Over the past year the cost of new solar plants dropped 20%, while onshore wind prices dropped 12%. Since 2010, the prices for lithium-ion batteries — crucial to energy storage — have plummeted a stunning 79% and are projected to keep dropping, according to the latest Bloomberg New Energy Finance (BNEF) report.
The economic case for building new coal and gas capacity is crumbling. At the same time, solar and wind plants — which are increasingly being built with battery storage — are eating into the utilization of existing coal and gas plants, making them far less profitable. For instance, the super-efficient combined-cycle gas turbine (CCGT) plants that have been popular in recent decades, were designed to be used at full power between 60% and 90%of the time.
But their actual utilization rate (also called the “capacity factor”) has been plummeting in recent years, and is now close to a mere 20% in countries as diverse as China, Germany, and India .
In California, the world’s sixth-biggest economy now mandates that half its power in 2030 be renewable. With solar and wind prices plummeting, NRG Energy recently said it would shutter three gas-fired plants.
And things are only going to get tougher for gas and coal compared to renewables. BNEF’s projection of current and future prices for this country shows that onshore wind is already cheaper than coal, and is becoming cheaper than gas. Solar photovoltaics is rapidly becoming cheaper than coal and will beat gas within several years.
Furthermore the biggest new power markets are in developing countries, which don’t have as expansive of an electric grid, again making distributed renewables relatively more attractive. But those countries often have a lot of relatively inexpensive undeveloped land in very sunny places.
In the Middle East, the economics of solar power and batteries are so good that SoftBank Group is partnering with Saudi Arabia to build a stunning 200 gigawatts of solar power capacity for $200 billion. This is 100 times larger than the largest solar farm ever proposed.
The future could not be sunnier for renewables.