Photovoltaics break one record after another. Their cost of production has dropped to 1.35 cents per kilowatt hour in Abu Dhabi and to 1.6 cents in Portugal. But we are only at the beginning of a new impressive cycle of decline.
Last year, photovoltaics covered 2% of world electricity production. When they reach 8% of world electricity production, then the cost of energy produced by them will fall to 50% of today.
The assessment comes from Ramez Naam, one of the world’s leading energy transformation analysts. According to him, when 2,400 GW of solar production will cover 8% of the world’s electricity needs per year, then, in the sunniest parts of the world, such as California, we will talk about prices of 2.5 cents per kilowatt hour. Respectively in Northern Europe these will range from 4-5 cents.
In fact, according to an extreme, but not improbable scenario, recently presented by the American-Egyptian analyst and former Microsoft executive, at some point in the distant future, solar energy production will reach… 19.2 TW. That is, as much as is needed to cover 2/3 of the current electricity production in the world. Since the sun only shines during the day, this seems unfounded. Ramez Naam has a different view. The demand for electricity will increase exponentially in the coming decades, as will the demand for cheaper electricity, for a number of reasons, such as:
1. A richer world is emerging in the long run. Income and consumption will increase in several countries of the developing world more and more.
2. The use of electricity in travel will be generalized. In the coming decades, land transport will be electric, increasing global demand for electricity by up to 50%.
3. Demand will become more flexible. Electricity demand (including electric vehicle charging) will become increasingly flexible. In the coming years, the use of electricity will become more and more preferred during the hours when it is cheaper.
4. Cheap energy storage. Cheap energy storage will allow the use of solar-generated energy at night, increasing the amount that can be used on a 24-hour basis.
5. Carbonation of industry. Cheap clean electricity will be used to power either factories or hydrogen, which can be used by industry. Such uses concern, for example, the cement industry and heat production in general.
When will we see such low prices
The question is how fast will we get to see such low prices. An evolution that depends not only on technology or economic progress, but also on the resistance of established interests, on mentalities, that is, on politics itself.
According to the IEA sustainable development scenario, solar energy will increase at a rate of 16% per year. In addition, according to the latest IEA World Energy Outlook, the solar industry is not far from achieving such performance. And an annual increase of 16% may be considered small compared to the almost 40% achieved by the solar industry between 1998 and 2018, but again as a percentage it is very large.
Therefore, according to the scenario of an annual increase of 16% of the production of electricity from solar energy, then, as Ramez Naam estimates, during the period 2030-2035, we will see almost zero costs in the sunniest parts of the planet. Then we will be in the third phase of clean energy, as he typically says. In the first phase, renewable energy sources were policy-dependent, as they were not cost-competitive without heavy subsidies. In the second phase, the one we are going through today, RES are increasingly competitive against hydrocarbons, in terms of installing new power. In the third phase, which follows, each energy producer will choose to invest exclusively in RES. Their costs will be so low that they will be much more profitable than running coal or gas-fired power plants.
In the last decade, photovoltaic electricity production prices have fallen between 5 and 8 times, depending on the country and the case. In fact, in photovoltaic panels, the cost of production is now 350 times lower than the levels at which they were in 1979,
Today, new investment from New Mexico to Australia and ambitious plans for new mega-hydrogen plants in China set the tone for the global renewable energy market, which, despite initial turmoil due to COVID19, appears to be recovering very quickly. its dynamics.
