Solar energy is free, and more of its energy hits the Earth in a single day than what is used in an entire year. Solar panels have been designed to capture it – and these run-on sunlight not sunshine, making solar a proven and stable technology even in countries like the UK, that sees cloudy skies for much of the year.
The “levelized cost of energy” (LCOE) is a measure used to understand the full life cycle cost of producing electricity from different sources, looking at the production of the technology (or power plant), fuel, operation, and maintenance.
Using this measure, we can observe that the LCOE for solar has dropped by about 90% since 2010. It is now at a lower LCOE than producing electricity from gas, as PV panels have benefited from continuous efficiency innovation.
The days of needing subsidies for solar farms to be economically viable seem to be over. This should provide a strong tailwind to the scale-up of solar in general and companies involved in its value chain.
Another tailwind is our global need to meet our climate goals and decarbonise the energy mix, reflected in incoming net-zero regulation and increased electrification (for example, electric vehicles replacing petrol cars). Solar energy is a low carbon technology with no end-source emissions. It is predicted that our energy mix will decarbonise dramatically, with solar growing from 11% of global electricity capacity to make up 38% in 2050 and growing about 9 times in absolute terms.
Additionally, solar can bring about significant co-benefits. Despite bad news surrounding solar farms taking up farmland, in reality these only cover 0.1% of UK land, with golf courses taking up more space even if we expanded solar five-fold. It is very efficient and due to its low-impact and quiet state, solar farms can produce fantastic biodiversity benefits. There are also successful examples of it being used in collaboration with local farmers.
Lastly, solar presents a short-term fix to energy security that doesn’t harm our long-term climate plans. Solar can be built and operational in as little as three months, while a gas fired power plant takes minimum one year, and coal 4-10 years. In solving the current energy crisis and preventing those in the future, solar can play a vital part.
The EQ portfolios are set up to support the growth of this low carbon energy source, and benefit from its growth opportunities.