Solar energy vs fossil fuels: How do they compare?

If you've been following the ongoing battle between solar energy vs. fossil fuels, it might seem like the predominant resources on which the global economy depends – oil, coal, and natural gas – will be completely phased out of existence in the near future. In reality, these resources still power most of the planet,  while renewable resources like solar and wind only contribute some two to three percent of global energy capacity. This reality check begs the following question: how does solar really stack up against fossil fuels, and why is there so much excitement about the growth of solar?

In terms of environmental impact, solar power is a much more optimal resource than fossil fuels. In terms of reliable application, coal, and natural gas have the edge. The ultimate way to compare solar energy to fossil fuels is by cost, where solar has quickly caught up with its non-renewable counterparts.

Comparing the cost of various energy sources is far from simple. Government subsidies play a major role in shaping the growth potential for a new power source, which means that making an "apples to apples" comparison of the costs of solar energy vs. fossil fuels side-by-side is a complicated task.

The nations of the Group of Twenty (G20) may have agreed to begin phasing out fossil fuels in 2009 due to their inefficient and polluting qualities, but not every G20 member is following through on its word. According to Oil Change International's report, while the G20 makes up more than 85% of global GDP, these top economies are spending $452 billion every year to subsidize fossil fuels.

Curious to know who is the largest contributor to fossil fuel subsidies in the world? The answer is right here at home. The United States has continued to subsidize fossil fuels at a higher rate than any other nation in the world, even under the environmentally progressive Obama Administration. With fossil fuel advocates already lined up for the incoming Trump Administration, the next era of American energy will likely continue on its same course of heavy fossil fuel subsidization.

When we compare the cost of solar energy vs. fossil fuels, we have to factor in the relative subsidies that are keeping costs low. In the case of solar power, the Investment Tax Credit (ITC) currently covers 26 percent of any U.S. solar installation.

While renewable energy skeptics have criticized the ITC for being a costly taxpayer-funded stimulus, the reality is that this short-lived subsidy represents only a small fraction of the money that U.S. taxpayers are spending each year to subsidize fossil fuels. Without any subsidies, solar is likely the cheapest energy source in the world, as demonstrated by record low power purchase agreements in countries like the United Arab Emirates and Chile. And solar's low-cost trajectory is likely to continue: unlike oil, gas, and coal, solar PV is a technology, not a fuel – meaning that its costs will continue to fall every year as research continues and technology improves.

The best way to compare solar energy and fossil fuels without subsidies is to examine global energy prices. Consider this: global coal prices have historically averaged 0.06 cents per kilowatt-hour (kWh). Until the past decade, no alternative energy resource came close to rivaling that price. Fossil fuel steam averages around 0.05 cents/kWh, and small-scale natural gas can go as low as 0.03 cents/kWh. It's no wonder that the world was shocked in 2016 when a major commercial solar installation bid an extremely low price for PV at 0.029 per kWh – effectively leveling the playing field between solar and fossil fuels' cheapest offerings.

As a result, the discussion of whether solar is cheaper than coal has already become an outdated debate. Today, energy companies are developing solar PV projects that can deliver energy at half the cost of coal, and that's without factoring in the costly negative impacts of coal – such as heavy carbon pollution, strip mining, and mountaintop removal.

The pro/con list of solar energy vs. fossil fuels is likely no surprise to you. Fossil fuels offer the benefit of being a reliable resource that offers near-constant availability. Whether you want to go for a drive at 3 a.m. or 3 p.m., there is nothing you have to consider as a consumer other than if your gas tank is full. However, many people are already aware of the detriments of gas, oil, and coal, including significant pollution and the reality that it is a scarce resource that will eventually run out.

The full list of fossil fuel "cons" is fairly well understood, save for one: the cost and detriment of creating its production plants. Simply put, the operating costs associated with producing fossil fuels dramatically outweigh the operating costs of producing solar energy.

Solar is easily installed on a rooftop surface or ground mount and harnesses an already-available resource (sunlight). By comparison, fossil fuel use requires the degradation of the earth as a means to a fuel's production. Many people are unaware that fossil fuels do not just create greenhouse gas emissions – the process of drilling also degrades and erodes the ground and pollutes the water supply.

Comparing fuel to technology: why the difference matters

The benefits of solar energy vs. fossil fuels offer a long list of reasons for a home or commercial property owner to consider. However, like fossil fuels, solar energy offers both pros and cons. On the positive front, the reality of solar as a source of green power and a non-pollutant is a major benefit for any mass energy source that will be produced at scale. Additionally, renewable resources are ideal because they replenish and are not scarce resources, which can create conflict, cause price volatility or even lead to war. This aspect of solar power is evident, but the fact that photovoltaics are a technology – not a fuel – is not.

While fuels are tangible commodities and must be produced, treated, and transported, solar PV is a technical innovation that involves silicon cells converting sunlight into energy at a highly efficient rate. This is why people are so excited about solar as an energy solution: fuels have an innovation cap, whereas technologies improve constantly over time.

You may be familiar with Moore's Law, observing that computer processing power doubles every year, which means that technological innovation will occur at an exponential rate over time. In turn, the costs of that same technology will also exponentially decrease over time.

A version of Moore's law can be applied to solar power as well, as illustrated by the "hockey stick" growth of PV that occurred in the past decade while prices plummeted. The true excitement lies in solar's potential – it is already cost-equivalent to fossil fuels without subsidies, and there are still cost-cutting opportunities to come through efficiency improvements.

The same principle simply cannot apply to a fuel that must be burned; the natural chemical process of a resource being burned cannot "innovate" over time. Like whale oil before it, the value proposition of today's fossil fuels peaked many decades ago. This doesn't mean the world economy will stop relying on them tomorrow, but as renewable energy technology continues to dramatically improve, the end of fossil fuels approaches.

The only real "con" to solar is that it isn't universally accessible yet. Today, not every roof type is ideal for solar, and the payback period is not low enough to attract every income bracket. Energy storage solutions must be improved for solar so that it can become an affordable energy option for all homeowners, 24 hours every day. In addition, although existing policies already make solar a smart investment with a high rate of return today, the technology needs to continue its quest towards ever-lower costs to win the battle of tomorrow.

Luckily, the solar industry is already on its way to overcoming these hurdles through advanced research and development to improve PV hardware, as well as smarter uses of software to easily bring buyers and sellers together. For those curious about what a solar installation would cost, this Solar Calculator can offer a personalized estimate based on your roof and local quotes in your area.