A transformation is happening in global energy markets that’s worth noting as 2016 comes to an end: Solar power, for the first time, is becoming the cheapest form of new electricity.
This has happened in isolated projects in the past: an especially competitive auction in the Middle East, for example, resulting in record-cheap solar costs. But now unsubsidized solar is beginning to outcompete coal and natural gas on a larger scale, and notably, new solar projects in emerging markets are costing less to build than wind projects, according to fresh data from Bloomberg New Energy Finance.
The chart below shows the average cost of new wind and solar from 58 emerging-market economies, including China, India, and Brazil. While solar was bound to fall below wind eventually, given its steeper price declines, few predicted it would happen this soon.
“Solar investment has gone from nothing—literally nothing—like five years ago to quite a lot,” said Ethan Zindler, head of U.S. policy analysis at BNEF. “A huge part of this story is China, which has been rapidly deploying solar” and helping other countries finance their own projects.
This year has seen a remarkable run for solar power. Auctions, where private companies compete for massive contracts to provide electricity, established record after record for cheap solar power. It started with a contract in January to produce electricity for $64 per megawatt-hour in India; then a deal in August pegging $29.10 per megawatt hour in Chile. That’s record-cheap electricity—roughly half the price of competing coal power.
“Renewables are robustly entering the era of undercutting” fossil fuel prices, BNEF chairman Michael Liebreich said in a note to clients this week.
Those are new contracts, but plenty of projects are reaching completion this year, too. When all the 2016 completions are tallied in coming months, it’s likely that the total amount of solar photovoltaics added globally will exceed that of wind for the first time. The latest BNEF projections call for 70 gigawatts of newly installed solar in 2016 compared with 59 gigawatts of wind.