Solar Power May Soon be the Cheapest Energy Around

Solar Energy

By Maura Forrest

March 05, 2015

By 2025, solar power will be the cheapest energy available in sunny parts of the world, according to a new study.

The report, commissioned by German think-tank Agora Energiewende, finds that the cost of producing power in central and southern Europe will be four to six cents per kilowatt hour by 2025, and only two to four cents by 2050.

In Germany, solar prices have dropped dramatically in the last several years, from over 40 cents per kilowatt hour in 2005 to just nine cents in 2014. In sunny Dubai, a solar power purchase agreement was recently signed for five cents per kilowatt hour.

In contrast, electricity from new coal- and gas-fired power plants typically costs five to 10 cents per kilowatt hour, and electricity from nuclear plants can cost up to 11 cents.

“The study shows that solar energy has become cheaper much more quickly than most experts had predicted and will continue to do so,” said Dr. Patrick Graichen, the director of Agora Energiewende, in a press release. “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 favourable costs, solar power will on the contrary play a prominent role, together with wind energy.”

In Canada, predicted solar prices are a little higher than in Europe, with an estimated range of four to 12 cents per kilowatt hour in 2025 and two to 8.5 cents in 2050.

Still, this is hardly the first report to make predictions about renewable energy prices, and there is no consensus about which form of renewable energy will form the most important part of the clean energy mix in years to come.

A report from January 2015 by the International Renewable Energy Agency found that onshore wind, hydropower, geothermal, and biomass electricity are already as cheap as fossil-fuel power. That report found that solar power is not yet cost-competitive, though its price is falling fast.

Ultimately, regulatory environments will play a key role in determining how cost-effective solar power can be, in large part due to the significant capital costs associated with photovoltaic installations.

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

Currently, Canada provides few incentives for solar power development at the federal level, particularly since it stopped accepting new applications for its ecoENERGY programs for energy companies and homeowners in 2011 and 2012, respectively.