Wind and Solar Cost Decline. 1980 to 2015

Shown here is information on the staggering decline in the cost of wind and solar power over the last 35+ years. Through a process of R&D, technological advancement and scale economies in manufacturing, costs have been reduced by more than 95 percent for wind and 99 percent for solar, since the late 1970s.  

Further substantial cost declines continue to be realised and these are discussed below.

 
Source: US White House blog 'The Clean Energy Economy in Three Charts.' 6-Jan-2014, 

Source: US White House blog 'The Clean Energy Economy in Three Charts.' 6-Jan-2014, 

 

In 1980 the cost of solar cells was 95 percent+ of the final cost of electricity from solar panels. For this reason the cost of solar cells has traditionally been used as a convenient proxy for the total cost of electricity generated by solar photovoltaic panels. Other costs (generally termed - 'balance of plant') are such things as regulations & permitting, racks to hold the panels, electrical wiring and connection costs, labour etc.). 

The following chart shows the exponential decline in solar cell costs since 1980. That decline has been so rapid that, by 2010, the cost of cells had declined to only about 50 percent of the total installed cost of solar power. Today the figure is about 10 percent and for that reason the focus has shifted to 'balance of plant' where, in North America, there remains enormous scope for further cost reductions.   

 

Source: Bloomberg New Energy Finance and pv.energytrend.com

 

Cost declines continue and these have been noted by numerous investment banks, government agencies and media outlets. One of the more widely cited investment banks is Lazard which annually produces 'Lazard's Levelized Cost of Energy Analysis' - an excellent reference.  The following is excerpted from page 10 of the 2016 edition. It shows wind and solar cost declines in the last 7 years (66% and 85% respectively) and largely speaks for itself;

 
 

This is all very well but one might still wonder how the economics of wind and solar compare with more traditional forms of generation such as coal, oil, natural gas and nuclear. The US Energy Information Administration annually compiles such a comparison and this year's, for the first time, shows that wind energy is now one of the cheapest new generation options - and that is compared with thermal, nuclear and renewable sources. Check out this excellent article: admittedly from the American Wind Energy Association but any potential wind bias is countered by its links to multiple independent, third-party, sources.

This rapid drop in the price of wind has caused numerous observers to postulate that the rules of the game have now fundamentally changed. The reason?
In a world of finite and limited fossil fuels then increased demand will, in the long run, lead to increased prices. In the world of renewable energy - the fuel (wind & solar) is free which means that reduced costs lead to increased demand which results in more manufacturing which results in scale economies and hence reduced costs and so it goes on. This paradigm shift is reviewed here by Bloomberg.   

In response to these price signals the US generation mix has fundamentally changed since 2011 and, based on price alone, it is going to change a whole lot more in the next few years!