A report released today by the Abu Dhabi-headquartered International Renewable Energy Agency (IRENA) has projected a 59% cost reduction for electricity generated by solar PV by 2025.
The report, titled The Power to Change: Solar and Wind Cost Reduction Potential to 2025, suggests that solar – nurtured by the right regulatory frameworks and policy – can achieve huge reductions in cost over the next decade, bringing the global average price per kilowatt hour (kWh) to between $0.05 – $0.06.
IRENA states that solar PV module prices have fallen roughly 80% since 2009, and with every doubling of installed capacity module costs plunge a further 20% thanks to economies of scale and the types of performance and efficiency improvements currently being seen.
However, support for continued cost reduction must come in the form of stable and sustained policies in many countries that are designed to nurture a cost-reduction environment across the board. This means that balance of systems (BOS) costs must also achieve similar reductions, as must quality project management and O&M costs.
“We have already seen dramatic cost decreases in solar and wind in recent years, and this report shows that prices will continue to drop thanks to different technology and market drivers,” said IRENA director-general Adnan Z. Amin. “Given that solar and wind are already the cheapest source of new generation capacity in many markets around the world, this further cost reduction will broaden that trend and strengthen the compelling business case to switch from fossil fuels to renewables.”
This switch, which has hitherto been delayed by clean energies’ lack of scale and affordability, is inching closer with each passing day and each incremental reduction in production and installation costs, Amin added. “To continue driving the energy transition, we must now shift policy focus to support areas that will result in even greater cost declines and thus maximize the tremendous economic opportunity at hand.”
The IRENA report follows an earlier study this week by Bloomberg New Energy Finance (BNEF), which forecasts that solar PV generation costs per MWh will fall by 60% by 2040 (15 years later than IRENA’s projections), based on current costs – meaning that by the 2030s, solar will be the world’s cheapest source of energy, and that which attracts the most investment.
Following IRENA’s report this week will be an additional, solar-specific study to be released in the summer. Letting in the Light: How Solar PV Will Revolutionize the Electricity System, will provide a comprehensive overview of solar’s global reach and its prospects for the future, including a report on end-of-life management for solar PV panels.