A 200-acre solar farm now can generate significantly more electricity than that same amount of square footage would have generated 20 years ago. In this Fool Live segment from "The High Energy Show," recorded on Feb. 15, Motley Fool contributors Travis Hoium and Jason Hall discuss this and other ways that renewable energy is making rapid progress.
10 stocks we like better than Walmart
When our award-winning analyst team has an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Stock Advisor returns as of 2/14/21
Travis Hoium: I think this is an interesting chart. This is from NREL to show why we're even talking about hydrogen. There's a lot of numbers here and a lot of data, but just to give a quick overview top-left is showing the cost of residential solar over time from 2010-2020. It goes from about seven dollars and 50 cents per watt to two dollars and 71 cents per watt for context from an energy cost perspective that makes solar energy on your roof basically cost-effective versus buying solar from the grid particularly if you live in a state like California or Massachusetts where energy costs are pretty high. Same trends in commercial and utility scale.
The bottom line there is utility scale, you're getting costs as low as 94 cents per watt on utility-scale projects. That means that companies who own utility-scale solar projects can bid for energy contracts that are in the range of 2-3 cents per kilowatt hour which is competitive with natural gas plants. When utilities are looking at adding energy to their mix they have to look at cost reliability; all kinds of different factor. But if you're just looking at cost, solar energy is actually very competitive in the market. That's the reason that hydrogen has become a topic because if you can produce hydrogen in a cost-effective manner, now it becomes really interesting source of energy. Jason, you have anything to add there?
Jason Hall: I do. This is from NREL, right?
Travis Hoium: Correct.
Jason Hall: It's National Renewable Energy Laboratory just so people know, it's a federal government thing. This is a free resource you have access to nrel.gov, I just wanted to say that. One of the questions we're going to answer; I'm sure people are looking at this, and they're like, "Well, if the solar energy is so cheap, why would we want to spend money to take that electricity and use it to make hydrogen? What's the point?" We'll get to that in a minute, but the reality is that there are a lot of limitations to solar and to wind also. Wind is followed; hasn't been a sharp of a decline. There has been a decline in those costs as well.
But I think the key here is to understand that two amazing things have happened with solar particularly. That is the advancement of the technology, the efficiency, how much of the sunlight that hits the panel can actually be converted to electricity has continued to improve for the past 40 years. I think the past 10 or 15 years Travis have been remarkable at how much more solar power electricity panel is able to generate, that efficiency improvement is just incredible. At the same time the growth of scale, all of the hundreds of billions of dollars that have been thrown into increasing global capacity, finding more efficiencies, all the equipment that makes the solar panels getting better, and faster, and cheaper; the improvements in material science, the cost per watt is the key. It's those two things, you can get more energy density from the same. A 200-acre solar farm now can generate significantly more electricity than that same amount of square footage would have generated 20 years ago, and then you think about the cost decline coming down; the cost to deploy that assets and all of those benefits. It's absolutely remarkable and that's what's gotten us where we are today.
Travis Hoium: For context, this data is actually a little bit old.
Jason Hall: That's 2020.
Travis Hoium: I believe it's 1980 is when we start seeing. [laughs] The cost reduction in a solar panel per watt is over 99 percent cost reduction, that's insane. That's what I think is really hard as I've written about the solar industry specifically over the last decade. It's really hard to wrap your head around how energy changes when costs are falling in like that, because typically in the energy industry you actually see costs rise over time. It becomes harder to pull a barrel of oil out of the ground, it becomes harder to build a natural gas plant. It becomes more expensive generally to do everything in the energy industry. Wind and solar specifically have turned that on their head. It become more like the technology industry where you expect costs to come down over time, and so you're even pricing projects.
If you're building a project today that's going to come online in four years, you have to price that anticipating what your cost reductions are going to be in the meantime. That's more analogous to what you're doing in something like the chip industry than it is what you're doing in oil and gas. It flips the entire industry on its head. It also raises some interesting challenges that if you get a whole bunch of wind and solar on the market, the sun is not out all the time, the wind isn't blowing all the time, what do you do? You can't just turn the power plant on like you can with the natural gas plant, coal plant, even nuclear, so what do you do to store energy? That's one of the things that we're going to talk about that hydrogen plays an interesting role in.