Cost of Fossil Fuel vs Solar Energy – The Sun wins the race in 2017!
Forget the traditional usage of fossil fuels that cost double, did you know that in 2017, solar energy is rapidly turning out to be far cheaper than even wind energy? In more than 30 countries, solar and wind energies have become competitive, and the costs continue to fall drastically this Eyear.
Why solar energy turned out to be a profitable industry?
As pointed out by WEF’s Michael Drexler, “renewable energies, like solar energy, have reached a tipping point to help reserve the threats of global warming’’. Currently, the cost of solar power generation is at an average of $110/MWh whereas, that from Coal is about $220/ MWh. According to calculations, the cost is further going to drop down by 70% within 2040.
In comparison to traditional sources of energy, three great factors that played a crucial role in taking the shift towards solar power generation are: ‘being cheap, not- polluting and reliable’. Negative impacts of coal such as strip mining, mountain top removal, and most importantly heavy carbon pollution, has forced the world to rethink and implement the use of solar energy. Looking at the environmental concerns and global expenditure of more than $500 billion per year on fossil fuels, the governments of all the main countries have agreed to give subsidised solar energy and because of this factor, solar and wind energy are turning out to be even cheaper. Currently, the subsidies on- renewable energy sources are not even 50% of that of coal based grants. Still, the world has invested in only about 25% of the $1 trillion goals set by the Paris Climate Accord that has the vision to establish green power by the end of the next decade.
Reaching the Grid Parity
When the Levelized Cost of Electricity (LCOE) of an alternate source of energy, like solar or wind, comes out to be equal (or even less) than the traditional sources of energy, that point is called as ‘Grid Parity’. Currently, the LCOE of wind is around $50 per MWh, whereas that of fossil fuels like natural gas and coals is $100 per MWh. Talking about solar energy, back in 2010, the cost of solar energy was about $600 per MWh, coming down to $300 per MWh in 2012, and interestingly last year, solar energy has reached a grid parity of $100 per MWh, that is almost equivalent to that of coal! This year, the figures are going to drop down even lower, thus giving a final and a severe blow to the coal based industry.
Who are the potential bigger players?
Yes, on a global scale, fossil fuels are still cheaper in many places, but, there are quite some examples where clean energy is triumphantly winning. Currently, 35 members of the Organization for Economic Cooperation and Development (OECD) are the biggest spenders on renewable energy, with spending of about $155 billion per year. The top investors in solar energy include countries like Brazil, Australia, Chile, Uruguay, South Africa, India and Mexico. According to the Climate Council, power prices in Australia have dropped by over 58% in the past five years. In the developed countries like Japan, the USA and China, prices of solar energy remain at competitive rates compared to fossil fuels.
Facts about lowered costs
Countries like Chile and Dallas are even offering free electricity during certain parts of the year. This is largely done by reducing grid maintenance costs, energy storage, modifying federal tax credits and most importantly, raising awareness. Dubai sets a new record of bringing the prices of solar power energy to as cheap as $29.10 per MWh, which is a healthy dip below the coal prices. The US Solar market stands third in number, and it is growing at a whopping rate of 119% per year! As the costs of PV panels and prices continue to fall, it is much likely that the installation and operation of solar farms will become more and more attractive in the upcoming years. Currently, China, the USA and the UK are the world leaders in solar energy production.
On the website of Euro Solar, they talk about solar in Australia and beyond, the technology advancement and about the key role it played saving people thousands on energy bills. Tesla Powerwall 2.0 battery system and homes equipped with high-end solar power systems have made use of this mode of energy practical and reliable. A typical solar photovoltaic panel in Australia is between 1.5 to 5 kW (or, roughly about 6- 20 panels in numbers). With this, Australia is now a world leader in possessing the highest number of PV systems installed on roofs of home, compared to any other country in the world. This has become practically possible due to the excellent climate and plenty of sunshine showered in the Australian continent.
CME reported that solar powered homes could generate as well as store energy, and the latter can be kept for later use, especially when the energy costs are high on demand on the power grid. Though, it may be a little harsh on the pockets of the home owners while installing the equipment, but, it would certainly equalise or even probably nullify the costs in the long run.
Nevertheless, even without the government support, new solar power plants are practically much cheaper than new coal, nuclear or natural gas based power plants, largely because of usage of thin film solar photovoltaic plants that produce clean and affordable power.
Australia has already achieved the grid parity. In the next few years, about 3, 700 MW of solar energy, powering 6 million households, will become operational in Australia. Rooftop solar industry in Australia is turning out to be the biggest game changer.
In a study done by BNEF, it was seen that investors are less likely to finance new coal based structures as it will give them not only a substantial risk premium but also reputational damage due to emission intensive investments. More investors are rather likely to pump in money in this solar energy sector as harnessing solar power is not only viable but, it is a long term, inflation protected and a stable investment option that is guaranteed to give huge returns in the future.