Solar’s costs continue to fall at the rate of about 24-28 per cent for each doubling of production capacity, or roughly twice the pace of wind, Mr Quong said.
“Given the inexpensive nature of the technology and the limited penetration on a generation basis, BNEF expects the market to continue to grow, with 140-178GW of new solar to be built in 2022,” the consultancy said in a new report.
While growing rapidly, solar’s generation output remains only a fraction of total electricity because of its lower so-called capacity factor than fossil-fuel plants, which operate day and night. Last year, solar generated about 2.7 per cent of electricity compared with 0.16 per cent a decade earlier, BNEF said.
The coronavirus pandemic initially disrupted solar panel output but the industry has since bounced back, faster than wind and other power plant production, Mr Quong said.
“It’s been far more positive than we thought at the start of COVID-19,” he said.
For Australia, a rapid expansion of new wind and solar investments in recent years will slow sharply this year as the Renewable Energy Target for 2020 is already filled and because uncertainty over energy policy is deterring new spending.
New solar and wind farm capacity in Australia in the first half of 2020 totaled 514 megawatts, or only about one-fifth of the 2525MW installed in the first half of 2018, BNEF said.
“2020 was always going to be a tough year for new renewable energy investment in Australia,” Mr Quong said.
Still, state-based auction schemes such as in Victoria, Queensland and the ACT have provided some certainty that is supporting new wind and solar farms. NSW has also been streamlining investment plans in three large new renewable energy zones.
Another deterrent for investment in new power generation in Australia has been the steep dive in wholesale electricity prices. Average power prices were down more than 60 per cent in South Australia in the first half of 2020 compared with a year earlier, with Victoria reporting a 52 per cent drop and NSW 19 per cent, BNEF said.
Investors, though, would likely have even less incentive to invest in new coal or gas-fired power plant. Such projects, particularly coal, would be “incredibly risky” in part because future efforts to decarbonise the economy could see such assets stranded well before their 40-60 year design life, Mr Quong said.
New solar panels had dropped about 90-95 per cent in cost since Australia last built a new coal fired power station a decade ago, and “those costs are going to continue to fall in the future,” he said.
Peter Hannam writes on environment issues for The Sydney Morning Herald and The Age.