Solar electricity will be cheaper than any other source of electricity by 2020.
There, you heard it from me first. This claim is now more believable than ever.
Signs are everywhere that this will be reality within our lifetime. The reason is very simple, and it has nothing to do with the Environmental Protection Agency or environmentalists. It has to do with good old capitalism.
First, some basic, but important, data.
You can go crazy trying to determine the cost of electricity from coal (try the Internet), but since I have seen some utility bills from large companies at about 3.3 cents per kilowatt hour, it is quite safe to assume that — under most circumstances — it is less than 3 cents, including the transmission to the point of consumption.
More importantly, it is safe to assume that it is not going down. Kentucky residential customers pay about 8 cents per kWh and they know it has not been going down.
Today the solar industry can install utility-size systems that over their 40-year lifetime will produce electricity at a cost of 10 cents per kWh, down from about 18 per kWh about a year ago.
The reasons for this sudden decline are several, but the two main factors are:
■ European countries have lowered their feed-in-tariffs, the amount of money European utilities promise to pay for solar electricity, making them less attractive to investors
■ China is investing huge amounts of money in solar production plants. This has created an oversupply situation in the photovoltaic industry, sending the price of PV modules tumbling.
The cost of solar was going down before these two recent events and it will continue going down, most likely in fits and starts. Eventually, it will halve again, and again and again. I predict that by 2020, the cost of a solar kWh will be 2.2 cents, delivered.
Many in the industry make similar predictions. Forward thinking companies and governments all over the world are spending hundreds of millions of dollars to install solar systems. Once the cost of solar electricity reaches "grid-parity," the point where solar electricity is cheaper than the alternatives, they will spend hundreds of billions of dollars.
Solar has all kind of neat advantages. It produces electricity without water, without ashes and without various unwanted gases and poisons. But as we have seen, for many people those advantages are not enough. The decisive advantage of solar is that its cost is going down.
The implications are far reaching. Countries and states that do not act now to build a solar energy infrastructure, including knowledgeable engineers, qualified installers, modern transmission lines and even electricity storage, will find themselves with the highest electrical bills in less than 10 years.
Some say that coal is already the expensive solution today because of its externalities: its pollutions of all kind and their consequences. What seems to be the source of cheap electricity today will no longer be the source of cheap electricity tomorrow, no matter how you do the math and no matter how you account for externalities.
Some people say we cannot afford to rely on more expensive renewable energy. Their message — that renewable energy is pushing the price of electricity up — is the exact opposite of what is going to happen. Sticking with the status quo is what is going to cause the cost of electricity to increase the most. Investing now in renewable energy will create the cheapest electricity in the near term.
Groups involved with the Kentucky Sustainable Energy Alliance (KySEA) and the Kentucky Solar Energy Society (KySES) are finally making some progress in Frankfort waking up our legislators to this reality. They are advocating a bill that would progressively increase the portion of clean energy that utilities purchase and implement policies — which states including Ohio, North Carolina and New Jersey have already adopted — to grow Kentucky's clean-energy market, clean-energy expertise and clean-energy jobs.