According to Bloomberg New Energy Finance, by the year 2025, the average global cost of solar power may be less than coal. Already, solar power is cheaper than generating energy from coal in some parts of the world. In 2016, Chile and the United Arab Emirates were able to provide solar power for less than three cents a kilowatt-hour — half the average cost of coal power worldwide. Saudi Arabia, Jordan, and Mexico are all aiming to drop prices even lower this year.
“These are game-changing numbers, and it’s becoming normal in more and more markets,” said Adnan Amin, the director-general of the International Renewable Energy Agency. “Every time you double capacity, you reduce the price by 20%.”
The World Economic Forum (WEF) predicts that in just a few years, about two-thirds of all the nations in the world will reach grid parity. The term “grid parity” means that an alternative power source like solar energy is capable of generating the same amount of power as a traditional power grid at a cost that is the same or lower. As of today, over 30 countries have already achieved unsubsidized grid parity.
Solar power is becoming more popular and less expensive for a number of reasons, including lower production costs, more investors, greater government subsidizing, more local legislation, and advancements in technology.
The “sunbelt countries” are leading the way in cutting solar power costs, but low prices have less to do with the sun and more to do with competition. Countries like Chile have used auctions to award power-purchase contracts, forcing energy companies to compete for business by lowering costs.
“We’re seeing a new reality where solar is the lowest-cost source of energy, and I don’t see an end in sight in terms of the decline in costs,” said Sami Khoreibi, founder and chief executive officers of Enviromena Power Systems.
Right now, the average American household is spending about 2.7% of its income on energy bills, totaling to about $2,000 a year. As solar power gains momentum, it is highly likely that energy costs in the U.S. will see a major decline, benefiting Americans around the country. A 600 square foot solar panel would be needed to power the average home, and this alone could save about $84 a month in energy costs.