New York - There’s a transformation happening in
global energy markets that’s worth noting as 2016 comes to an end: Solar power,
for the first time, is becoming the cheapest form of new electricity.
There have been isolated projects in the past where
this happened: An especially competitive auction in the Middle East, for
example, resulting in record-cheap solar costs. But now unsubsidized solar is
beginning to outcompete coal and natural gas on a larger scale, and
notably, new solar projects in emerging markets are costing less to build than
wind projects, according to fresh data from Bloomberg New Energy Finance.
While solar was bound to fall below wind
eventually, given its steeper price declines, few predicted it would
happen this soon.
“Solar investment has gone from nothing—literally
nothing—like five years ago to quite a lot,” said Ethan Zindler, head of US
policy analysis at BNEF. “A huge part of this story is China, which has been
rapidly deploying solar” and helping other countries finance their own
projects.
Half the price of coal
This year has seen a remarkable run for solar power.
Auctions, where private companies compete for massive contracts to provide
electricity, established record after record for cheap solar power. It started
with a contract in January to produce electricity for $64 per megawatt-hour in
India; then a deal in August pegging $29.10 per megawatt hour in Chile. That’s
record-cheap electricity—roughly half the price of competing coal
power.
“Renewables are robustly entering the era of
undercutting” fossil fuel prices, BNEF chairman Michael Liebreich said in a
note to clients this week.
Those are new contracts, but there are plenty of projects
reaching completion this year, too. When all of the 2016 completions are
tallied in coming months, it’s likely that the total amount of solar
photovoltaics added globally will exceed that of wind for the first time. The
latest BNEF projections call for 70 gigawatts of newly installed solar in
2016 compared with 59 gigawatts of wind.
Shit to clean
The overall shift to clean energy can be more expensive
in wealthier nations, where electricity demand is flat or falling and new solar
must compete with existing billion-dollar coal and gas plants. But in countries
that are adding new electricity capacity as quickly as possible, “renewable
energy will beat any other technology in most of the world without subsidies,”
said Liebreich.
The world recently passed a turning point and
is adding more capacity for clean energy each year than for coal and natural
gas combined. Peak fossil fuel use for electricity may be reached within
the next decade.
Thursday’s BNEF report, called Climatescope, ranks and
profiles emerging markets for their ability to attract capital for low-carbon
energy projects. The top-scoring markets were China, Chile, Brazil, Uruguay,
South Africa, and India.
Read also: Solar boom on the horizon?
When it comes to renewable energy investment, emerging
markets have taken the lead over the 35 member nations of the Organisation
for Economic Cooperation and Development (OECD), spending $154.1 billion in
2015 compared with $153.7 billion by those wealthier countries, BNEF said. The
growth rates of clean-energy deployment are higher in these emerging market
states, so they are likely to remain the clean energy leaders indefinitely,
especially now that three quarters have established clean-energy targets.
Still, the buildup of wind and solar takes time and
fossil fuels remain the cheapest option for when the wind doesn’t blow and the
sun doesn’t shine. Coal and natural gas will continue to play a key role
in the alleviation of energy poverty for millions of people in the years to
come.
But for populations still relying on expensive
kerosene generators, or who have no electricity at all, and for those
living in the dangerous smog of thickly populated cities, the shift
to renewables and increasingly to solar can’t come soon enough.
BLOOMBERG