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Wind and Solar Will Soon Become the ‘Least-Cost Option Almost Universally’

There’s no end in sight for cost reductions.

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by Stephan Lacey (June 23, 2015) Greentechsolar:

The first phase of growth for renewable electricity was driven by policy. The next phase will be driven by straight economics.

Two new reports on global demand for renewables forecast dramatic growth in nearly every region of the world over the coming decades. While promotion policies are still important for supporting the industry in some countries in the short term, conventional technologies like wind and solar are becoming cheap enough to compete without direct subsidies.

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According to a new report from Bloomberg New Energy Finance (BNEF), the average cost of developing wind projects will fall by 32 percent and the cost of solar PV projects will fall by 48 percent by 2040. Within a decade, wind will become “the least-cost option almost universally.” And by 2030, solar will become the cheapest resource.

“Economics — rather than policy — will increasingly drive the uptake of renewable technologies,” wrote Seb Henbest, an analyst with BNEF.

By 2020, solar will dominate new capacity additions, accounting for $3.7 trillion in investment over the following two decades, according to the BNEF report. By 2040, small-scale rooftop solar will make up 13 percent of global generation capacity.

GTM Research is also out with a global demand report for solar. It projects an even greater expansion of the technology, also driven primarily by economics rather than policy. According to the report, the world could see 135 gigawatts of installations annually by 2020 — double projections from the PV Market Alliance.

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We think that by 2018 solar is going to be the resource of choice,” said GTM Research’s Adam James. 

That year will be the “tipping point for grid parity,” said James. “We expect unsubsidized PV development across multiple markets.”

China, America and Japan will be the top three countries for solar PV development in 2020. But the market will be very diverse, with Africa, Latin America and the Middle East jumping from 1 percent of solar demand today to 17 percent within five years.

Maturing business models — both solar services in developed countries and off-grid solutions in developing ones — will allow solar to compete in a growing number of countries based solely on cost.

“We are already seeing a solar evolution as companies align themselves with a future where solar demand is more market-based. We expect solar will hit grid parity demand in mature markets, open the tap to capital markets, and benefit from regulatory changes that facilitate accelerated long-term solar growth,” said James.

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The global PV industry has fluctuated dramatically over the years as changing policies created cycles of growth and retraction. As solar becomes more market-based, GTM Research foresees much more level yearly growth.

BNEF and GTM Research both predict that solar will make up most of the new generating capacity installed after 2020.

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