Emerging markets are leapfrogging the developed world thanks to cheap
panels.
A transformation is happening in global energy markets that’s worth
noting as 2016 comes to an end: Solar power, for the first time, is becoming
the cheapest form of new electricity.
This has happened in isolated projects in the past: an especially
competitive auction in the Middle East, for example, resulting in record-cheap
solar costs. But now unsubsidized solar is beginning to outcompete coal and
natural gas on a larger scale, and notably, new solar projects in emerging
markets are costing less to build than wind projects, according to fresh data
from Bloomberg New Energy Finance.
The chart below shows the average cost of new wind and solar from 58
emerging-market economies, including China, India, and Brazil. While solar was
bound to fall below wind eventually, given its steeper price declines, few
predicted it would happen this soon.
“Solar investment has gone from nothing—literally nothing—like five years
ago to quite a lot,” said Ethan Zindler, head of U.S. policy analysis at BNEF.
“A huge part of this story is China, which has been rapidly deploying solar”
and helping other countries finance their own projects.
Half the Price of Coal
This year has seen a remarkable run for solar power. Auctions, where
private companies compete for massive contracts to provide electricity,
established record after record for cheap solar power. It started with a
contract in January to produce electricity for $64 per megawatt-hour in India;
then a deal in August pegging $29.10 per megawatt hour in Chile. That’s
record-cheap electricity—roughly half the price of competing coal power.
“Renewables are robustly entering the era of undercutting” fossil fuel
prices, BNEF chairman Michael Liebreich said in a note to clients this week.
Those are new contracts, but plenty of projects are reaching completion
this year, too. When all the 2016 completions are tallied in coming months,
it’s likely that the total amount of solar photovoltaics added globally will
exceed that of wind for the first time. The latest BNEF projections call for 70
gigawatts of newly installed solar in 2016 compared with 59 gigawatts of wind.
The overall shift to clean energy can be more expensive in wealthier
nations, where electricity demand is flat or falling and new solar must compete
with existing billion-dollar coal and gas plants. But in countries that are
adding new electricity capacity as quickly as possible, “renewable energy will
beat any other technology in most of the world without subsidies,” said
Liebreich.
Turning Points
The world recently passed a turning point and is adding more capacity for
clean energy each year than for coal and natural gas combined. Peak fossil-fuel
use for electricity may be reached within the next decade.
Thursday’s BNEF report, called Climatescope, ranks and profiles emerging
markets for their ability to attract capital for low-carbon energy projects.
The top-scoring markets were China, Chile, Brazil, Uruguay, South Africa, and
India.
When it comes to renewable energy investment, emerging markets have taken
the lead over the 35 member nations of the Organization for Economic
Cooperation & Development (OECD), spending $154.1 billion in 2015 compared
with $153.7 billion by those wealthier countries, BNEF said. The growth rates
of clean-energy deployment are higher in these emerging-market states, so they
are likely to remain the clean energy leaders indefinitely, especially now that
three-quarters have established clean-energy targets.
Still, the buildup of wind and solar takes time, and fossil fuels remain
the cheapest option for when the wind doesn’t blow and the sun doesn’t shine.
Coal and natural gas will continue to play a key role in the alleviation of
energy poverty for millions of people in the years to come.
But for populations still relying on expensive kerosene generators, or
who have no electricity at all, and for those living in the dangerous smog of
thickly populated cities, the shift to renewables and increasingly to solar
can’t come soon enough.
