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Debunking the Myth: Solar Energy's Cost Competitiveness in 2023

Sabrina Lopez
Sabrina Lopez
July 2, 2013
2 min read

[Originally published on July 2, 2013 | Updated on January 24, 2024 - 2 min read]

The perception of solar power as too expensive compared to traditional energy sources has long been debated. However, recent trends and data suggest a significant shift in the economics of solar energy.

  1. Cost Competitiveness: Recent data indicates a remarkable increase in solar energy investments, driven by high fossil fuel prices and strong policy support like the US Inflation Reduction Act. In 2023, investment in solar energy exceeded upstream oil for the first time, highlighting solar's growing financial appeal (IEA).

  2. Decreasing Costs: The global weighted average levelized cost of electricity (LCOE) from newly commissioned utility-scale solar photovoltaics (PV) fell by 3% year-on-year in 2022 to USD 0.049/kWh, showcasing continued cost reductions despite rising material and equipment costs (IRENA). This trend starkly contrasts with the mid-seventies when solar manufacturing costs were around $60.00 per watt.

  3. Solar vs. Fossil Fuels: The economic competitiveness of solar has improved significantly compared to fossil fuels. In 2010, solar PV was 710% more expensive than the cheapest fossil fuel-fired solution. However, by 2022, it will cost 29% less than the cheapest fossil fuel-fired solution, a dramatic shift underscoring solar's economic viability (IRENA).

  4. Utility Scale Solar Growth: Globally, electricity demand is expected to double by 2050, with renewables, particularly solar and wind, projected to provide around 45 to 50 percent of generation by 2030 and 65 to 85 percent by 2050 (ENERGY.GOV). This growth reflects solar's increasing role in meeting global energy demands.

  5. Challenges and Opportunities: While the momentum behind clean energy investment is strong, it must be evenly distributed across countries or sectors. It highlights areas that policymakers must address to ensure a broad-based and secure energy transition. The macroeconomic environment, including higher interest rates and the cost of financing, remains a challenge, especially in developing economies (IEA).

  6. Solar vs. Nuclear and Coal: The construction times for traditional power plants like nuclear and coal are considerably longer than for solar projects. In 2022, about 40 GW of new coal plants were approved, primarily in China, amidst a global trend of declining investments in new coal-fired power plants (IEA).

In summary, current trends and data have increasingly challenged the once-prevalent notion that solar power is too expensive compared to traditional sources. The solar industry continues to benefit from technological advancements, policy support, and a global shift towards renewable energy.