Planetary Technologies

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The Sun Has Won

An Ongoing Report Series exploring the future of Renewable Energy

THE SUN HAS WON, PART 1: MARKET INEVITABILITIES IN ELECTRICITY PRODUCTION

Rob Carlson, July 2022

Summary: Solar power now provides the lowest cost electricity generation in history. The continuing decrease in solar costs is driven by technological change, economies of scale, and by learning effects derived from the expansion of manufacturing. This cost trend is coupled to an annual exponential increase in solar installation that has run for more than 25 years and that is likely to continue, if not accelerate. Falling costs for solar power are accompanied by a long-term shift in the structure of investment; in 2021 more money was invested on an annual basis into renewables projects than into fossil fuel projects, more new solar power was built than any other generating capacity, and the cost of capital for solar projects was at least 4X lower than for fossil fuel projects. As a result, new solar installation now constitutes more capital-efficient electricity generation than any other source with the exception of wind, which is economically and physically efficient only when installed at very large scales. Taken together, these factors reveal that solar power is now a better, and lower risk, investment than new fossil-fueled electricity projects. Despite this cost advantage, many countries will continue to build and operate coal and gas generating capacity because 1) these facilities provide both electricity generation and employment, and 2) constructing adequate manufacturing capacity for renewables to fully replace fossil fuels is likely the work of decades. Yet by approximately 2025, operating the vast majority of existing fossil fuel power production will be inefficient and uncompetitive when compared to the combination of new solar power and battery storage. To the extent that local energy costs for manufacturing and services determine global competitiveness—particularly in any manufacturing process that uses, or can be adapted to use, electricity—the cost advantage brought by deploying low-cost solar will drive adoption in regions that wish to succeed economically. The economic and financial advantages of solar relative to fossil fuels suggest that the next thirty years will see solar power come to dominate global electricity production.

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Summary: China dominates global solar photovoltaic (PV) manufacturing and domestic installation. China by itself installed an estimated 265 GW of PV, or 60% of the global total, in 2023. China's domestic installation is such a large fraction of the global market that changes in domestic demand may have increasingly important global consequences. Moreover, any uncertainty in China's domestic financing of manufacturing, or in government policy that influences manufacturing, could affect module availability worldwide. A contraction of domestic Chinese installation could result in a global glut of modules, and a contraction of Chinese manufacturing could result in tightening supplies, with either event influencing global prices. One ameliorating factor to emerge in the wake of the pandemic and war in Europe is the apparent rise of the warehousing of modules, which can buffer fluctuations in both supply and demand. Given China's present dominance in all phases of module manufacturing, I estimate it will be 5-10 years before domestic investment in new manufacturing in other countries will modulate China's impact on global supply and prices, a topic that I will cover in an upcoming report. This Research Note updates reporting on China from The Sun Has Won, Part 1.

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Summary: Germany continues its progress toward a cleaner, greener, more efficient economy. Renewable sources provided 55% of total German electricity generation in 2023 and surpassed 60% of total generating capacity. The rise in renewable generation is contemporaneous with 1) an increase in stability of the German grid, 2) an increase in GDP, and 3) a reduction in CO2 equivalent emissions. After spiking at the outset of war in Ukraine, wholesale electricity prices in Germany are falling and are now modest compared with peer economies in Europe. While the German economy is facing a variety of challenges, leading The Economist to wonder whether the country is “once again the sick man of Europe”, that man is breathing ever cleaner air and has an increasingly capital-efficient energy production system. Ongoing deployment of renewable energy production will lead to greater fitness and improving economic health. This Research Note updates and expands reporting and analysis from The Sun Has Won.

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Research Note: Discerning Trends in PV Installation Data

Rob Carlson, July 2024

Summary: Estimating future annual photovoltaic (PV) installations is critical for planning the buildout and operation of energy systems at scales ranging from individual homes, to cities, to nation states, to continents. Yet annual installation rates continue to grow so fast that reality makes a regular habit of surpassing even near-term forecasts, frequently in just one quarter. Linear models of PV installation are ahistorical, have been poor predictors of future deployment rates, and consequently mislead in regards to capital investment, labor requirements, and emissions reductions. The forecasting challenge is compounded by temporal and geographical variability. There are at least three different historical price eras for PV, with different market dynamics, and there are today at least four distinct PV markets, with installation rates determined by contrasting local policy priorities. Due to this variability, different models of future market installation that are consistent with historical installation data can produce final installation totals, and maximum installation rates, that span more than an order of magnitude; existing data are consistent with a 2050 installation total of 25–100 TW, and a maximum installation rate of 600 GW to 6 TW per year. In other words, we cannot distinguish between a wide range of outcomes given existing data. Nevertheless, the exercise of comparing models to the historical record can help delineate and constrain the range of our ignorance, which provides a basis for evaluating scenarios for PV installation over the next three decades.

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Summary: Wind and solar now constitute the vast majority of newly constructed electricity supply in the U.S., reaching 99.7% of new net generation commissioned in Q1 of 2024. Fossil-fueled electricity generation, produced by burning coal or natural gas, peaked in 2007 and has since fallen by 14% through 2023. In contrast, over that same period, electricity production from renewables, here defined as the combination of wind and solar, has grown by 600 GWh, to about 20% of total U.S. electricity supply. The growth in renewables has more than made up for the decline of fossil fuels, and fossil fuels are now being displaced by the combination of wind and solar, facilitated by battery storage. Utilities and power planet operators expect to shut down increasing amounts of coal-fired electricity production. Some state markets are further into the energy transition than others. The combination of solar and batteries reduced natural gas usage during afternoon and evening hours in California in H1 2024 by approximately 50% compared with the same period in 2023. Similar impacts on gas use are emerging in Texas this year with the commissioning of new battery capacity. Widely trumpeted plans for significant new domestic gas-fired electricity generation are not yet evident in surveys of developers and utilities by the U.S. Energy Information Agency (EIA). While much is made today of a projected increase in electricity demand from data centers, which may delay the expected shutdown of some fossil-fueled production, the low price and capital efficiency of renewables will increasingly outcompete fossil fuels to meet that demand; the medium-, and long-term prospects for fossil-fueled electricity production in the U.S. are poor.