It’s the solar economy stupid

Shine on!

It’s the solar economy stupid

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We have tools to fight climate change. Let’s use them.  

The numbers are getting kind of cray cray as I eloquently put it in my recent X — formerly known as Twitter — post. People are still talking about other technologies and crazy ideas like mod nukes but solar and batteries are blitzing the year and the decade and the future. It’s time we thought about what that means.

New additions of PV this year are off the hook

Solar and battery growth are now outpacing even the most bullish outlooks. BloombergNEF, which has closely followed the sector for almost two decades, now predicts the world will add 392 gigawatts of solar power in 2023 alone! To understand the impact, consider that just one gigawatt (GW) is roughly the output of two coal-fired power units , enough energy to power 750,000 homes. This translates into new solar capacity to power 294 million homes.

In June, the International Energy Agency (IEA) ratcheted up its predictions for installed solar and wind this year by 24% — and that’s just from their December view! This means the IEA’s expectations for solar and wind have more than doubled since 2020.

Of all renewables, solar in particular is blowing way past expectations. The well-regarded analyst Hans Gunnar Navik at Arctic Securities (hardly a bastion of hype!) recently wrote about China’s incredible role in driving solar’s phenomenal growth in his weekly energy newsletter.

“China manufactured 44.5 GW of (PV) cells in July, translating to 524 GW annualized, up a stunning 79% on year, according to the National Bureau of Statistics. Year-to-date average annualized output is 480 GW, up 75% on year. These numbers indicate close to 600 GW manufacturing capacity, representing a basis for sustained strong PV deployment growth in the years to come, seemingly limited only by demand,” Gunnar Navik wrote.

Profound energy implications

In a European example of what this means in the real world, Politico reported that 23 countries in the European Union are going to meet their 2030 targets for renewables generation by 2027.

I don’t know a day in history prior to the 2020s when any one technology was being installed at a rate of 1 GW per day. It speaks volumes about the speed of the transition and investors should take note.

With the climate crisis escalating, every year now counts. The Euro-zone added 41GW of new solar in 2022 — a 40% increase in 2021. And it is on pace to do about the same growth this year — more than 50 GW. Growing 40%, 50% or 79% year-on-year, “[Solar] development has been spectacular,” Javier Esparrago, an energy expert at the European Environment Agency told Politico.

In other examples, the U.S. generated 25% of its electricity from renewables in the first half of 2023. And South Africa, basically a bastion of coal, installed a surprising 2 GW of solar power last quarter. The stuff is popping up everywhere!

1 gig a day keeps the fire away!

The reality is that it will be hard for any other energy tech to keep up with solar’s compound growth. It is harder to really understand the downstream implications of all this low-cost electricity. Now the naysayers will likely say that this is all a problem, given solar’s peaking supply and the lack of storage to hold all this sunshine. But tell that to places like Texas that just got through a tough summer peak load thanks to the solar that was installed in the last five years and some battery storage installed this year!

See Danny Kennedy’s previous Shine On columns.

Bloomberg New Energy Finance, one of the better forecasters, acknowledges even its most optimistic projections have undershot the market. Its prediction that the world will add 392 GWs means the world is adding the equivalent power of two big coal-fired units every single day. I don’t know a day in history prior to the 2020s when any one technology was being installed at a rate of 1 GW per day. It speaks volumes about the speed of the transition and investors should take note.

This is a snapshot from the Bloomberg Terminal:

Note that the cost per watt for solar  panels (modules) is now less than $0.15. This translates to prices per kWh of less than 3 or 4 cents. Nothing can beat that, which is why solar photovoltaics (PV) is winning head-to-head with all technologies. That number gets better the more we deploy, so look at the upstream supply of polysilicon. We’re going to have the capacity to make more, lots more. Or if we are to believe Navik at Arctic Securities, maybe 600 GW. For every doubling the price has dropped 20% historically so by 2025 we should be paying less than 3 cents for a kilowatt of electricity. 

We’re doing something remarkable here

You cannot build a gig of nukes, gas or coal in two years and certainly not for anything near that cost. Wind would need hundreds of turbines to be installed. Assuming you had the inventory of lots of diesel generators, you might deploy and commission 1 GW of them in a day or a week but I don’t know of it happening anywhere. Can someone tell me if I am missing something here? Take a look at the chart above. Something remarkable is going on.

This log plot of the growth of energy tech after each has reached its first exajoule (zero in the graph above) is telling. Solar’s streak is straightening — up, not to the right!

The spillover effect is why Europe is introducing heat pumps at pace; why electric transportation solutions are charging ahead (to make a pun) by leaps and bounds in emerging markets.

Fast forward a few years and you will have a drowning out of all other electricity supplies due to the incredible amount of solar power. With battery prices also dropping dramatically, it will be all but impossible for more expensive coal and gas to compete. This combination will be fatal for conventional power plants. 

Electricity is everything

And it is good news for all kinds of new uses of electricity in our “electric everything” future. The spillover effect is why Europe is introducing heat pumps at pace; why electric transportation solutions are charging ahead (to make a pun) by leaps and bounds in emerging markets. Hell, it is why we’ll likely produce our metals like steel with electricity (the number of e-arc furnaces went up 68% in one year!) and we’ll get magnesium from seawater in the not too distant future (just as we did in the 20th century until Dow gave the business away to hardrock mining and coal-powered smelting in China).

As to the naysayers, I hate to tell them this but batteries of all sorts are getting there too. We need chemical and heat batteries to store all the electricity to be generated by PV. And sure enough, solar-plus-storage now represents 93% of all the hybrid power plants being built in the USA. And there are over 400 so-called gigafactories planned in the world according to Benchmark Source, which provides intelligence for the energy transition.

How cheap can solar and battery power get?

What these sorts of growth curves mean to a technology manufactured in a factory setting (as opposed to a bespoke nuclear plant made in the field by highly specialized engineers) is that the product gets cheaper, and cheaper. And sure enough, batteries are screaming down the cost curve, whether it be Rondo Energy or Alterna capturing surplus electricity for heat or lithium ion battery makers. How low can it go!? Who knows? I used to think the cost of solar- powered and battery-stored (PV+) energy would plateau but there’s no sign of that. This is mostly likely because battery prices continue to fall and they are likely to get a lot cheaper still.

In conclusion, we have tools to fight climate change. We need to use the tools we’ve got. 

Let’s say our house was on fire — and I’d say what’s happening in Hawaii’s Lahaina, Canada’s YellowKnife and Greece’s Alexandroupolis is exactly that — I say let’s use the firehose we have to put out the flames. That’s solar power and battery storage. And we need more of it — now! Not in the next decade or even next year but this year. I’m not willing to wait for the perfect nozzle and firetruck. The tools we have are abundant, low-cost solar, some wind and a growing variety of batteries. Let’s lean in on it. 

Shine on! 

Written by

Danny Kennedy

Danny Kennedy is the CEO of New Energy Nexus, a clean energy startup incubator with chapters in the U.S., China, Southeast Asia, India and Uganda. He is also Managing Director of the California Clean Energy Fund overseeing the $25m for early-stage innovation companies and the $12m CalTestBed initiative. Kennedy co-founded Sungevity in 2007, the company that created remote solar design, and incubator fund Powerhouse in Oakland, CA. He is the author of Rooftop Revolution: How Solar Power Can Save Our Economy – and Our Planet – from Dirty Energy in 2012. Prior to being an entrepreneur and investor, he worked at Greenpeace on climate & energy.