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2016 was the year solar panels finally became cheaper than fossil fuels. Just wait for 2017

2016 was the year solar panels finally became cheaper than fossil fuels. Just wait for 2017 thumbnail

The renewable energy future will arrive when installing a new solar panels is cheaper than a comparable investment in coal, natural gas or other options. If you ask the World Economic Forum (WEF), the day has arrived.

Solar and wind is now the same price or cheaper than fossil fuels in more than 30 countries, the WEF reported in December (pdf). As prices for solar and wind power continue their precipitous fall, two-thirds of all nations will reach the point known as “grid parity” within a few years, even without subsidies. “Renewable energy has reached a tipping point,” Michael Drexler, who leads infrastructure and development investing at the WEF, said in a statement. “It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.”

Those numbers are already translating into vast new acres of silicon and glass. In 2016, utilities added 9.5 gigawatts (GW) of photovoltaic capacity to the US grid, making solar the top fuel source for the first time in a calendar year, according to the US Energy Information Administration’s estimates. The US added about 125 solar panels every minute in 2016, about double the pace last year, reports the Solar Energy Industry Association.

The solar story is even more impressive after accounting for new distributed solar on homes and business (rather than just those built for utilities), which pushed the total installed capacity to 11.2 GW.

But global global investment in renewable energy still lags far behind levels needed to avoid potentially catastrophic global warming, according to the United Nations. Global renewable investment last year was $286 billion, or 25% of the $1 trillion goal set by nations at the Paris climate change accord. Barriers to investment are mostly political rather than economic: Contracts are not standardized, regulatory uncertainty remains, and financial institutions have not created an asset class with a public, standardized track record that will reassure mainstream investors, reports the WEF (pdf, p 12).

But prices are eventually expected to win the day. Solar is projected to fall to half the price of electricity from coal or natural gas within a decade or two. That milestone has already been reached in some locales. In August, energy firm Solarpack contracted to sell solar electricity in Chile at just $29.1 per megwatt hour, 58% below prices from a new natural gas plant.


57 Comments on "2016 was the year solar panels finally became cheaper than fossil fuels. Just wait for 2017"

  1. Kenz300 on Tue, 27th Dec 2016 8:35 am 

    Wind And Solar Now Cheapest Unsubsidized Electricity Sources In The U.S. – First Solar, Inc. (NASDAQ:FSLR) | Seeking Alpha

    World Energy Hits a Turning Point: Solar That’s Cheaper Than Wind – Bloomberg

    Solar cheaper than natural gas and coal. Climate Change will be the defining issue of our lives.

    Cheaper Wins !

  2. Cloggie on Tue, 27th Dec 2016 10:45 am 

    Pumped storage for entire nations? OK – but the energy to make these lakes and the loss of land must be included in the “renewable” energy calculation.

    You don’t need to make lakes, just two dams and pipelines and install pumps/generators.

    Norway Could Provide 20,000MW of Energy Storage to Europe

    That’s 20 large power stations backup.

    study identifying a massive 2291 GWh of development-ready sites having existing reservoirs which can be used as new pumped hydro energy storage plants in the EU-15, Norway, and Switzerland… Southern Norway is the region with the most potential feasible pumped storage capacity, accounting for 1242 GWh, or 54% of the study total, followed by the Alps, with 303 GWh or 13%… the 2291 GWh identified in the study is more than seven times the current installed capacity of European pumped hydro energy storage.

  3. JN2 on Tue, 27th Dec 2016 2:19 pm 

    Cloggie: one 6 MW wind turbine is 124 barrel/day. Thanks for the numbers.

    One square mile of PV produces 1,020 barrels of oil per day (at 17% PV efficiency, average global insolation).

  4. makati1 on Tue, 27th Dec 2016 5:30 pm 

    JN2, does that mean that all we need is about 18,000 square miles of solar panels to replace oil? Easy! print up a gazillion fiat dollars, buy New Hampshire and Vermont and install them. Or you can build 150,000 wind towers. Yep! The U$ is in alreadyDebtor’s Prison so why not go another gazillion in debt? LMAO

  5. Kenz300 on Wed, 28th Dec 2016 9:39 am 

    The oil companies and the auto companies need to get their collective heads out of the sand and realize that the world is changing with or without them.

    Climate Change is real….. it will impact all of us…

    It is time to move away from fossil fuels and embrace alternative energy sources like wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste. They need to change their business models and move from being OIL companies to ENERGY companies. The auto industry needs to move from just building compliance vehicles to embracing electric vehicles and start putting development and advertising behind them..

    Clean energy production with wind and solar and battery storage.

    Clean energy consumption with electric vehicles. No emissions.

  6. Antius on Wed, 28th Dec 2016 9:19 pm 

    Cloggie, here a link to the Wikipedia page on the Dinorwig pumped storage plant in North Wales. It was finished in 1984 at a cost of £425 million. Not sure what it would cost to repeat the project in today’s money, but it could hardly be described as an easy or cheap project and with large scale renewable penetration the UK would need a hundred of them.

    The page also makes mention of a smaller project capable of storing 500MWh for a capital cost of £50 million. 500MWh is about 45 seconds of UK baseload electricity consumption. Imagine what we would need to build to store 1 week of excess energy. I do not see how it could be done without fossil fuel back up.

  7. Davy on Thu, 29th Dec 2016 4:51 am 

    I am doubtful of pump storage at the scale needed for an energy transition. Batteries are a narrower niche considering cost and resources needed. At lower levels of scale pump storage is a promising area for niche transition. Sweet spots should be exploited and important niches occupied. Yet, this will leave so many areas unsupportable because of economics. I doubt the world can afford to deliver alternative energy to the masses like air travel and cars. Some grids might have a large contribution especially in areas with comparative advantage, social acceptance, and economic ability. Northern Europe is a quick example. I don’t see enough areas like northern Europe to run a world like we have today not even close. If the world is in a demand destruction paradigm because of macro stagflation there will likely never be the activity needed to achieve economies of scale where alternatives permeate our lives and drive economic production.

    We can do so much more with end users by having panels at homes and businesses for important functions. Lighting is a great area to focus on even though batteries are needed. Emergency and vital services are a great area to introduce alternatives. Our water works should be heavily alternative based. Vital Communications should be alternative supported with power and backup. In agriculture we need to be replacing fossil fuels with alternatives. Let’s dry grain with solar. Grain silos need fans and sometimes heat. Irrigation is a great area that should be alternative based. While I am doubtful of alternatives and transport as a game changer I do believe some areas can see significant penetration. Mass transit is a great area.

    What are some other niches to occupy? Human nature is one. Is it possible to get people in some locals to adapt to intermittent power supply? What would that mean? How focused and motivated can we get citizens as consumers and businesses to adapt to intermittency? I have many doubts about this making a big difference because people are lazy and anchored in their ways. I mention this because if we go into a process that is a collapse spiral we may need to adapt to alternative sources with reduced fossil fuel support. To extend this resource and fully utilize it we would need to adapt to this availability scenario. We need to research this at a minimum.

    There are so many mal-investment man is making today globally in so many locations. Mal-investment in activities that do not revolve around longer term survival. We are spending money on lifestyles that are discretionary and not vital. Unfortunately our civilization has adapted to discretionary activity making it a vital force in our economies of scale. We have some economic hanging fruit to draw from these areas but not much. We are in or near a demand destructive environment now creating systematic dangers to global economics. Large changes requiring ending activates and changing lifestyles that have consequences. For example if you penalize mass leisure in some way to free up resources for energy transition this will have economic consequences. The pie is shrinking so we are going to have to move priorities around not create new ones. Some of the negative consequences can be made up by the activity of transition itself but not all. Once the transition is complete that increased activity stops. You can’t expect all of that lost activity to be made up or new activity generated. Economic loss through transition could be very dangerous. Economies of scale and velocity of economic activity are vital for transition but transition efforts are dangerously exposed to the negative consequences of it. When you start pushing the envelope of scale the effects magnify from limits and diminishing returns. This is a mirror of our modern civilization.

    I have doubt because of the scale and the negative consequences of large scale transition. We still have the old civilization to maintain and support. It all seems too much considering we are a mess now with social priorities and beset with problems beyond our abilities. Let’s be realistic with alternatives and hope over time they can make us more able to withstand decline. They can offer us another area for economic growth. They can buy us time and in that respect I have optimism. Taking the dynamics of alternative further is hubris and fantasy. It reminds me of space travel talk. It may end up being more mal-investment at a time when every dollar is critical to get invested properly because we are facing an existential storm of survival.

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