Solar at 6 to 8 cents per kilowatt-hour will capture enormous electricity market share and make central station power plants a declining business, as David Crane, the CEO of NRG that owns power plants said in Virginia on October 18th.
But will solar hit those price points? And when?
Solar is at the 10 cents per kilowatt-hour price in Arizona, after a 30% to 40% decline in the last 12 months. Another decline of 30% to 40% and solar would be at 6 to 7 cents per kilowatt-hour.
Another 30% to 40% decline in solar prices is insured, since solar prices have been declining steadily for 20 years, and the pace of lower prices is quickening due to economies of scale and large investments in the industry. A rule of thumb is that solar prices decline 1% per month and that the efficiency of panels increases by 0.5% per year. Lower prices but more power production year after year.
Projecting an annual decline in solar pricing of 6% to 12% is reasonable and would mean in about 4 or less years solar will be in the 6 to 8 cents per kilowatt-hour where it is a deeply disruptive, creatively destroying resource. The math guarantees solar soon will be as big as shale gas is today.