Why Solar Keeps Being Underestimated - Dr. Felix Creutzig

There are competing ideas on the best technologies to rapidly decarbonize the energy system, as required to avoid dangerous climate change.

Some scenarios emphasize the role of carbon capture and storage to render coal- and gas-fired power plants more climate-friendly.  Others point to nuclear energy and a third group is more optimistic on renewable sources.

But it’s plausible that even these more optimistic outlooks have greatly underestimated the potential of solar power.  In an analysis, just published in Nature Energy, my colleagues and I ask why this has happened and how much solar could contribute to climate mitigation.

Solar scenarios
There is huge variability in renewables’ expected contribution to the future energy mix.   A scenario comparison study that fed into the Intergovernmental Panel on Climate Change (IPCC) found global solar electricity generation ranging from 8–35 exajoules (EJ) per year in 2050, in scenarios consistent with keeping temperatures below 2C.

This corresponds to around 5–17% of global electricity supply.   In contrast, the same study projects biomass-based energy supplying 50–90EJ per year in 2050.

Energy futures are typically analyzed in scenarios from the International Energy Agency (IEA) and energy system models deployed to inform the IPCC.  Importantly, IEA scenarios are often used to calibrate the IPCC scenarios.  The resulting projections indicate a large role for coal, coupled with capturing and storing CO2 underground, nuclear, and biomass.

But historically, these studies seem biased against solar. In our Nature Energy analysis, my colleagues and I show that projections by both the IEA (black lines in the chart, right) and Greenpeace (green lines) – which is certainly not guilty of an aversion to solar – consistently underestimated the real rate of deployment (red line).

Real growth of solar PV capacity (gigawatts, red line) has consistently outperformed projections from the IEA (black lines), the German Advisory Council on Global Change (WGBU, blue line) and even Greenpeace (green lines). 

The IEA, a key reference for all modelers, predicted growth rates of 16-32% per year between 1998 and 2010.  In fact real growth ranged from 20-72%, with the annual average at 38%. This difference caused huge under-predictions of how much solar would be installed.

While an average growth rate of 19% leads to 470% growth over 10 years, a growth rate of 38% can produce a 2,500% increase in capacity in a decade.  Even the most optimistic scenarios, published by Greenpeace from 2007–2010, underestimated solar growth.  Initially high growth rates were expected to fall to 24-32% per year, a rate that has been surpassed by real-world development.

Models and scenarios have underestimated the growth of solar capacity not once, but repeatedly, so that the gap between prediction and reality fails to narrow down.

Missing models
Why is there such a gap between expectation and reality?  Admittedly, solar’s growth, starting from a minuscule base, has been spectacular.  Few technologies have taken hold so fast.

Consumers proved willing to pay a premium for green technology on their own rooftops, while ambitious policy instruments like Germany’s Feed-in-Tariff and California’s Renewable Portfolio Standard pushed renewables much faster than anticipated.

These dynamics have so far been poorly captured by energy system models, which tended to represent the complex mix of different climate policies in a simplified and stylized way – for example, as a single, economy-wide carbon price.  These models also assume that society will always seek to minimize costs, ignoring the potential role of personal preferences.

Most importantly, faster initial deployment caused costs to decline rapidly and consistently.  In fact, solar module costs decreased by around 23% with each doubling in installed capacity, a phenomenon dubbed “technological learning“.  Traditionally, technological learning has been inadequately reflected in many models.

The levelized costs of solar are now undercutting fossil fuels in competitive markets.  In locations as diverse as Dubai, Mexico, and Chile, the best solar PV projects are selling power at less than $0.03 per kilowatt hour (kWh).  In India or Zambia, some PV projects are producing power at or below $0.06/kWh, out-competing coal.

One final factor explaining why models have underestimated solar is their cost projections for other technologies.  As a result, they have not only overestimated the costs of solar, they have also been too optimistic about cost reductions for the alternatives or even failed to foresee cost increases.
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As solar becomes more central to energy supplies, battery systems and storage become increasingly important. Some states like Vermont already deploy Tesla’s home battery systems to help stabilize the grid. And in Minnesota a study suggests solar power together with battery storage is a more cost effective way to balance the grid than natural gas.

Battery costs are declining even faster than those of solar power.  That is a fortunate coincidence, as storage costs rather than photovoltaic costs will be the determining factor for solar investments.  Another new study, also just published in Nature Energy, finds that a combination of solar, wind, and battery storage can plausibly directly compete with fossil-fuel based electricity options.

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