Solar Now 56% Lower Than The Lowest-Cost Fossil Fuels

In 2010, solar energy was four times more expensive than the cheapest fossil fuels. Today, it’s less than half the cost of the lowest-cost fossil alternatives, according to the International Renewable Energy Agency (IRENA).

Solar energy has become a key player in global energy development due to its rapidly decreasing costs. IRENA’s data through 2023 shows that the levelized cost of electricity (LCOE) for solar has dropped by 90% since 2010.

LCOE is an important measure of cost-efficiency for different energy generation technologies. It calculates the present value of the total cost of building and operating a power plant over its lifetime, divided by the energy production.

The most significant cost reduction has been in solar PV generation. In 2023, the LCOE of solar PV was 56% lower than the average cost of fossil fuel-fired alternatives, compared to being 414% more expensive in 2010.

Globally, solar LCOE costs have decreased from $0.460 per kWh to $0.044 per kWh. In 2023 alone, there was a 12% reduction. Solar PV capacity has increased 35-fold from 2010 to 2023, with over 1.4 TW installed by the end of 2023.

The capacity factor, which measures the actual electricity produced compared to the maximum possible, has improved from about 13.8% to around 17%. This improvement is due to better solar panel efficiency, enhanced racking, tracking, and monitoring systems, and other operational efficiencies.

Several factors are expected to further enhance the competitiveness of solar PV technology in the long term. These include continued improvements in equipment efficiency, manufacturing optimization, more efficient use of materials, and design innovations. These advancements are expected to offset recent temporary cost increases.

The decline in costs for utility-scale solar projects is mainly due to reduced prices for modules and inverters. From 2010 to 2016, 67% of the cost reductions were due to these components. Between 2016 and 2023, module and inverter cost declines accounted for 37% of the total cost reduction for utility-scale solar installations.

Operations and maintenance (O&M) costs have also decreased. In the United States, median O&M costs for utility-scale plants fell by 74% from 2011 to 2022, dropping from $42.3 per kW annually to $11.2 per kW annually.

Recent costs in the United States are primarily driven by preventive maintenance and insurance, which make up 59% to 62% of the total, depending on the system type and configuration.

In 2023, new solar installations reached 346 GW, a 73% increase over 2022, marking the largest year-on-year growth since 2011. Solar has led the way in new renewable energy capacity additions each year since 2016.

IRENA also reported a significant increase in battery storage capacity, from 0.1 GWh in 2010 to 95.9 GWh in 2023. The costs of battery storage projects have dropped by 89% during this period, from $2,511 per kWh to $273 per kWh.