Solar power could transform electricity generation as fundamentally as shale transformed oil and gas, according to a new study by international energy research and consulting firm Wood MacKenzie.
“Just as shale extraction reconfigured oil and gas, no other technology is closer to transforming power markets than distributed and utility scale solar,” writes lead author Prajit Ghosh. The analysis was based on the net cost of new solar generation, which Wood MacKenzie sees falling in California through 2035, and the relative profitability of investing in solar, wind, or natural gas plants.
“Solar is hands-down the most profitable investment, but not necessarily for the reasons you would think,” Forbes reports. “Yes, the cost of solar is declining, but that is only a small part of the story. Solar is capturing revenues that would have accrued to natural gas generators.”
The risk, Pentland writes, is that gas-fired generation will still be needed to back up new solar capacity, but the shift in demand will cut into natural gas revenues. “Solar reduces both the price and the quantity of power sold by gas generators,” Ghosh said. “The risk is that gas plants—once they become uneconomic—will not be there as a backstop.”