Electricity Through Solar Power Now Cheaper Than Fossil Fuels, WEF Says In New Report

The cost of production of electricity through utilization of solar energy is outpacing other alternatives as the cost accrued in investing in the installation of solar panels is turning out to be comparatively cheaper than a comparable investment in coal, natural gas or other options, according to a new World Economic Forum (WEF) report.

In more than 30 countries, electricity produced through solar and wind energy is the same price or cheaper than any new fossil fuel capacity, the report, released last Wednesday, noted.

“Renewable energy has reached a tipping point–it now constitutes the best chance to reverse global warming. ... It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns,” Michael Drexler, who leads infrastructure and development investing at the WEF, said in a statement.

A major developmental milestone for this rapid breakthrough came earlier this year when it was concluded that solar energy is outpacing wind energy as the most competitive in terms of cost. The cost of solar energy in 58 lower-income countries — including China, Brazil and India — has fallen to about a third of their respective levels in 2010 and is now becoming cheaper than wind energy, according to data produced by Bloomberg New Energy Finance (BNEF).

In a year-end note, Michael Liebreich, BNEF chair, said: “The latest projections from our solar and wind analysis teams are that there will be almost 70 gigawatts of photovoltaics added globally in 2016, up from 56 gigawatts in 2015 and that wind installations will total 59 gigawatts, down from 62 gigawatts last year.”

The other major development was announced in a report by Lazard, an investment bank and research firm that assesses the total “levelized cost of energy” (LCOE) of various sources. LCOE is measured in $/MWh units.

The significant conclusion of the report notes that "utility-scale, thin-film solar PV plants produce cheaper power, on average, than new natural gas plants."

A decade or two into the future, electricity generated through solar power is projected to fall to half the price of that from coal or natural gas. However, global investment in renewable energy is lacking the drive that was spelled out in the Paris climate change accord.

Global renewable investment last year only reached 25 percent of the $1 trillion goal with an investment of $286 billion. Barriers to investment are mostly political rather than economic: “Contracts are not standardized, regulation varies widely across countries and time, deals are scattered and due diligence is mostly conducted by existing infrastructure teams, on a case-by-case basis,” WEF said in the report.

But it is noteworthy that a milestone has already been reached. The record lowest price of electricity was achieved in an auction in Chile this August. At the price of $29.10 per megawatt-hour, the solar electricity cost was at about half the price of a coal competitor.