Amid so much focus on plummeting oil prices, it’s worth noting the costs of solar continue dropping faster than forecasted–by 2030 it will be cheaper to build new solar capacity than to operate existing fossil fuel plants. Why? It all comes down to the “experience curve”:
Wright first observed that every doubling of scale led to a constant percentage reduction in cost in 1936, while studying the production costs of airplanes. Since Wright’s initial observation, the same power law relationship between cumulative production and cost has been found in other areas. For example, every doubling of cumulative Ford Model T production led to a roughly 16% decline in cost per unit.
The trajectory of solar has profound implications for investments in startups, real estate, and of course oil and natural gas.