Solar power is projected to become the world’s largest source of electricity within the next decade, overtaking coal, oil, and natural gas as falling costs continue driving rapid global adoption, according to a new report from BloombergNEF.
The report said the transition is expected to occur largely for economic reasons rather than because of government mandates, with solar energy increasingly becoming the lowest-cost option for electricity generation worldwide.
“Solar is winning the race,” Matthias Kimmel, head of energy economics at BloombergNEF, told TechCrunch.
The shift is expected to occur alongside a major increase in global electricity demand fueled by AI infrastructure, data centers, and the electrification of transportation and industrial systems.
Falling Costs Drive Rapid Solar Expansion
BloombergNEF said solar power’s growth has accelerated because of continued declines in manufacturing and deployment costs.
The report highlighted Pakistan as one example, noting the country added 25 gigawatts of solar capacity over the last two years after natural gas prices surged following Russia’s invasion of Ukraine.
According to BloombergNEF, solar costs are expected to decline another 30% by 2035, further improving the technology’s competitiveness against coal and natural gas generation.
By 2050, the report projects that solar panels will generate more than twice as much electricity globally as natural gas.
Kimmel said solar prices have fallen unusually quickly because of two primary factors: China’s industrial policies supporting solar manufacturing and the economies of scale created through mass production.
“Costs fall with every doubling of installed capacity,” Kimmel said. “In the case of solar, it has gone even faster than that.”
China has heavily subsidized solar manufacturers and expanded production capacity, contributing to lower panel prices worldwide.
AI And Data Centers Increase Electricity Demand
The report also highlighted how AI infrastructure and data centers are reshaping energy markets.
BloombergNEF projects that data centers alone will drive demand for an additional 1 terawatt of utility-scale solar power, 400 gigawatts of battery storage, 370 gigawatts of natural gas generation, and 110 gigawatts of coal generation by 2050.
Because natural gas and coal plants can provide continuous electricity generation around the clock, BloombergNEF expects fossil fuels to account for approximately 51% of incremental electricity generation used by data centers through mid-century.
The report said technology companies and data center developers will likely play a major role in determining which energy sources remain commercially viable over the coming decades.
At the same time, other technologies are competing to supply electricity to AI infrastructure projects.
Battery Storage, Nuclear, And Geothermal Expand
Long-duration energy storage, geothermal energy, and nuclear power are also attracting growing investment as alternatives for powering data centers.
Google recently included approximately $1 billion worth of 100-hour battery systems from Form Energy in a data center project.
Meanwhile, geothermal company Fervo Energy and nuclear company X-energy both completed high-profile IPOs this month.
BloombergNEF said grid-scale battery markets are now entering a growth phase similar to solar energy’s position around 2020.
Last year, 112 gigawatts of grid-scale battery storage were installed worldwide. BloombergNEF expects annual installations to nearly triple by 2035.
Companies including Redwood Materials and Ford Motor Company have also expanded into energy storage businesses.
In countries such as Spain and Italy, BloombergNEF said standalone solar farms are becoming less profitable during daytime hours because solar power generation has pushed electricity prices downward.
As a result, developers are increasingly building hybrid renewable energy systems that combine solar installations with battery storage to capture higher electricity prices during evening hours.
Report Links Renewable Transition To Energy Independence
BloombergNEF said the report did not fully account for the recent conflict involving Iran because the analysis had already reached final stages before the war began.
However, the organization modeled separate scenarios examining how decarbonization could affect countries’ reliance on imported energy.
Under an economic transition scenario driven primarily by market economics, BloombergNEF said every country would reduce dependence on imported energy supplies, including major oil exporters such as Saudi Arabia.
Under a more aggressive net-zero scenario driven by stronger regulations, countries could nearly eliminate dependence on foreign energy imports altogether.
“The transition, which in many ways is cost efficient, is actually good for energy independence,” Kimmel said.
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