In a new report , the International Energy Agency (IEA) has suggested that solar energy is now the cheapest form of electricity that utilities can aspire to .
The report underlines the importance of policies to encourage the development of renewable energy and other advanced technologies for the environment.
The calculation depends on the financing figures compared to the amount of production of the solar projects. That means that, as panel technology becomes more efficient and prices for basic panels continue to fall, investors are getting better and better financing deals .
As Carbon Brief (CB) explains:
Previously, the IEA assumed a range of 7 [to] 8 [percent] for all technologies, varying according to the stage of development of each country. Now, the IEA has reviewed the evidence internationally and finds that for solar energy, the cost of capital is much lower, at 2.6 [to] 5.0 [percent] in Europe and the United States, 4.4 [to] 5.5 [per percent] in China and 8.8 [a] 10.0 [percent] in India.
In other words, the “20 to 50 percent cheaper” statistic is based on an estimate of companies building solar projects, not something that has a direct effect on consumers or even solar homeowners. It’s still something to keep in mind though, because the cost of building power plants is a big part of why so much of the world remains tied to coal and gas power.
What causes the cost of capital to go down? It depends on many things, but in the case of renewable energies there are some factors that do not depend on anything. As individuals and companies contemplate more successful projects like Elon Musk’s South Australia solar battery farm , their investment confidence grows.