Solar’s levelized cost of electricity will rise to $30/MWh in 2050 as global capacity increases, DNV said.
The global risk management company DNV has offered its annual overview of the global energy transition. It put solar energy in the spotlight as a pioneer of renewable energy sources.
“In 2050, solar electricity will be in an undisputed position as the cheapest source of new electricity worldwide,” DNV said.
As the world moves towards carbon dioxide-free power generation, DNV expects the share of coal to decrease by 4% and gas by 8% by the middle of the century. As the global fossil fuel industry becomes a metaphorical fossil itself, DNV expects the world’s energy mix to be 70% dependent on variable renewables such as solar and wind power. Fossil fuels account for slightly more than 10 percent of the energy mix at that time.
On this path, The solar capacity will increase 22 times according to DNV’s energy transition vision. The company said it sees variable renewables as the cheapest and fastest path to both carbon reduction and energy security.
Costs are expected to improve by the middle of the decade. The global weighted average levelized cost of energy (LCOE) for solar is currently around $50/MWh for solar and $120/MWh for additional solar storage. DNV expects solar LCOE to drop to $30/MWh by mid-century, with some individual projects costing well below $20/MWh.
“The main driver for this drop in LCOE is the reduction in unit investment costs, which are now around $900 per kW globally on average,” DNV said. “This will drop significantly as solar PV installation doubles globally to reach $650 per kW in 2050.”
Currently, the level costs of solar energy and storage are currently more than double the cost of stand-alone solar energy. Continued declines in battery prices will close the gap to around 50 percent by mid-century, DNV said.
Despite its higher cost, solar plus storage has an advantage in recovery cost. Storage plants can charge their batteries when there is plenty of sunlight during the day and sell the stored electricity when the price is high. DNV said that by 2038, the price advantage of solar and storage projects will outweigh the cost disadvantage, making these projects even more attractive.
“PV and storage systems are designed as a ‘package’ that can produce energy on demand, just like hydro, nuclear or combustion plants,” DNV said.
In 10 years, DNV said about 20% of solar projects will be built with its own storage, and by mid-century such projects will reach about 50%.
“By mid-century, the total installed capacity will be 9.5 TW for solar energy and 5 TW for solar energy and storage. The resulting solar capacity of 14.5 TW is 24 times greater than in 2020,” DNV said. “While solar will account for 54 percent of installed capacity at mid-century, it will account for 30 percent of global grid electricity generation.”
DNV’s complete energy transition view can be found here.