Electrification
The Exponential View of Solar Energy
The Exponential View of Solar Energy
The human brain is terrible at comprehending exponential growth.
Much like the power of compound interest is a magical force for investors, it is also possible for innovations and technological breakthroughs to build off each other in the physical world, creating a similar compounding effect.
In this chart, we look at how solar technology has surpassed all expectations from an economics perspective, including those initially set by the International Energy Agency (IEA). Then later, we’ll also look at a new set of predictions for solar energy economics over the next 30 years.
Solar Energy: The Technological Overachiever
Back in 2010, the cost of utility-scale solar power ranged between $0.25-$0.37 per kWh. This meant it was at least three times as expensive as fossil fuels, and that solar was highly cost-inefficient at the time.
Going forward, most organizations projected a linear path for whittling down the cost of solar.
The IEA, for example, forecast that the global cost of solar would drop to roughly $0.22 per kWh by 2020. In reality, however, the price dropped to about one-fifth of that at $0.04 per kWh.
| Year | Actual (BNEF Global) - $ per kWh | 2010 Forecast (IEA) - $ per kWh |
|---|---|---|
| 2010 | $0.28 | $0.36 |
| 2020 | $0.04 | $0.22 |
| Change | -85.7% | -38.9% |
Almost all industry forecasters, including the IEA itself, missed the exponential factors at play.
Wright’s Law
Ramez Naam, the co-chair for energy and the environment at Singularity University, points out in his blog that the exponential decrease in solar costs stem from Wright’s Law:
For most technologies, every doubling of cumulative scale of production will lead to a fixed percentage decline in cost of the technology.
-Wright’s Law
Professor Naam says this occurs through “learning-by-doing”, and more specifically:
- Innovation that improves the technology itself
- Innovation that reduces the amount of labor, time, energy, and materials needed to produce the tech
Put another way, the more solar panels we make and the more we install—the better we get at the whole process over time. And once we’re making thousands or millions of panels, the costs come down exponentially, much like with lithium-ion batteries.
The Future of Solar Costs
Over the years, Naam has taken his own stab at forecasting the cost of solar energy into the future, leveraging the idea of Wright’s Law.
Here’s what he sees coming, based on using a 30% learning rate* for solar:
*The learning rate is the fixed percentage decline that occurs with every doubling of the scale of production.
Based on these projections, even the costliest of solar installations will be more economical than the cheapest of utility-scale fossil fuel plants. This means solar can basically go anywhere, and make sense from a cost perspective.
Underestimate Solar No More?
For fun, here’s a final look at how IEA projections have constantly underestimated solar installations, which are one of the key factors dictating the “learning rate” under Wright’s Law:
With solar energy costs plummeting to record lows and global installations continuing to ramp, it’s possible that solar forecasters may no longer forget about the exponential nature of solar production.
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How Much Land is Needed to Power the U.S. with Solar?
Solar power is essential for the clean energy transition, but how much land is needed to power the U.S. using solar panels?
How Much Land is Needed to Power the U.S. with Solar?
The Biden administration has set a goal of reaching 100% clean electricity throughout the U.S. by 2035, and solar power is a key for this American energy transition.
In the last decade alone, solar has experienced an average annual growth rate of 42% in the U.S. thanks to federal tax credits, declining costs, and increasing demand. It is projected that more than one in seven American homes will have a solar power system by 2030.
To put this trend into perspective, this graphic uses data from the United States Department of Energy to see how much land would be needed to power the entire country with solar panels.
Solar Panels Across the Ocean State
The U.S. has 102.9 gigawatts of total solar installed capacity which is equivalent to 965 square miles, roughly the size of the country’s smallest state, Rhode Island. This current solar capacity generates enough electricity to power 18.6 million American homes, which is nearly 13% of the nation’s households.
According to a report from the National Renewable Energy Laboratory, roughly 22,000 square miles of solar panel-filled land (about the size of Lake Michigan) would be required to power the entire country, including all 141 million households and businesses, based on 13-14% efficiency for solar modules.
Many solar panels, however, reach 20% efficiency, which could reduce the necessary area to just about 10,000 square miles, equivalent to the size of Lake Erie.
Solar Installations Spreading Across the States
Today, solar represents only 3% of the total U.S. electrical generation.
While California has traditionally dominated the market, other states like Florida and Texas are expanding rapidly, boosted by the residential market.
Large companies with clean energy goals such as Walmart, Apple, Target and Amazon have also helped push solar adoption to near-record levels in 2021.
Despite having a high installation cost, the technology tends to bring savings in the long term. An average-sized residential system has dropped from a price of $40,000 in 2010 to roughly $20,000 in 2020. Along with this, solar panels can save between $10,000-$30,000 over a 30-year lifetime.
Between land and rooftops, the United States has more than enough space to build all the solar panels necessary to power the country. Until then, the future of clean electricity will also depend on hydro, nuclear, geothermal, and wind energy.
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