The price of solar energy just did something amazing

I don’t write much about energy. I love economics and policy, but there’s only so many fields you can get excited about. I normally prefer to focus on transport, cities, the labour market, taxation, trade and technology.

But the developments in solar energy make the field impossible to ignore.

solar price
Source: Bloomberg

The price of solar energy is now lower than its competitors throughout most of the US. In fact, there are 36 states that are either sunny enough (California) or far enough away from the oil (Vermont) that solar will be the cheapest choice in 2016.

In India, solar is now cheaper than importing Australian coal.

In Victoria, the feed-in tariff paid by government for electricity generated on people’s roofs is 6.2c per Kilowatt Hour. Meanwhile AGL is charging 22c/ kilowatt hour for their product.

The potential of solar is enormous.

Currently, solar provides around 1 per cent of Australia’s energy. But we have the rays to make a lot more:

Kilowatt hours per square metre. Source Wikipedia
Kilowatt hours per square metre. Source Wikipedia

The long-time global leader in solar power is Germany. They use the sun for 3 per cent of their electricity needs. Here’s that same* map for them. Note the scale is different. Germany’s red is equivalent to Australia’s light green.

germany solar

Obviously solar is not yet dominant in Australia, and the technology is far from settled..

Even the basics can improve a lot more. For example, placement of panels. The traditional choice has been between having them fixed and having them move to chase the sun. The former is generally preferred for it simplicity.

When fixing them, obviously you should point them at the midday sun. Right? Apparently not. The smartest thing to do is point them at the sunset.  The point is not to maximise supply, but to maximise supply when demand is highest – i.e. people get home from work. The late afternoon is when traditional coal-burning power stations ramp up, and when solar can best counter the spike in prices.

The other problem with solar panels that all point at the midday sun is packing them in. Solar arrays have to use more space because the panel in front casts a shadow on on the one behind. A british academic reckons east and west facing panels can be packed in twice as densely.

Battery technology also needs to improve for solar to manage the evenings and cloudy days.

You can see the impact of clouds on this super-cool interactive and animated live map that shows the share of Australian electricity demand being met by solar panels. As I type this at 9am, Queensland is winning with 5 per cent of electricity coming from solar. Click to play with it.

Solar energy may need a boost from government, but the policy space around energy is a hot mess.

I wanted to say something smart about it, but between The Renewable Energy Target (which the government is trying to change) and the Clean Energy Finance Council, the Clean Energy Regulator, the Australian Renewable Energy Agency, feed-in tariffs and solar subsidies, the Solar Cities Program and Direct Action, I’m not sure if we end up with too little policy or not enough.

But overall I note that Australia lacks large-scale solar, which doesn’t seem ideal.

I suspect economies of scale mean individuals putting their own solar panels on their roofs won’t be the dominant trend for ever. Installation costs are pretty significant in the life-span of a solar panel. Furthermore, homes mainly use energy at night.

Costs will fall if big organisations can do solar at scale on the roofs of industrial buildings and in areas where land is cheap. Like this massive installation in rural NSW.

AGL Nyngan


I look forward to a day when you drive the Australian outback and know the bloke leaning on a fence post and chewing a stick of grass is as likely to be an electrical engineer as a drover.

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Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

4 thoughts on “The price of solar energy just did something amazing”

  1. Well I think we can be sure of one thing, Australia will be a follower and we will import the solutions after other countries develop them. We are at a high point of incompetence in government and the current generation of leaders and administrators cannot face up to the changing reality.

    Liked by 1 person

  2. The reason we don’t have much large scale solar is because it is more expensive than domestic solar. When you install panels over rural land you still need to buy the land but you also need to build a transmission line to connect with the grid, build a fence around the panels to stop theft/vandalism and employ security and maintenance staff. For domestic solar, the homeowner provides all these services and no transmission line is needed because the power is consumed where it is produced.


    1. This is interesting. I guess the implication is that unlike turbines, there are not economies of scale in PV. Therefore the most important costs are rent and transmission costs. I know that when they do solar in the outback it’s often using mirrors to concentrate the sun’s rays, boil water and run a turbine. But I’m not sure how that compares, efficiency wise, with PV cells. Maybe more posts needed on this topic!


      1. The idea of using solar thermal (boiling water as you put it) is not so muc for thermal efficiency but for economic return and, most importantly, because it can produce electricity at night. Most of them melt salt of some combination due to the higher temperatures allowed at atmospheric pressures. You can also consider the engineering involved. Solar thermal uses pretty much the same engineering and construction techniques used in a coal plant. PV is completely different skill and technology steps.
        So you can see, solar thermal has some huge advantages at scale.
        That said PV, generally, has a higher thermal efficiency, and storage is quite possible, at scale, with molten salt batteries (sodium sulfur) so will one day be the obvious choice for a new breed of engineers and tradesmen


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