How long will it take for wind and solar energy projects to be able to compete heads up with fossil fuel? And will that be enough to halt global warming?
In the absence of an energy crystal ball analyzing industry trends, the latest research and CEO guidance are what investors must rely upon for the answers.
On June 23, GreenTechMedia (GTM) Senior Editor Stephen Lacey published, "Wind and Solar Will Soon Become the ‘Least-Cost Option Almost Universally.'"
According to Lacey, "The first phase of growth for renewable electricity was driven by policy. The next phase will be driven by straight economics."
Bloomberg New Energy Finance (BNEF)
GTM pointed to a recent BNEF report that said, "the average cost of developing wind projects will fall by 32 percent and the cost of solar PV projects will fall by 48 percent by 2040. Within a decade, wind will become "the least-cost option almost universally." By 2030, solar will become the cheapest resource.
One surprising conclusion, "By 2020, solar will dominate new capacity additions, accounting for $3.7 trillion in investment over the following two decades, according to the BNEF report."
It appears that a confluence of technology, innovation and scale are driving costs down at a faster rate than most investors probably realize.
GTM Research - Perhaps Even Faster
The GTM Research Global Solar Demand report projects an even greater expansion of the technology, also driven primarily by economics rather than policy.
"According to the report, the world could see 135 gigawatts of installations annually by 2020 -- double projections from the PV Market Alliance."
Source: GTM Research
"We think that by 2018 solar is going to be the resource of choice," said GTM Research's Adam James. He believes that year will be the "tipping point for grid parity" and expects to see non-subsidized solar projects in many developed markets.
"Maturing business models -- both solar services in developed countries and off-grid solutions in developing ones -- will allow solar to compete in a growing number of countries based solely on cost."
GTM forecasts that China, the U.S. and Japan will lead the way for solar in 2020.
A CEO Prediction
In another GTM Research piece, Eric Wesoff reported on comments by First Solar, Inc. (NASDAQ: FSLR) CEO Jim Hughes at a recent Edison Electrical Institute meeting.
First Solar is an S&P 500 company with a $5.1 billion market cap; as a vertically integrated solar company, First Solar has considerable skin in the PV game. According to Hughes:
"Within 18 months, we will overcome the cost delta resulting from the drop [of the ITC] from 30 percent to 10 percent. It actually opens up new markets, in our opinion, because you'll see an increased interest in utility generation once the distortion of the ITC is behind us.
The CEO added, "We have a technology roadmap -- by 2017, we'll be under $1.00 per watt fully installed on a tracker in the western United States."
Hughes believes that utility scale and community solar projects, which benefit from economies of scale, will dominate when the subsidies fall by the wayside.
Data Centers & DC Power Innovation
As community solar projects mature and become more prevalent, the ability to generate power closer to large electrical loads such as data centers will open up additional possibilities for delivering innovative solutions.
Hughes added, "If you can co-locate or locate within in a reasonable distance, you can put DC right into the data center," resulting in "a 15 percent cost savings from avoiding the whole AC conversion side of the equation."
Are Carbon Emissions Still An Issue?
"The broad swath of renewable energy technologies -- including wind, solar, biomass, hydro and geothermal -- will account for 46 percent of generation by 2040, according to the BNEF report. Wind and solar alone will account for 30 percent of global generation."
When it comes to global warming concerns, however, this will not be enough to solve the growing problem.
"By 2040, fossil fuels will still make up 44 percent of electricity supply, most of it in developing countries. As a result, global carbon emissions from the electricity sector could rise by 13 percent between now and 2040."
Lacey pointed out an International Energy Agency report in May, which, "called for a tripling of public and private investments in new energy technologies in order to prevent catastrophic warming."
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