The Remarkable Decline in Solar and Renewable Energy Prices
Over time, awareness about human’s responsibilities towards the environment have increased. This has intensified the adoption and usage of environmental- friendly methods in various fields around the globe. Renewable Energy is one such method and can swiftly replace non- renewable methods of energy production. Why is that so? Because renewable sources of energy do not emit harmful greenhouse gasses into the environment. They do not put strain on natural resources in order to meet the electricity needs of people. They promote sustainable development by using abundant and renewable resources.
The benefits that human species can reap from renewable energy are much more than those mentioned above. Many must be thinking that renewable energies are expensive and civilians cannot afford them, but that’s not true. Even though renewable energy sources, especially solar power and wind energy are gaining popularity day-by-day; their prices are continuously facing a downward trend.
Earlier solar power and other renewable energies were expensive undoubtedly; but as the sector experienced advancement in technologies and innovations, the high prices started declining. Past few decades were significant for this field as the large percentage of fall in prices was recorded during 1990- 2022. The percentage fall in renewable energies was about 95%. Solar panel price drop was estimated to be 85-88%; whereas onshore wind energy witnessed the price drop of 70-72%. At the present moment, prices of solar power are as low as $0.37-$0.39/ watt which used to be $102-$107/ watt during the late 80’s.
Hence we can perceive the idea of renewable energy sources; especially photovoltaic techs and wind energy, being accepted and adopted worldwide mainly due to price reductions.
Key Contributors to Price Reduction.
In the above section, we saw how the renewable energy sector, especially solar and wind energy, witnessed drastic price drop over the last few decades. But that didn't just happen out of nowhere, there are definitely certain factors that are causing such price reductions. The main and notable reasons behind such price fall could possibly be increased productivity, purchase of required materials in huge slots, large-scale production, Government aids, and increased competition. Let's understand them one- by-one
- Enhanced Productivity With the improvement in technological areas, new innovations are introduced frequently. One such innovation is increased productivity of various renewable technologies. Solar Panels can now produce better, or at least the same amount of electricity from less sunlight. Therefore, the need to install large amounts of solar panels decreases and from a consumer’s perspective solar panels become affordable.
- Bulk Purchasing Due to the increasing popularity of Solar and renewable energy among people, the materials and equipment required in their manufacturing processes are now easily available at reasonable prices. As a result of which producers and manufacturers often purchase these things in big slots which reduces the cost incurred on their acquisition. Due to this, automatically the prices decrease.
- Streamlined Manufacturing Earlier the producers had to incur huge manufacturing costs but it’s not the same anymore. With advancements in the R & D sector, the manufacturing processes of the solar and renewable energy technologies became inexpensive. Due to this, many manufacturers prefer large-scale productions as it decreases the manufacturing costs per unit; which is also a reason for the price drop of solar energy and renewable energy sources.
- Government Aids Even though people today are inclining more towards solar and other renewable sources of energy, there are still many areas where people do not prefer switching over to a sustainable method of meeting their needs. Main reason behind this is the expensiveness of these sources. Therefore, the governments offer various subsidies and incentives in order to make these sources less expensive and affordable for everyone. Such aids also help the governments to encourage people to opt for renewable energies like solar and wind.
- Growing Popularity and Competition Over time, the popularity of renewable sources (mainly solar and wind energy) is increasing. More awareness is causing more inclination towards such sources and as a result of which competition in the renewable energy industry is increasing. Cut-throat competition is being faced by the producers almost everyday and in order to survive in that competition, every seller is willing to decrease the price to a certain level just to attract more customers.
Solar Energy Cost Trends
Solar energy is one of the most popular and widely accepted sources of the renewable energy sector. It indeed is the one with less investment and best results. With increase in popularity and adoption, the solar market has started facing immense competitiveness internally. Due to this, prices of solar power and technologies are facing a downward steep (that we have already discussed in the above section).
We saw the cause behind the solar price drop, but wouldn’t it be unfair if we just focus on the cause and not on its intensity and effect on the prices? Under this section, we shall focus on the solar energy cost trends.
- The prices of solar panels were as high as $4800/ watt during early 2009.
- But it started sloping down at a rapid speed till 2012.
- The prices went from $4800 to $2500/ watt in the small phase of 3 years.
- After 2012, the price drop slowed down its pace, but it kept lowering down anyway.
- This graph also depicts that not only the costs of manufacturing and the final product have declined, but also the costs associated with installation, inverters, etc. have reduced as well.
Wind Energy Cost Trends
Even though the popularity factor is shared by every source of the Renewable Energy Sector, Solar and Wind Energy are the two most known and adopted ones. We have already talked about Solar energy, in this section we will go through the cost trends of Wind Energy. Below is a graph and some key points to have a better grip on this topic.
- The annual change in technology costs for wind turbines varied from year to year.
- The cost reduction in 2017 to 2018 (-12%) indicates that wind turbine technology became more cost-effective during that period.
- The rate of cost reduction slowed in 2018 to 2019 (-5%) and 2019 to 2020 (-2%).
- In 2020 to 2021, there was a notable increase in costs (+3%), possibly influenced by the sharp rise in steel prices in 2021.
- The estimated cost change for 2021 to 2022 is a significant decrease (-22%), possibly reflecting cost- cutting measures or efficiency improvements.
We can also understand through this graph that the prices of steel played a crucial role in influencing the cost trends for wind turbine technology. It’s pretty much obvious as steel is the key material used in wind turbines. The industry saw significant price fluctuations in steel that eventually impacted the annual cost changes.
The wind turbine industry managed to reduce costs in earlier years but faced cost challenges in 2021 because of the increase in steel prices. The estimated cost decrease in 2022 may indicate efforts to mitigate these challenges and improve cost-efficiency.
Impacts on Energy Market
The falling price graph of renewable energy sources would have various impacts on the market like technological advancements, policies and incentives, global market expansion, etc. Almost all of them are in favor of the industry but it will take a long time to discuss them all. Therefore we will be discussing the three key impacts that are and will be experienced by the market.
- Expanded Uptake One of the most beneficial impacts on the renewable energy market would be increased adoption of its various sources. As the prices fall down, it will attract more people. Solar and other renewable energies would become accessible, people will start adopting it and as a result the market will expand. Market expansion would bring more investments and scope for innovations with it.
- Strategic Edge Manufacturers and sellers in the renewable sector can now offer affordable and sustainable energy generation products and services. The customer base of this market will increase and in order to satisfy and retain them, more innovation and efficiency improvements would be stimulated. This stimulation will give a competitive edge to the renewable energy market against the traditional energy sector.
- Accelerated Growth Solar and other renewable energy price drops are definitely going to increase the market size. As the volume of the market becomes more dense, investment will touch the skies and new technologies would be introduced. The industry will grow and more job opportunities will be generated. Increased employment generation would also improve the economy of the locally residing people.
To sum up the discussion, we would say that the declining cost of solar and renewable energy marks a pivotal moment in our quest for sustainability. These cost reductions, driven by technological advancements and supportive policies, are reshaping our energy landscape. They offer economic growth, job opportunities, and a chance to combat climate change.
As we move forward, it’s crucial to seize this clean energy opportunity. By investing in and adopting renewable technologies, we can accelerate the transition to a greener, more sustainable future. The era of expensive fossil fuels is waning, making way for a brighter, cleaner tomorrow.