Key facts
- Solar power now requires less upfront investment than coal or gas plants for the same amount of electricity delivered.
- Solar PV's total installed cost has fallen by 87% since 2010 due to mass manufacturing and efficiency improvements.
- Firm solar-plus-battery electricity costs range from $54–82 per megawatt-hour, comparable to new coal and gas plants.
- Emerging economies, often facing high borrowing costs and fuel import dependence, stand to benefit significantly from this upfront cost parity.
- Fossil fuel plants carry recurring fuel purchase costs and associated infrastructure expenses, which solar largely avoids.
Solar power has reached a critical economic milestone, now requiring less upfront investment than coal or gas plants to deliver the same amount of electricity. This shift, detailed in a new Ember analysis, signifies a fundamental change from previous years when solar's high initial capital costs were a significant barrier, especially in emerging economies.
Historically, solar concentrated its costs at the beginning of a project, while fossil fuels spread costs over decades of fuel purchases. This made fossil fuels appear more attractive, particularly in regions with high interest rates and limited capital. However, mass manufacturing, improved efficiency, and expanded supply chains have driven down solar PV's total installed cost by 87% since 2010, according to IRENA. This has effectively dismantled the argument that fossil fuels offer a cheaper upfront financing option.
While intermittency remains an engineering challenge, the cost of battery storage has also plummeted by 93% since 2010. This allows for firm solar-plus-battery electricity to be competitive, with costs estimated between $54–82 per megawatt-hour in high-irradiance regions, compared to $70–85/MWh for new coal in China and over $100/MWh for new gas globally. Although system costs vary by location and renewable penetration, the economic veto of intermittency is diminishing.
Furthermore, the comparison often overlooks the significant system costs associated with fossil fuels, including pipelines, terminals, storage, and fuel contracts, as well as commodity price volatility. Solar, in contrast, effectively prepays much of its energy supply for decades. This upfront cost parity is expected to have a profound impact, particularly in fast-growing emerging economies that face rising electricity demand, high borrowing costs, and dependence on imported fossil fuels.