For new power plants built from scratch, solar is rapidly becoming the cheapest energy source in many parts of the world, according to data collected by the global research organization Bloomberg New Energy Finance.
The BNEF report looks at the costs of new energy capacity in 58 emerging-market economies in Asia, Africa and Latin America, including countries such as China, India and Mexico. It found that the price of solar dropped from $6 million per megawatt in 2010 to $1.65 million per MW in the first quarter of 2016. For the first time, solar plants are now slightly less expensive to build than wind power ($1.66 million per MW). Those numbers represent the complete cost of building an energy project on an installed per-MW basis.
As a result of the drop in solar costs, in countries such as India and Chile, solar power is now being offered to users at about half the price of coal per MW/hour.
Solar costs are dropping in part because because solar panels are becoming less and less expensive to manufacture, and it’s easier to install large numbers of them than to build wind farms or plants that burn fossil fuel, according to a recent Fortune article.
“Solar prices are dropping everywhere, so this isn’t an emerging market-only trend,” Ethan Zindler, head of U.S. policy analysis at BNEF, said in an email. “Still, it is notable that in these countries where financing can be harder to secure, solar is now very much in the running with wind and often with coal or gas.”
Solar is most competitive in countries that have “exceptionally sunny conditions,” Zinder said. Many parts of Asia, Africa and Latin America rank high in direct normal irradiation, a measure of their potential to generate electricity from the sun.
Zinder said that costs also are dropping because companies are looking to establish themselves in markets where there is ample potential for growth.
In terms of the impact on greenhouse gas emissions, the report notes that both India and China (two of the four top CO2 producers along with United States and EU) have committed to reductions relative to GDP, which actually would allow them to increase their emissions significantly and still technically meet goals laid out in the 2015 Paris climate treaty.
In the U.S., and Europe, which have areas where the sunlight isn’t as strong, solar is still coming in behind wind, cost-wise. Both sources are cheaper to build new than coal or nuclear but still have a long way to go to catch up with natural gas, according to U.S. Energy Information Administration data.
“As for the US, we’ve already seen certain places here where wind power is the lowest-cost supplier of power,” Zindler wrote. Most often, this is in parts of the country with the very strongest winds and where projects can produce in excess of 50% of the time. Oklahoma and west Texas are regions where this is most prevalent.