The journey of solar energy from a niche technology to a mainstream power source hinges on a critical question: When did the cost of solar cells finally reach parity with fossil fuels? The answer isn’t a single date but a convergence of technological breakthroughs, policy shifts, and economies of scale that unfolded over decades. Let’s unpack the timeline and the factors that reshaped the energy landscape.
In the 1970s, solar photovoltaic (PV) modules cost over $100 per watt, making them prohibitively expensive for most applications. Back then, fossil fuels like coal and natural gas dominated global electricity generation, with costs hovering between $0.05 and $0.10 per kilowatt-hour (kWh). Solar was confined to satellites and experimental projects. Fast-forward to the early 2000s, and prices began inching downward. By 2008, solar module costs had dropped to around $3.50 per watt, thanks to improved manufacturing processes and rising demand in countries like Germany and Japan, which pioneered feed-in tariffs to incentivize adoption.
The real game-changer came between 2010 and 2015. During this period, global solar module prices plummeted by nearly 80%, driven by China’s aggressive scaling of PV manufacturing. By 2015, utility-scale solar projects in sun-rich regions like the southwestern U.S., Chile, and the Middle East started achieving “grid parity”—the point where solar-generated electricity costs the same or less than power from fossil fuels. For example, in 2016, a solar auction in Dubai set a record-low price of $0.029 per kWh, undercutting coal and natural gas in the region. This wasn’t a fluke. Similar trends emerged in India, Mexico, and parts of the U.S., where utility-scale solar costs fell below $0.04 per kWh.
Behind these numbers lies a mix of innovation and industrialization. Advances in silicon wafer efficiency, thinner solar cells, and automated production lines slashed material and labor costs. The “learning curve” effect—where every doubling of cumulative solar capacity reduces prices by 20–30%—kicked into high gear. Governments also played a role. Tax credits, renewable portfolio standards, and auctions created stable demand, while R&D funding (like the U.S. Department of Energy’s SunShot Initiative) accelerated efficiency gains.
Residential and commercial solar followed a slightly different trajectory. While utility-scale projects hit grid parity first, rooftop systems faced higher “soft costs” like permitting, installation, and customer acquisition. Even so, by the mid-2010s, states like California and Hawaii saw residential solar achieve cost parity with retail electricity rates. Battery storage advancements after 2015 further tipped the scales. Pairing solar with lithium-ion batteries allowed households and businesses to offset peak utility rates, enhancing ROI.
Critically, fossil fuels still held advantages in reliability and existing infrastructure. But by 2020, solar had become the cheapest electricity source in history for two-thirds of the world, according to the International Energy Agency. The COVID-19 pandemic briefly disrupted supply chains, but prices rebounded quickly, with polysilicon (a key solar material) hitting record lows in 2023. Today, solar accounts for over 5% of global electricity generation, up from 0.15% in 2010.
The story isn’t just about panels. Balance-of-system costs—inverters, wiring, labor—have also declined. For instance, the average installation cost for U.S. residential solar dropped from $7.34 per watt in 2010 to $2.66 per watt in 2023, per the National Renewable Energy Laboratory. Meanwhile, fossil fuel plants face rising operational costs due to environmental regulations and volatile fuel prices.
Looking ahead, solar’s cost edge is expected to widen. Thin-film technologies, perovskite solar cells, and bifacial modules promise higher efficiencies, while recycling programs aim to cut waste. As storage costs keep falling, solar-plus-storage systems could displace gas peaker plants by 2030.
For a deeper dive into the economics behind this shift, check out this analysis on solar cells cost. The data makes one thing clear: Solar isn’t just competing with fossil fuels—it’s redefining what affordable, sustainable energy looks like.