The insanity of burning coal for power as solar costs plunge to 1c/kWh by 2020

Burning coal to generate electricity in today’s era of cheap power from the sun makes as about as much economic sense as “burning dollar notes”, one of Australia’s leading solar researchers has said.

Speaking at the APVI Asia Pacific Solar Research Conference in Melbourne this week, UNSW Professor Martin Green said the world had entered a “new area” where solar was well and truly the cheapest way of generating bulk electricity.

Green, who recently predicted that the cost of solar would fall to around $US10/MWh, or 1c/kWh by 2020, repeated that bullish projection on Wednesday, based on the new lows in prices being bid at international auctions for the long-term supply of electricity.

Green said this downward trajectory had taken the cost of solar from still “a relatively expensive option” just two years ago, to a point two months ago where a price of $US17.86/MWh was bid at an auction in Saudi Arabia.

It has since fallen even lower, to $US17.70/MWh, or $A23.40/MWh, in Mexico’s latest tender, for 3 terawatt-hours of solar electricity.

“I was brave enough to project that some time between now and 2020 we’d see a bid of $US10/MWh, that’s 1c/kWh for solar from one of these auctions,” Green told the conference on Wednesday.

“I think that’s very likely to happen,” he added.

“So we’re in a new era. … If you look at the costs that have been bid for solar compared to a new coal plant, well actually they’re there times lower now.

“And the really interesting and perhaps important thing is that if you compare the costs that are being bid for solar against the opportunity costs for the coal – that is, the money you’d earn by selling the coal, rather than burning it – you can see that the solar costs are even lower than that.

“So that sort of means that while the sun is shining, burning coal to generate electricity is a little bit like burning dollar notes. You’re just throwing money down the drain,” Professor Green said.

“I think that’s an important new era, because it takes away an incentive to keep the coal plants operating if you’re getting cheaper electricity from another source.

“The really exciting thing is that costs are still likely to get very much lower with solar.

“We’re still seeing these rapid reductions (in solar costs) and no sign of them falling off. …So it’s a very promising future.”