Katerina Swanson
Solar energy has become increasingly popular as a renewable energy source and a cheaper alternative to fossil fuels. The cost of solar energy has decreased significantly over the years, with a 78% decrease in solar LCOE (levelized cost of energy) since 2009. In 2020, the lifetime cost of utility solar power was $31 per megawatt-hour, compared to $26 for wind, $41 for coal, and $28 for natural gas. This price reduction is due to various factors, including technology improvements, economies of scale, and the abundance of free sunlight as a source of power. Despite the decreasing cost of solar energy, it still faces obstacles such as public policy, utility relations, and local land planning. Additionally, the inertia in the system due to long-term contracts between utilities, energy producers, and mining companies poses challenges to the widespread adoption of renewable energy sources. However, with each generation of technology, solar energy is expected to become more efficient and accessible, making it a competitive alternative to fossil fuels.
| Characteristics | Values |
|---|---|
| Levelized Cost of Energy (LCOE) | Solar LCOE has decreased by 78% since 2009, or over 25% annually. Solar LCOE ($72-86/MWh) is currently outcompeted by the lowest-cost coal ($66/MWh) and gas combined cycle ($61/MWh). |
| Location | Insolation is lower in more northern regions, so solar energy will not work everywhere equally well. |
| Peaking Demand | Solar PV could be an attractive resource for meeting peak demand, which is often the most expensive and dirtiest part of managing the electric grid. |
| Government Subsidies | Government subsidies play a major role in shaping the growth potential of a new power source. The G20 nations, which account for over 85% of global GDP, spend $452 billion per year subsidizing fossil fuels. |
| Cost Trajectory | Solar PV is a technology, not a fuel, so its costs will likely continue to fall as research continues and technology improves. |
| Environmental Impact | Solar power is a much more optimal resource than fossil fuels in terms of environmental impact. |
| Reliable Application | Coal and natural gas have an edge over solar energy in terms of reliable application. |
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What You'll Learn
Solar LCOE has decreased by 78% since 2009
The levelized cost of energy (LCOE) is a contentious metric in energy circles. It covers capital costs, operation and maintenance costs, performance, and fuel costs. Critics argue that LCOE is an inadequate tool for measuring renewables and dispatchable technologies because it does not account for the system-wide costs of providing backup to solar and wind power.
However, according to a source, the LCOE of solar energy has decreased by 78% since 2009, or over 25% annually. This decrease in solar LCOE has made solar energy more competitive with power from fossil fuels. As of 2025, the LCOE of utility-scale solar PV projects in the US ranges from $38 to $78 per MWh, while existing gas plants have a cost range of $24 to $39 per MWh.
The decreasing LCOE of solar energy is due to increasing investment in renewable energy research and each new generation of technology becoming more efficient and cheaper. As a result, solar energy is becoming more attractive to utilities and other power producers, and it is estimated that the LCOE of utility-scale solar will be well below the current generation costs in many major urban areas.
However, it is important to note that the LCOE of solar energy varies depending on location, with southern cities with better insolation having higher LCOE for utility-scale solar. Additionally, without storage, solar energy may not meet the dispatch characteristics necessary to serve as a peaking technology.
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Solar is cheaper than fossil fuels without subsidies
Solar energy is cheaper than fossil fuels without subsidies. The cost of solar energy has decreased by 78% since 2009, or over 25% annually, making it more affordable than traditional fossil fuels. In fact, according to a 2020 Lazard analysis, the lifetime costs of utility solar power are $31 per megawatt-hour, compared to $41 for coal and $28 for natural gas. The initial demand for satellites fueled a cycle of decreasing prices for solar panels as more panels were produced, and the cost of solar energy is expected to continue to decline due to technological improvements and the rise of economies of scale.
The low cost of solar energy has made it a competitive alternative to fossil fuels, even without subsidies. In some cases, solar energy is outcompeting fossil fuels in terms of price. For example, in the Midwest, unsubsidized wind energy costs as little as $71 per MWh, while solar-plus-storage in the mid-Atlantic costs around $164 per MWh. These prices are comparable to, and often lower than, the cost of electricity generated by fossil fuels.
The cost of building new renewable energy sources is becoming more competitive with the cost of adding additional capacity to existing fossil fuel facilities. This is especially true when considering the future fuel prices of conventional generation methods, which can make solar energy even more attractive. Additionally, solar energy is very cheap per unit of energy produced, and the costs of solar development vary regionally, with public policy and subsidies influencing the economic viability of solar power in different areas.
The decline in solar energy prices can be attributed to various factors, including the rise of new technologies and the increasing efficiency of solar panels. The more people invest in solar energy, the cheaper it becomes. This is in contrast to fossil fuels, which struggle to keep up with the pace of solar energy cost reductions. Fossil fuel power plants have to purchase mined fuels to operate, which accounts for a significant portion of their total expenses. On the other hand, sunshine and wind are free, allowing the costs of tapping into their power to decline sharply as technology improves.
The transition to solar energy is not only cost-effective but also has the potential to generate revenue. Doyne Farmer, a scientist at the University of Oxford, supports this claim by stating that transitioning to renewable energy sources like solar and wind is not just cheap but will also bring in money. This is because the cost of renewables is expected to continue decreasing, leading to lower energy prices in the future.
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Solar PV can be an attractive resource for meeting peak demand
Solar energy has been gaining traction as a viable alternative to fossil fuels, and for good reason. While the levelized cost of energy (LCOE) for solar energy has been a contentious topic, with critics arguing that it does not account for the system-wide costs of providing backup solutions, the fact remains that solar energy has become increasingly cost-competitive with traditional fossil fuels.
Solar Photovoltaic (PV) technology, in particular, has been experiencing rapid advancements and cost reductions, making it an attractive option for meeting peak energy demands. Here's why Solar PV can be a compelling choice:
Cost-Effectiveness
Solar PV technology has seen significant cost reductions over the years. The levelized cost of energy (LCOE) for solar has decreased by 78% since 2009, making it increasingly competitive with traditional fossil fuels. In some cases, solar PV can even be cheaper than fossil fuels, especially when accounting for future fuel price increases.
Peak Demand Management
Meeting peak energy demands is often the most expensive and polluting part of managing the electric grid. Solar PV can be an attractive solution during these peak periods. While gas or diesel generators used during peak demand can cost between $179-$332/MWh, solar PV offers a more cost-effective alternative, with costs ranging from $86-$177/MWh.
Grid Benefits
Solar PV not only reduces peak demand but also consistently shifts the peak load towards off-peak hours. This helps optimize energy consumption and reduces the strain on the grid during peak periods. Properly sized solar PV systems can maximize financial savings for commercial customers, utilities, and ratepayers.
Technological Advancements
Solar PV technology is continuously improving, with efficiency gains being made. The average efficiency of solar panels today is 21%, but researchers have developed PV modules with efficiencies nearing 40%. Tracking systems that follow the sun throughout the day can increase energy production by 10-30% for single-axis trackers and 20-30% for dual-axis trackers. Building Integrated PV (BIPV) solutions, such as solar shingles, also improve aesthetics and replace traditional building materials.
Policy Support and Growth
Solar PV is gaining momentum globally, with policy support and investments driving its expansion. China, the United States, the European Union, and India are making significant strides in solar PV capacity and installations. Tariff reforms and appropriate policies will be crucial in attracting further investment and ensuring fair cost allocation among consumers.
In conclusion, solar PV technology offers a compelling case for meeting peak energy demands. With cost reductions, technological advancements, and increasing policy support, solar PV is an attractive resource that can help manage peak demand, reduce costs, and contribute to a more sustainable energy future.
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The cost of solar has dropped by a factor of 5000 since 1958
Solar energy has become increasingly popular as a clean and affordable alternative to fossil fuels. The cost of solar photovoltaic technology has decreased significantly over the years, following a "learning curve" known as Wright's Law, which states that the cost of technology decreases as its cumulative production increases. This trend has been evident in the solar industry, with solar photovoltaic costs falling by 90% in the last decade.
The International Renewable Agency and other sources have confirmed this exponential decline in prices. For example, in 2010, generating a megawatt-hour of electricity from solar photovoltaic technology cost a global average of $378 without subsidies. By 2019, this cost had plummeted to just $68, making it cheaper than nuclear, coal, and even onshore wind power. This decrease in price is crucial for the rapid and widespread adoption of solar energy.
The total lifecycle costs of solar energy, often referred to as the levelized cost of energy (LCOE), have also decreased significantly. Since 2009, solar LCOE has decreased by 78%, or over 25% annually. In 2025, utility-scale solar projects had a range of $38 to $78 per megawatt-hour, while existing fossil fuel plants had higher costs, with natural gas plants ranging from $24 to $39 per megawatt-hour and coal plants ranging from $31 to $114 per megawatt-hour.
While there have been fluctuations in prices due to various factors such as the COVID-19 pandemic and supply chain challenges, the overall trend shows a significant drop in solar energy costs since 1958. This has made solar energy more accessible and economically competitive with other sources of electricity generation, driving its growth in new markets. Federal policies, tax credits, and increasing demand for clean electricity have also contributed to the expansion of the solar industry.
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Solar is 41% cheaper than the cheapest fossil fuel option
Solar energy is now cheaper than fossil fuels, and its low-cost trajectory is expected to continue. Unlike oil, gas, and coal, solar PV is a technology, not a fuel, so its costs will continue to fall as research continues and technology improves.
The cost of solar energy has decreased by an astounding 78% since 2009, or over 25% annually. When we examine these costs, we can see that only the lowest-cost coal ($66/MWh) and gas combined cycle ($61/MWh) can currently outcompete solar ($72-86/MWh). However, when accounting for future fuel prices, solar becomes even more attractive.
The price of solar has dropped by a factor of 5,000 since it was first used in 1958. In 2016, a major commercial solar installation bid an extremely low price for PV at 0.029 per kWh, effectively leveling the playing field between solar and fossil fuels' cheapest offerings.
Solar PV projects can now deliver energy at half the cost of coal, and that's without factoring in the costly negative impacts of coal, such as heavy carbon pollution, strip mining, and mountaintop removal.
While solar energy is cheaper than fossil fuels, it is important to note that renewable energy sources like solar and wind only contribute about 2-3% of global energy capacity. However, data from the past 20 years suggests that solar and wind will soon take over in generating electricity.
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Frequently asked questions
Yes, solar energy is cheaper than fossil fuels. The cost of solar energy has decreased by 78% since 2009, and solar power costs 41% less than the cheapest fossil fuel option.
The cost of solar energy has decreased due to technology improvements, economies of scale, and increased investment. Additionally, sunshine and wind are free sources of power, allowing for a sharp decline in the costs of tapping into their power.
Yes, solar energy is a renewable and clean energy source that does not produce carbon dioxide emissions, contributing to the fight against climate change.
Yes, there are challenges such as the need for storage solutions, policy and regulatory issues, and inertia in the energy system due to existing long-term contracts with utilities, energy producers, and mining companies.
The outlook for solar energy is positive, with projections indicating that solar energy will become even more cost-competitive and accessible. Saul Griffiths predicts household energy costs could be reduced by 50% or more in the near future.
