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New Study Shows Solar Energy Soon To Be Cheapest Option

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.”

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