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Solar electricity prices increasingly matching and beating fossil fuel

Solar electricity is rapidly heading towards price parity and better, according to a report from Deutsche Bank. While the report is about the US market there is no reason to believe that similar circumstances do not apply in other parts of the world, including the UK.

The Bloomberg financial news service reports:

Gone are the days when solar panels were an exotic plaything of Earth-loving rich people. Solar is becoming mainstream, and prices will continue to drop as the technology improves and financing becomes more affordable, according to the report….

The reason solar-power generation will increasingly dominate: it’s a technology, not a fuel. As such, efficiency increases and prices fall as time goes on. The price of Earth’s limited fossil fuels tends to go the other direction.

Solar is on track to be as cheap or cheaper than average electricity prices in 47 US states in 1916 even if the current 30% tax credit drops to 10%. The bank’s chart shows the position state by state.

Not surprisingly the biggest price advantage for solar is in Hawaii followed by California. But then comes New York and several other north eastern states with sunshine hours closer to those in northern Europe. Looking closely at the chart it is hard to see a correlation between climate and electricity price.

Price parity or better for 36 US states in 2016.

Price parity or better for 36 US states in 2016.

The Bloomberg article comments:

Solar will be the world’s biggest single source of electricity by 2050, according to a recent estimate by the International Energy Agency. Currently, it’s responsible for just a fraction of one percent.

Because of solar’s small market share today, no matter how quickly capacity expands, it won’t have much immediate impact on the price of other forms of energy. But soon, for the first time, the reverse may also be true: Gas and coal prices will lose their sway over the solar industry.

The prediction of declining importance for gas and oil prices is why finial markets are becoming increasing interested in alternative energy sources.