New report says solar energy is the cheapest energy source available
The International Energy Agency notes that solar is “the cheapest electricity in history.”
The International Energy Agency has regularly been criticized for its assessment of solar energy and its potential. However, in their most recent report, they made an extraordinary statement, saying solar energy is now “the cheapest electricity in history.”
This extraordinary statement is part of the IEA’s World Energy Outlook (WEO) 2020, publishes every fall, and includes detailed analyses of the worldwide energy system. The report states that solar power is on track to dominate a larger market share in the coming decade, as prices will continuously decrease. For example, the European Union plans to produce 32% of its energy from renewable energy sources by 2030, and a big part of it will come from solar energy.
According to the report, in almost all countries, it is more affordable to invest in solar farms than in new gas or coal-fired power plants. The Levelized cost of electricity in most utility-scale solar projects finished in 2020 ranged from $35 to$55 per MWh. A decade ago, the average Levelized cost of energy was $300 per MWh, while four years ago, it dropped to $100 megawatt-hour. The trend is quite obvious, and a further decline in solar energy cost is all but guaranteed.
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For comparison, the cost for coal ranges between $55 and $150 per MWh, which has been consistent throughout the last ten years. That’s despite the massive efforts from the Trump administration to stimulate its growth.
The average cost of capital is also as a prime factor that boosts investments in the solar energy sector. In its report last year, IEA presumed that it would be between seven and eight percent for all renewable energy technologies, including solar.
This year, they corrected their assessment and figured that the cost of capital is significantly lower, from 2.6% to 5% in the US and the EU, 4.4% to 5.5% in China, and 8.8% to 10% in India. Much of this is due to a new set of policies designed to mitigate the risk of renewable energy investments.
The IEA report suggests that countries with the best locations, favorable finance, and policies can generate electricity through solar power for 20$ per MWh or even less. The cost of a new utility-scale solar farm in the US and the European Union range between $30 and $60/MWh. On the other side, in China and India, the cost can vary from $30 to $40/MWh. In these countries, the investment appeal is significant because of the guaranteed electricity prices.
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