A decade ago, the solar industry was almost nonexistent in the U.S. There was a large solar thermal power plant in the Mojave Desert that was completed in 1984; but between then and around 2008, there was almost no solar activity in the U.S.
That all changed as costs quickly dropped for solar energy, and solar panel prices fell. Today, solar power plants are competing with fossil fuels on a cost-per-kW-hr basis to provide energy to the grid, and homeowners are now beginning to create their own power from the sun. Quickly, solar energy is taking over the country.
Solar costs continue to drop like a rock
The biggest reason why solar energy is growing is because it is cost competitive with other energy sources. The chart below shows how fast system installation costs have fallen during the past four years, lowering solar energy's cost to below grid parity in sunny or high-energy-cost regions.
Costs have come so far that, today, SunPower is building a solar plant in Chile without a subsidy, and selling its power into the competitive electricity market. Here at home, SunPower and First Solar are selling power from new power plants to utilities for competitive wholesale prices. SolarCity is able to build residential installations and lease them to customers for $0 down, lower cost per kW-hr than what energy costs from the utility, and make a tidy profit in the process.
Costs are now falling to the point where solar energy made up 74% of the new electricity generation built in the U.S. in the first quarter of this year. That's up from nearly nothing just a few years ago.
The growth of solar energy
According to GTM Research, installations rose 41% in 2013, to 4,751 MW; in the first quarter of 2014, they grew 79%, to 1,330 MW.
As installations have grown, so has the amount of power coming from solar power plants. According to the Energy Information Administration, utility solar power hitting the grid will soon pass 2,000 MW-hrs per month, or enough to power over 67,000 homes, and is growing rapidly from there.
Solar energy is also accounting for more and more of the new electricity generating capacity in the U.S. each year. Solar energy accounted for nearly 22% of new power plants built last year, and that doesn't even include nearly 2 GW of distributed power on residential and solar rooftops.
In the first quarter of 2014, the percentage of new capacity grew to a whopping 74%, as costs continued to fall, and large plants came online.
The solar energy revolution has just begun
As fast as solar energy is growing, it's still just a sliver of the energy produced in the U.S. every day. You can see below that coal and natural gas both dwarf solar energy right now, meaning the upside for the industry is immense.
There's no reason to think that the solar energy industry won't keep cutting costs, and fossil fuel costs will continue to rise over time. That means that demand should continue to grow.
SunPower, First Solar, and SolarCity are just beginning to realize their potential, and experience the growth they're capable of. As they do, solar energy will continue to take over the U.S. and countries around the world, which is good news considering the benefits that come with homegrown clean energy.
Travis Hoium manages an account that owns shares of SunPower and personally is long shares and options in the stock. The Motley Fool recommends SolarCity. The Motley Fool owns shares of SolarCity. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.