Summary: Solar is probably going to become our core renewable electricity generation technology. It's simple, it works in lots of situations, and it's getting cheaper. One challenge we need to face up to is 'too much of a good thing', when our solar panels all produce their maximum output at the same time, pushing spot electricity prices down close to zero.
Why this is important: While the marginal cost of producing the extra unit of electricity from a solar panel is very low (the raw materials are free), the upfront capital cost is not trivial. Investors still need to earn a fair return on their investment, or the money will not flow. And financial return is harder to deliver if revenues frequently head toward zero. The Duck curve helps us to understand this, and it helps us start to think about solutions. And be assured, solutions do exist.
The big theme: The twin aims of 'electrify everything possible' and 'make our electricity green' lie at the heart of most countries plans to achieve net zero and to decarbonise their economies. But, delivering on this is not just a case of building more wind and solar (plus geothermal and hydro). Our current electricity grid, and how we manage our electricity flows, is based on a system that Thomas Edison (arguably the father of electricity for all) would recognise, and he died in 1931. There are a lot of changes coming, which we need to anticipate and plan for. The electricity grid of the future will look very different.
And before you ask - yes, there are ducks involved. A useful tool in understanding what higher levels of solar generation can mean for the demand for electricity from other sources is called the duck curve. And yes, it does look a bit like a duck.
In some countries/regions there is so much solar generation during the sunny part of the day, that very little other electricity supply is needed. And this is going to happen more and more. This might sound like a good thing. After all solar is low carbon, just the type of electricity we need more of. And it is good, but this also creates challenges.
The first one we already know - too much solar supply can, if not properly managed, push the price that the solar generating company gets down close to, or even below zero. This is something that many states in Australia are very familiar with. The other challenge is that the steep ramp up in supply needed in the early evening puts real pressure on grid stability.
Why this is important
If we are going to use renewables, especially solar, to decarbonise our electricity generation system, we will need a lot more of them. We need to massively scale up from the c. 12% of (global) electricity generation we saw in 2022, to closer to 65-70%. For that to happen, investors and companies need to believe that investing in renewables makes good long term financial sense.
The easier bit of that analysis is the cost to build, and the expected total demand. But, what price will solar electricity sell at ? If it's too cheap, we cannot expect investors to earn a fair financial return - which means not enough new capacity will get built (or subsidies for ever).