The market for solar power is growing faster than ever, but profitability has been lagging. The keys to improvement are better capital and operational efficiency.
Solar energy is becoming a force to be reckoned with.
Last year, China and the United States installed a record 15 and 7.5 gigawatts (GW) of solar, respectively. This year, the world could install as much as 66 GW.1 In 2015, investors poured $161 billion of capital into solar, the largest amount for any single power source.2 In China, 43 GW of capacity have been installed, more than in any other nation; India aspires to build 100 GW of solar capacity by 2022. Across the sun-drenched Middle East, investment rose from $160 million in 2010 to about $3.5 billion in 2015.3
The world is building more solar-power plants because they are getting cheaper. Since 2009, the total installed costs of solar have fallen by as much as 70 percent around the world. New power-purchase agreements frequently fall below $100 per megawatt-hour, with some reaching less than $30.4 That price puts solar at or below the cost of a new natural-gas plant.
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This article was originally published on McKinsey Sustainability on October 18th, 2016. Link to the original article is here: https://www.mckinsey.com/capabilities/sustainability/our-insights/how-solar-energy-can-finally-create-value
