4 micro inverters, which today can handle about 250 watts per unit.

      • Will E

        capital costs is also money made, producing inverter is a job money made and taxes paid and the insurance comp makes money too. solar is a big boost to economics. cost of solar is jobs.
        burning fossil is burning money, polluting, and climate change damage.
        I love my Solar and heat pump and money saved on the energy bill 2500 a year.

        • Solman636

          Has anybody calculated the cost of Fukushima, or the ongoing cash drain of providing security at retired nuclear plants. Cash flow is important, and cash flow improvements with solar are immediate and positive. Calculate the amount of capital necessary at today’s interest rates to pay for security and storage IF we can ever find a place to store the nuclear waste. The costs need to be evaluated over hundreds of years not decades and we haven’t even touched the environmental costs of the old paradigm. I also live in my second net zero solar home, quite comfortably and with no more investment than the average home builder. The cash flow improvement allows me to limit my utility expense to $240 a year which is a donation to the utility company for my membership to the grid, but as we speak they are building another nuclear plant in Georgia with government backed loans. Bad deal even if the motivation was well intentioned.

    • Offgridman

      It was better explained in the previous similar article that this analysis was only for big grid feed systems not rooftop. Which have more installation and and maintenance considerations than you plus the financing and permitting costs already referenced in this piece.

      • Will E

        when I have savings over 24000, I pay 4 percent taxes, 24000 is free.
        so I bought Solar, payback time 5 years is 20 percent ROI, plus 4 percent saved taxes on savings tax is 24 percent ROI on rooftop Solar.
        bank pays 1.5 percent on the savings account.

  • globi
    • JamesWimberley

      Yes, and it’s not the first time. Zach should exercise more control, or authors more diligence. It’s only reasonable if the author has a different take or additional context on the same news.

  • tibi stibi

    nice. so when you start building a coal or gas plant now it will be ready in 2020 and will only be 5 years prices competitive.

    • JamesWimberley

      I think gas capacity is a bit quicker to build, but basically yes. Investors are very aware of this risk od stranded assets, which is one reason why the switch to wind and solar is happening faster than a simple comparison of overnight LCOEs would suggest.

      • Matt

        With coal there is a double risk. One that by the time it is done being built there will only be a few years to market the power at a profit. Two that most of the world will move to CO2 fees and shorten the time of profits to zero. How many new coal plants have been announced that they are about to begin construction in the last 3 year in North America or Europe?

Back to Top ↑