Solar Costs Now Lower Than Coal and Even Natural Gas

Solar costs have been falling so fast over the last few years that we understand if you haven’t kept up. But a new report from the renowned financial firm Lazard marks a definitive turning point: Solar energy is more cost effective than traditional power sources even without tax subsidies.

The levelized cost of utility-scale solar is now as low as $36 per megawatt hour, putting it exactly on par with the marginal cost of coal. Factor in the Investment Tax Credit and the case becomes even more compelling.

Of note in the report, solar prices are falling faster than any other energy source — even other renewables. Solar prices have dropped 88 percent over the last nine years, including a 13 percent drop just in the past year, according to the new data. This is largely due to technological improvements and decreasing prices for solar system components.

Although some tax credits are set to ramp down over the next few years, Lazard says solar energy will still hold a cost advantage over traditional power sources in many circumstances.

In other words, it is now cheaper in many parts of the U.S. to build a new utility-scale solar project than to continue to run an existing fossil plant.

But don’t just take it from us – here’s what they had to say:

“Although diversified energy resources are still required for a modern grid, we have reached an inflection point where, in some cases, it is more cost effective to build and operate new alternative energy projects than to maintain existing conventional generation plants” said George Bilicic, Vice Chairman and Global Head of Lazard’s Power, Energy & Infrastructure Group.

The Lazard analysis explores the levelized cost of energy (LCOE) for various generation technologies and is widely considered the most all-encompassing cost measurement, as it accounts for the costs of building, running, supplying and maintaining different types of energy facilities.

And they’re not alone in their findings.

The University of Texas at Austin’s Energy Institute last month published research showing that solar is the cheapest source of electricity in swaths of the country. “Solar power is the cheapest technology in much of the Southwest, and, based on updated data, also in the eastern and northern regions of the U.S.,” the report said.

These reports are just the latest evidence that solar is the smart choice not only for consumers, but also the utilities that deliver their power.

Today, the U.S. has more than 58 gigawatts of total installed solar capacity. That’s enough to power 11 million American homes. As decreasing costs and improved efficiency continue to make solar the smartest energy option, U.S solar capacity is projected to more than double over the next five years — a forecast that we expect will only improve given these drastic price declines.