How cheap can solar get? Very cheap indeed

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Energy Post

Walmart roof

Walmart roof

If current rates of improvement hold, solar power will be incredibly cheap by the time it’s a substantial fraction of the world’s electricity supply, writes famous author and thinker Ramez Naam. According to Naam, electricity cost is from now on coupled to the ever-decreasing price of technology. That is profoundly deflationary and disruptive.

It’s now fairly common knowledge that the cost of solar modules is dropping exponentially. I helped publicize that fact in a 2011 Scientific American blog post asking “Does Moore’s Law Apply to Solar Cells?” The answer is that something like Moore’s law, an exponential learning curve (albeit slower than in computing) applies. (For those that think Moore’s Law is a terrible analogy, here’s my post on why Moore’s Law is an excellent analogy for solar.)

 Solar electricity cost, not solar module cost, is key

But module prices now make up less than half of the price of complete solar deployments at the utility scale. The bulk of the price of solar is so-called “soft costs” – the DC->AC inverter, the labor to install the panels, the glass and aluminum used to cover and prop them up, the interconnection to the grid, etc.  Solar module costs are now just one component in a more important question: What’s the trend in cost reduction of solar electricity? And what does that predict for the future?

Let’s look at some data.  Here are cost of solar Power Purchase Agreements (PPAs) signed in the US over the last several years. PPAs are contracts to sell electricity, in this case from solar photovoltaic plants, at a pre-determined price. Most utility-scale solar installations happen with a PPA.

In the US, the price embedded in solar PPAs has dropped over the last 7-8 years from around $200 / MWh (or 20 cents / kwh) to a low of around $40 / MWh (or 4 cents per kwh).


The chart and data are from an excellent Lawrence Berkeley National Labs study, Is $50/MWh Solar for Real? Falling Project Prices and Rising Capacity Factors Drive Utility-Scale PV Toward Economic Competitiveness

This chart depicts a trend in time. The other way to look at this is by looking at the price of solar electricity vs how much has been installed. That’s a “learning rate” view, which draws on the observation that in industry after industry, each doubling of cumulative capacity tends to reduce prices by a predictable rate. In solar PV modules, the learning rate appears to be about 20%. In solar electricity generated from whole systems, we get the below:


This is a ~16% learning rate, meaning that every doubling of utility-scale solar capacity in the US leads to a roughly 16% reduction in the cost of electricity from new solar installations. If anything, the rate in recent years appears to be faster than 16%, but we’ll use 16% as an estimate of the long term rate.

Every industrial product and activity gets cheap

This phenomenon of lower prices as an industry scales is hardly unique to solar. For instance, here’s a view of the price of the Ford Model T as production scaled.


Like solar electricity (and a host of other products and activities), the Model T shows a steady decline in price (on a log scale) as manufacturing increased (also on a log scale).

The future of solar prices – if trends hold

The most important, question, for solar, is what will future prices be? Any projection here has to be seen as just that – a projection. Not reality. History is filled with trends that reached their natural limits and stalled. Learning rates are a crude way to model the complexities involved in lowering costs. Things could deviate substantially from this trendline.

That said, if the trend in solar pricing holds, here’s what it shows for future solar prices, without subsidies, as a function of scale.


Again, these are unsubsidized prices, ranging from solar in extremely sunny areas (the gold line) to solar in more typical locations in the US, China, India, and Southern Europe (the green line).

What this graph shows is that, if solar electricity continues its current learning rate, by the time solar capacity triples to 600GW (by 2020 or 2021, as a rough estimate), we should see unsubsidized solar prices of roughly 4.5 c / kwh for very sunny places (the US southwest, the Middle East, Australia, parts of India, parts of Latin America), ranging up to 6.5 c / kwh for more moderately sunny areas (almost all of India, large swaths of the US and China, southern and central Europe, almost all of Latin America).

And beyond that, by the time solar scale has doubled 4 more times, to the equivalent of 16% of today’s electricity demand (and somewhat less of future demand), we should see solar at 3 cents per kwh in the sunniest areas, and 4.5 cents per kwh in moderately sunny areas.

If this holds, solar will cost less than half what new coal or natural gas electricity cost, even without factoring in the cost of air pollution and carbon pollution emitted by fossil fuel power plants.

As crazy as this projection sounds, it’s not unique. The IEA (International Energy Agency), in one of its scenarios, projects 4 cent per kwh solar by mid century.

Fraunhofer ISE, the German research institute, goes farther, predicting solar as cheap as 2 euro cents per kwh in the sunniest parts of Europe by 2050.

Obviously, quite a bit can happen between now and then. But the meta-observation is this: Electricity cost is now coupled to the ever-decreasing price of technology. That is profoundly deflationary. It’s profoundly disruptive to other electricity-generating technologies and businesses. And it’s good news for both people and the planet.

Is it good enough news? In next few weeks I’ll look at the future prospects of wind, of energy storage, and, finally, at what parts of the decarbonization puzzle are missing.

Source: Energy Post. Reproduced with permission.  

  • john

    While the module price is now less than half the price why is not the cost of installation falling?
    Installing a PV system is a very simple exercise.
    It seems the installers are not dropping their prices because they see it as a once off opportunity to get as much as possible to do a very simple job.

    • Island fisher

      John, as a licensed installer it may look like a simple process, but there are many regulations that have to be adhered to and labour and materia cost is increasing not decreasing.
      From what I see the prices that installers are charging are for installs are way to low and realistically this leads to shoddy workmanship, my motto is do it once and do it right, to do this you cannot install a number of 5kW systems in one day as many installers are doing

      • Sunbuntu Ltd

        >John, as a licensed installer it may look like a simple process, but there are many regulations that have to be adhered

        Like most ‘trades’ there is a total lack of innovation and too much art and not enough science.

        Builders, plumbers and electricians are at least 40 – 60 years behind factories in automation and deploying machinery.

        It would be trivial to reduce the ‘soft costs’ by 30 – 50%. But it is not in the installers interest .

        • john

          My suggestion is simple why the complication?
          Once the building has submitted the information as to incoming wires and meter board plus system of measuring the power usage it should be simple to replace it if needed as to installing the PV not a huge problem is it?

        • jeffhre

          Add that the the fact that they are installing on infrastructure that was not designed to optimize PV installations. And the structures may be “40 – 60 years” old and require expensive rehabbing. San Diego California requires new building to be essentially solar ready, making it much less expansive to add solar.

          A few hundred dollars of wiring and stub ins, could make it tens of thousands less expansive than adding solar to an older building (no need to cut through walls).

        • JonathanMaddox

          What? Those robots are laying out solar panels ‘on a concrete track’. On flat ground. This is in no way comparable to adding them to the electrical system of existing housing and commercial building stock with wiring going back in some cases as early as the 1920s. It’s not a factory job, it’s a highly skilled service. Plumbing likewise. The buildings that people actually live and work in, who are paying for these services, are not lego kits.

      • john

        I am hearing you.
        Material cost should not be increasing.
        Regulation cost should be simple a few mins on the computer.
        As to time yes with a simple one angle roof one day done as to more complicated roof system possibly 2 days max.
        Once panels installed and caballing done it is simple install this is not very hard to do.

        • Island fisher

          The amounts paid to installers for a 5kw system over the last 3 years has almost halved, (2.5k – 1.4k) for this amount we have to supply DC cabling, isolators, HD conduit and all materials other than panels, racking & inverter, regulation costs have increased even now additional requirements for earth fault notification & shrouds for roof top isolators that are now required.
          As for myself I will no longer do any installs for sales companies as it simply not worthwhile.
          As for sunbuntos post it is not even worthwhile answering, if he feels he can automate something were ever instal is totally different please tell us how

          • john

            I understand what is required in an install.
            For some jobs quiet a lot of work has to be done.
            Often small size wiring has to be replaced.
            On new housing things should be a lot easier.
            As to the reason that regulation cost have risen the items should be going down in price.
            The need for roof top shrouds on isolators is understandable.
            My comment was really aimed at the USA experience where install costs are very high.

          • JonathanMaddox

            “Regulation cost” includes documenting the detail of the work that must be done to comply with the regulation, and frequently includes paying for an independent inspector to come and check that the work has been done in accordance with the regulation. It’s not cheap and it can only be made cheap by doing installs only into ready-made cookie-cutter identikit buildings and/or by cutting corners.

            Domestic rooftop solar installs are a skilled *service*, not a factory job. You’re not going to make them cheaper by increasing mechanisation, and nor can you do it by reducing regulation to a rubber stamp, except by compromising safety.

          • Alastair Leith

            Against that Australia and Germany have studiously reduced soft costs compared to USA by streamlining regulation, approvals and standards, no?

          • JonathanMaddox

            Absolutely! Vexatious bureaucracy most certainly *can* be streamlined 🙂

          • john

            I am not saying anything about “factory mechanisation” just as I see it put it on the roof and one inspection.
            Yes I know often the wiring needs upgrading yes often there are issues with distance which cause this however it seems the general soft cost are not exactly as low as I feel they should be.

          • JonathanMaddox

            Yep, the “factory mechanisation” was more a reply to something else upthread about labour inefficiency in trades like plumbing and electric work. Not directed at your comments. Bureaucracy can be inefficient, but in cases where public safety is at issue, I think a bit of redundant belt-and-braces double-checking is in order.

          • Sunbuntu Ltd

            Well that is a problem. Why is an inspection “not cheap”?

            It should not be a ‘skilled job’. Re-engineer the equipment to be ‘smart’, that is add a system-on-chip would cost under $1 per panel. it should be any harder than plugging in a power cord.

            The whole of building industry is still in 1950.

          • JonathanMaddox

            It’s not so much the *industry* as the *buildings*.

      • Motorshack

        The article does not say as much in so many words, but I get the impression the data refers to utility-scale solar PV, not residential. So perhaps the difference in your experience is simply the difference between small-scale, custom installations and large-scale installations where the soft costs, such as permitting, can be spread over a much larger number of nearly-identical units. Volume discounts on materials would also be much bigger, etc.

    • Alastair Leith

      You need to say which country/state you are talking about, soft costs vary widely from country to country and even state to state.

      • john

        Alastair I am hearing you
        It seems that each state puts up different kinds of hurdles to jump through.
        Basically I notice that the soft costs in the USA are higher than for instance Australia.
        As to each state in Australia why is this so?
        It is not some huge problem either the system is above the ability of the local network to handle or it is not.
        The problem is the network is using 1920 technology simple two copper wire coils to reduce the HV to LV in transformers for street level delivery of power.
        I think what happens with old tech 1920 is that the voltage rises for that particular phase.
        Please correct my wrong assumption.

        • Alastair Leith

          most of the soft cost impediments are bureaucratic is my understanding although some installation issues arise from place to place that do not exist on other networks. Especially rural areas where it’s said by installers voltages already fluctuate way outside the legal range. Germany has been best at cutting red/green/brown tape for solar installers because the government and community wanted solarPV and they led the world.

          In Australia governments are beholden to FF interests because of many factors including:
          i. political donations to all the old major parties (though parties on the right take much more than ALP and the unions that make up much of the ALP membership)
          ii. politicians holding energy and environmental portfolios have traditionally been ambivalent at best about the climate change catastrophe that’s unfolding (John Thwaites, MLA a notable exception)
          iii. some states own the generation and or networks and there’s a level of incumbency and inertia to the entire system. some state governments take profits from delivering power; some states subsidies residents and commercial industries with cheaper power
          iv. there’s perceived political risk in breaking with the status quo and having a big RE bill to pay be it an exploding volume of feed in tariffs (which are almost non-existent now) or whatever, though this is rapidly becoming perceived as a political gain by ALP in Victoria as RE continues to get cheaper with a favourable deployment and learnings curve and utility RE is widely regarded as fit for purpose amongst those slower to catch on.
          v. many front bench ministers, especially energy and climate change ministers of late go on to take up lucrative offers from FF industry when they retirement. why spoil your chances to capitalise on your great political acumen, networks and all-round superior intelligence?

          In USA it’s more simple. The USA Congress is owned by FF interests, Presidents sell out to corporate interests as soon as they take power, explicitly failing to execute on election promises around CC action and pursue Free Trade (so called) agendas at the expense of any other initiative, that goes for all of them including Obama.

          Some US states have made moves on RE soft costs others have not.

          • john

            Yes ok
            but that does not get to the core of my question why are soft cost not falling?
            The regulations requirements can be done online either by the installer or the person getting the system.
            The actual install is not a huge problem if its a simple system it is put the racks on roof panels inverter and cabling leave the solar system connection switch in OFF then get it inspected by the retailers inspector.

          • Alastair Leith

            Not sure about specifics of USA and soft costs. Just know they are considerably higher than leading solar PV install countries.

          • john

            Alastair that is exactly what I have been saying the USA which has lower pay rates has very high soft costs which is hard to understand

          • Alastair Leith

            And that goes back to my original answer, John: political will or lack thereof to drive regulatory compliance regime costs and time delays down 🙂

            In Australia I recall the rush to install when the 60c FiT was to be reduced and some installers I knew couldn’t get sparkies to come out and connect the installed and otherwise operational systems to the network and house b/c their usual electricians were run off their feet and needed specialist knowledge not all electricians had/have. Delays (and possibly pricing to match) stretched out to months which annoyed many customers who were losing out on ROI.

  • Mark Roest

    I hope your projections on storage costs will include serious looks at the low end of the projections for 2018-2020, when Tesla will be ramping fast in the Gigafactory, and others will be scrambling to keep up. Tesla said they are targeting $100/kWh by 2020, and would be disappointed if they don’t get there.

  • travis_texas

    I don’t see you addressing the cost of either (1) energy storage for solar, or (2) backup and ancillary services (from fossil fuel plants), due to solar’s inability to provide energy 24/7. Every article I read such as yours touts how cheap solar has become and will continue to become, but then ignores these other costs. Are you simply going to wave your hands and declare “they will be addressed” or something similar, or can you please put pencil to paper and make a reasonable estimate? It seems to me that either (a) we need a similar level of fossil fuel generating capacity as we have of solar, in order to handle nights/dark days/etc, or (b) enough batteries (or other storage) to replace all of that fossil fuel capacity. Can you help estimate those costs?

    • jeffhre

      Since wind, gas turbines, coal, geo-themal, hydro, nuclear, bio mass, and pumped hydro exist, you can easily turn the question around and ask:

      What is the cost of adding fuel free, solar, in the day time, due to solars ability to operate during peak daytime hours, to the existing grid? Then using the existing wind, gas turbines, coal, geo-themal, hydro, nuclear, bio mass, and pumped hydro to back it up as it grows? Since it is reducing peak hour electricity costs, I would be looking for grid prices to be reduced, on a LCOE basis.

      …and there is always this,

    • JonathanMaddox

      We can make reasonable estimates for technologies which are already widely deployed and understood, on the basis of experience. Pumped hydroelectric storage is a known quantity. Batteries are a class of technologies which collectively is very widely deployed and whose costs are quite plainly plunging, but the most promising innovations in that field aren’t in mass deployment yet, they’re brand new and experimental and would appear prohibitively expensive if we took R&D expenses into account. Many other new storage technologies which people have mooted to solve the storage “problem” at lower cost and which might be used to address this problem have seen no large-scale deployment yet at all: not merely new battery technologies but also thermal, electro-mechanical and electrochemical.

      However as jeffhre says, in the existing system no additional storage is required. The existing capacity which solar will displace is all technology which withdraws energy from existing storage in the form of fuel or gravitational potential energy. Only when we have so much solar (and/or wind) generation that there is a frequent large instantaneous surplus of electric power, no ready buyers other than storage for the surplus, and the last of the dispatchable generators forced to bid painfully high prices to run for embarrassingly few full-load-hours each year, will (new) storage be required to take over the lion’s share of the capacity role.

      Until then we have improved inter-regional transmission, startup companies with big ideas, utilities buying batteries as a competitive alternative to gas-fired peaking generators, and electric vehicles addressing emissions in the transport sector. Storage will come.

      • jeffhre

        “Until then we have improved inter-regional transmission, startup companies with big ideas, utilities buying batteries as a competitive alternative to gas-fired peaking generators, and electric vehicles addressing emissions in the transport sector.” Plus demand response, including EV batteries which sit unused for 22.5 hours of each 24 hour day.

  • Alastair Leith

    I cite Ray Kurzweil’s prediction against nuclear fan boys all the time. How you gonna compete with free when your cost curve continues to climb I ask? There’s one thing nuclear proponents hate and that’s to be out-done in the tech stakes.

    Solar systems learnings rate is more like 20% cheaper per doubling (~2 years) according to many rather than 16% cited here. Soft costs in USA still high.

    • Christian Abel

      Nuclear is efficient and economical even with the crazy “regulation” that treats any trivial amount of radiation as a serious hazard.

      • jeffhre

        Nuclear is very expensive at the present time. Nuclear requires payments to begin from ratepayers before generation starts. At times ratepayers pay for over a decade for nuclear, before it is even placed in service. Nuclear requires financing charges for the 13 year average duration of construction. Nuclear is getting more expensive, while solar a and wind are dramatically dropping. NG has dropped from fracking.

        If you have information showing nuclear as “economical” please show it.

        • Christian Abel

          French consumers get very cheap electric power from nuclear.

          • jeffhre

            Very true. Nothing can beat the cost of amortized power per kWh that is already installed. At least until needed maintenance and reconstruction costs take the opportunity away. New generation is more expensive than existing, paid for generation. France has found that renewable energy is competitive for building it.

          • Christian Abel

            France is installing inefficient useless new renewable with taxes. This hoax should stop.

            “France has found that renewable energy is competitive for building it”

            You are making up shit.

          • jeffhre

            Show your numbers please.

          • Christian Abel

            Show yours, crackpot!

          • jeffhre

            Review the delays and increased costs for Olkiluoto 3. The strain is difficult for AREVA, the borrowing for expansion and improvements are a huge burden for EDF.

          • jeffhre

            “Show yours, crackpot!”

            Crackpots response! – you can get an LCOE calculator at the NREL website.

            You can build your reactor with all costs included and find the LCOE.

            I have seen utility scale solar PV contracts for $.09kWh in Texas and Saudi Arabia.

            2014 –

            2015 –

            Wind contracts have been sold for $.03kWh with ITC for ten years of the 20 year contracts. So minus the ITC = $.05kWh. But that was nearly a year ago, so will be lower now.

            Now play beat the crackpot, and list the costs for new nuclear.

          • Christian Abel

            Maybe in Saudi Arabia, but in France, not so much.

            I was never opposed to solar in Saudi Arabia.

            Nuclear fission is still a cheap, reliable, safe option.

          • jeffhre

            Without numbers, it’s just a belief!

            And, I have agreed that the costs of the marginal energy of paid off generators is inexpensive.

            However, plants built in the 1950’s will be replaced. Energy from demand growth will be covered. New plants are a far more expensive way to increase output.

            No numbers = no credibility.

          • Cain Abel

            Taking France as an example, nuclear plants were not build in the 50’s, and aren’t going to be replaced soon.

            EDF is currently investing in a lot to extend the lifetime of nuclear plants.

            The price paid by consumers is not a marginal price of production but covers the full cost of nuclear plants management and new investments.

            Demand in time of serious economic crisis is not rising much.

            New plants are more expensive that old ones due to greater complexity, but a first of kind price is not a predictor for the price of the next ones, when the process is stabilized.

          • Actually in France, it is based on the marginal cost of production, the french Senate calls it the “nuclear rent” because most of the debt (the cost of construction) was written off by the government. Notwithstanding, EdF is still riddled with its own nearly accumulated debt, to the point that it will not be able to afford those upgrades unless it gets another bail out from its government owners.
            Don’t post crap here please.

          • jeffhre

            No plants from the 50’s. Just 1st gen plant research. Plants that are 40 years old will be replaced. And not with inexpensive paid for plants, but brand new plants. Review the prices for Flamanville 3 and for Hinkley Point, in Somerset.

          • Gaute Søndrol

            Npp are safe? Show me how safe they are. Cheap! What’s the cost of storing nuclear waste?

          • Cain Abel

            The sharp increase of the price of electricity in France is caused by the solar and wind turbine subsidies.

            Will you deny that?

          • jeffhre

            I cannot deny or confirm numbers that you do no produce.

          • Alastair Leith

            So why is France reducing from 75% nuclear to 50% nuclear?

            Why did a major (and costly) research paper undertaken on behalf of French govt find that despite the French people having sunk costs in a 75% of generation NPP fleet, it would be cheaper to replace it by 2050 with a 95% RE fleet? How does that make nuclear economic when as you would acknowledge much of the cost of nuclear is in plant construction and compliance not fuel?

        • Cain Abel

          “Nuclear requires payments to begin from ratepayers before generation starts”

          No it does not.

          Why are you making up shit?