Solar Beating Oil For Energy’s Future

July 21st, 2016 by

solar-oilThe global oil glut may become even worse, as the rapid adoption of solar energy installations reduce the demand for oil. The outlook for coal is even bleaker: Solar and wind together are expected to totally replace coal in the next 20 years.

In fact, this year’s annual report from Bloomberg New Energy Finance predicts that Peak Oil will occur in 2025: not because supply is exhausted, but because solar and wind will have become cheaper than fossil fuels.

Cheaper and Cleaner

BNEF forecasts that the cost of implementing renewable energy will fall 41% by 2040. This follows previous technological advances that have pushed the costs of photo-voltaic cells down by more than half since 2010. The cost of a completed commercial solar energy system has fallen almost 30% just over the past three years. With costs falling so rapidly, and installations expanding so rapidly, it’s easy to believe the forecast that renewable energy will surpass fossil fuels by 2040.

solar-and-wind-powerThese rapidly falling costs have led BNEF to estimate the “tipping point” for fossil fuels will occur in 2027. Solar and wind installations are already cheaper than a new oil- or coal- fired power plant in many regions. By 2027, solar will be cheaper than running existing fossil fuel power plants. Electrical utilities will actually save money by closing their old power plants and moving to renewables.

In fact, investment in renewable energy capacity over the next 25 years is expected to be twice the investment in all fossil fuels combined. Renewable energy will see $7.8 billion invested, while oil, natural gas, and coal together will see $3.2 trillion.

It is expected that 8.6 terawatts of new energy generation capacity will be added by 2040. Of that, renewables are forecast to account for 64%. Total deployed solar capacity has expanded by 50x since 2004. By 2040, renewables will supply 70% of Europe’s power, freeing them from extortion by Russia. The US will be getting 44% of its power from renewables by then.  The capacity of photo-voltaic cells has expanded by 50% annually for the last 5 years. This means more power is harvested per square foot in new solar panels.

The International Energy Agency predicts that solar will be the largest source of electricity in the world by 2050. Bloomberg puts it succinctly: Solar is a technology that will always get cheaper over time.

The Sun Never Runs Out

Perhaps the biggest advantage that solar (and wind) have over oil is that they are not extracting a finite resource. When oil wells run dry, great trouble and expense is necessary to find a new deposit, sometimes in remote and inhospitable locations. The Sun nor wind will ever run out.

cloudy-weatherOf course, the big knock against solar and wind both is, “what are you gonna do when the wind stops, or it’s a cloudy day?” That’s where recent advances in lithium-ion batteries come in. (You can thank Elon Musk, among others, for that.) 41 million new electric cars are expected to hit the road in the next 25 years. The push toward longer-range and higher-performance electric cars will spur technological advances and economies of scale that will bring battery costs down for solar power as well as for electric cars.

A peek at the future will be provided by the first “Tesla Town” housing development in Melbourne, Australia. The developer promises that not only will each home fill 100% of its power needs with rooftop solar panels (paired with Tesla’s Powerwall), there will be enough left over each day to keep residents’ Tesla car charged for free.

A growing number of competitors vying with Tesla for the electric car and renewable power sectors means that technological breakthroughs will come to market even faster.

feedback-loopThis is a part of the positive feedback loop between renewable energy and energy storage systems. As more solar and wind installations are built, demand for energy storage increases. In turn, as energy storage becomes cheaper and more efficient, more solar and wind energy installations will be built. As mentioned above, the more solar plants that are built, the cheaper new ones become. Likewise, the more Lithium ion batteries that are built, the cheaper they will become to produce.

A Long Way To Go, Globally

While solar power is expanding at a remarkable rate worldwide, the raw numbers show that it has a long road ahead of it. Globally, oil still accounts for 100 times more power generation than solar. Coal still produces 90 times as much. From 2013 to 2014, solar energy consumption grew by 38%, and oil by 0.7%. Great, right? Not so fast. In raw numbers, growth in power consumption from oil was triple that of solar. This can be attributed to the rising energy needs of heavily-populated China and India.

solar-stationThe situation is much better for solar in the United States. Fortune magazine notes that solar power is set this year to provide more new capacity in the US than any other source, as much as 70% of new output. Expensive residential solar panel installations are giving way to large “solar farms” that are already producing electricity cheaper than oil or natural gas. These large arrays of solar cells sell their power directly to the local utility.

With literally millions of acres of land suitable for utility-grade solar farms, it’s surprising that the US only ranks #5 in a list of the top 10 nations getting their power from solar. Italy, Japan, China, and Germany are all producing more megawatts of power from solar than the US.

The birth of solar power focused on setups for individual homes and businesses, and was assisted by healthy government subsidies. Now that technological advances and falling construction costs have made solar cheaper than coal or oil, tax credits and subsidies are being phased out. Even so, the growth of solar and wind energy continues to accelerate. Elon Musk, CEO of Tesla, has announced ambitious plans to mate high-efficiency, low-cost solar panels from SolarCity with revamped Tesla Powerwall energy storage to reinvigorate the residential rooftop solar industry.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product