solarvscoal_bigWhen it comes to renewable energy, we have all heard the ongoing debate about its sustainability, efficiency, and most importantly, its potential as an alternative energy source in response to the depreciating state of the environment and the depletion of finite resources. However, new claims that say the cost of producing solar energy could rival that of coal could very well propel renewable energy as a leading energy source in the world.

Chief Executive of the global solar power plant builder Belectric, Bernhard Beck, recently proposed valid arguments for the future of the solar power market with a strong emphasis on its affordability. Solar power has come a long way in developing its technology and cost, something that energy providers need to recognize, as Beck suggests, in order to see the market grow. The International Energy Agency (IEA), projects that power will eventually cost less than 10 euro cents per kWh by the year 2020. I believe this will be a significant argument for using renewable energy going forward. However how does the cost of solar energy fare in comparison to coal?

The cost of solar power continues to decrease as production costs drop. Other factors such as technological advancements and rising global demand are contributing to this decrease also. The IEA claims that “renewable energy may supply more electricity than nuclear reactors or natural gas by 2016.”

Even the world’s biggest coal company is turning to solar power to lower its utility bill (Yale), an indication that the energy industry is becoming more accepting of solar energy. Policy incentives, such as the Production Tax Credits in the U.S., have also contributed to the rise in renewables.

However it is important to note various factors that may be hindering its growth, such as increasing rates of duties and tariffs, subsidy reductions and general uncertainty about the government’s support for new technology (Bloomberg).

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Figure 1: ICE Coal Futures July 2011 – July 2013. Graph created by ZEMA.

Coal on the other hand is expected to come close to surpassing oil as the world’s leading energy source by 2017 (IEA). A steady decrease in prices may be a contributing factor to its growth (see Figure 1) However other factors should also be taken into consideration, such as new pollution regulations enforced by U.S. President Obama. Costly new emission control requirements for the coal industry may also be negatively affecting coal production costs (Washington Post). While cost is an important determining factor when it comes to energy, a significant drawback may be the differences in productivity with some findings noting low productivity levels for solar energy.

There are many other factors to consider when it comes to future costs for both solar and coal that extend well beyond what I’ve discussed. I think a good question to ask is what this ultimately means for the future of the energy industry. Will renewable energy continue its progressions towards becoming a true contender in the power mix?

If we take a look at China, it is quickly becoming a global leader in the emerging solar energy market. Bloomberg notes “emerging markets will be the largest drivers of the growth for renewables in the next few years, with China accounting for 40 percent, or about 310 gigawatts of new capacity.” What’s also worth mentioning is the country’s heavy consumption of coal, almost at a par with global consumption (EIA). With predictions of renewable energy and coal to be the top energy sources in the future, it will be interesting to follow China’s growth, as it continues to be a major player in the energy industry.

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Graph created by Karen Hung.