Will the switch to an energy system dominated by solar PV cost the world money?

A research paper by Chris Goodall

Will the switch to an energy system dominated by solar PV cost the world money? (Link to PDF)


What follows is a thought experiment. I compare two scenarios to decide which will cost more. In one, fossil fuels continue to provide most of the world’s power and solar photovoltaics do not provide any more electricity than at present. In the second, solar PV grows very rapidly and provides the world with all its energy, not just electricity, by 2041. Each year, the amount of cash spent on fossil fuel energy each year is reduced by this switch. The experiment tries to answer the question ‘which scenario costs more?’.[1] Is decarbonisation costly, or financially beneficial?

For the first scenario, I estimate the total cost of wholesale oil, gas and coal from now until 2041. In the second, I add the total amount of capital invested in solar to the gradually lowering expenditure on fossil fuels, as a result of increased PV, to get an estimate of total expenditures, running and capital, on energy. With these figures I can provide an estimate of whether a fast switch to solar will cut the world’s expenditure on energy or not. As far as I know, no-one else has ever done this calculation.

The comparison shows that if the world makes a sustained push for growth of solar photovoltaics the total global cost of energy between now and 2041, including all the capital spent on PV, will be slightly less than if the globe continues to use fossil fuels. As time passes after 2041, the balance will swing even further in favour of PV because solar panels already installed will continue to provide near-free electricity for many years whereas fossil fuels will, in contrast, cost money.[2]

The critical assumptions going in to this analysis are a) that PV continues to grow at an average of 40% a year and b) that the rate of cost reduction of solar energy remains at 20% for every doubling of accumulated production and, of course, that fossil fuel prices remain at the February 2016 level. Any rise from today’s depressed levels will increase the benefit of the switch.

The experiment also assumes that one terawatt of fossil fuels needs one terawatt of PV power to replace it. This may be unfair to PV because it delivers a high quality energy (electricity) whereas most of the energy value in, say, coal, is lost in the power station in the process of conversion to electricity. Nevertheless, for the reasons given in the paper, I thought it appropriately conservative to assume that the amount of PV electricity needed is the same as the gross energy value of all the fossil fuels used.

The idea that solar PV could replace all use of fossil fuels sometimes seems absurd. What will happen at night or in mid-winter in high latitudes? But, as is increasingly clear, demand response will cut night demand, overnight storage will be provided by batteries and longer term buffers will come through the conversion of solar electricity to renewable gases and liquid fuels.

Reactions to this draft will be most gratefully received.

[1] I use PV as the main competitor to fossil fuels because I believe photovoltaics will become very clearly the cheapest and easiest way to generate electricity within a few years. But the arguments in this paper could also be made for wind energy. Or PV and wind could be combined to create the energy transition.

[2] I am very deeply indebted to Professor Nick Jelley of Oxford University for his mathematical work modelling PV growth and creating the ‘S’ curve. This thought experiment would have been wholly impossible without his help. Errors are mine, of course.