TL;DR

• Solar energy is now extremely affordable, driving massive growth but causing grid saturation and integration challenges.

• Off-grid solar offers a solution by bypassing grid limitations and maximizing solar’s peak energy output.

• Key opportunities include powering data centers, industrial heat, desalination, and producing green hydrogen and synthetic fuels.

• Off-grid creates a new and ambitious paradigm. Low-cost energy can transform industries and economies, but its intermittent nature will require a fundamental rethinking of our industrial processes.

Solar Power and the Path to Energy Abundance

Solar energy has rapidly become one of the most transformative and affordable technologies of our time. Its remarkable cost decline has reshaped the energy landscape, challenging traditional approaches to energy integration while opening up extraordinary opportunities, particularly through off-grid applications.

Access to cheap, abundant energy has historically underpinned humanity's greatest leaps in prosperity. Fossil fuels—coal, oil, and gas—have driven unprecedented social and economic advances, lifting billions out of poverty. As Casey Handmer aptly puts it, "To a good approximation, oil is the antidote to poverty." Yet fossil fuels are finite. With easy oil gone, fracking expensive, and climate change accelerating the need for alternatives, abundant energy is more critical than ever.

Per capita electricity consumption (kWh) vs GDP (US$) - Sources: Our World In Data, Casey Handmer's Blog

Solar power emerges as a vital solution to this puzzle. As Casey Handmer and Ben James emphasize in their insightful writings—including James’s compelling article, “Solar will get too cheap to connect to the power grid”—the dramatic affordability of solar energy disrupts traditional use cases but also necessitates a paradigm shift. This piece draws from their analyses to explore solar’s journey, its challenges, and the transformative potential of off-grid solar to redefine energy abundance for the future.

Solar Has Gotten So Cheap—and Will Get Even Cheaper

Solar photovoltaic (PV) technology is now a revolutionary energy source. Its unique manufacturing process transforms sunlight into electricity without moving parts, enabling rapid mass production and unlocking an extraordinary learning rate of 44%. This means solar costs decrease by 44% every time production doubles—a pace currently achieved every 18 months.

Solar PV learning rate - Source: Casey Handmer’s Solar and batteries for generic use cases

Production Growth Defied all predictions, led by China's massive scale-up

The solar power industry experienced unprecedented growth in 2023, with the world installing 447GW of solar capacity, representing an 87% year-over-year increase. China led this surge, adding 250GW of capacity—equivalent to the total global solar capacity from the previous year. This rapid expansion resulted in a 50% drop in solar module prices, driven by oversupply and China’s dominance across the solar manufacturing supply chain.

Looking ahead, this growth trajectory shows no signs of slowing down. By 2028, annual solar deployments are projected to reach 1 TW. China’s pivotal role in this global expansion cannot be overstated. Since 2011, it has invested over $50 billion in photovoltaic (PV) supply capacity, creating 300,000 jobs along the value chain. With a commanding share of over 80% of global manufacturing in essential stages like polysilicon, wafers, cells, and modules—more than twice its share of global PV demand—China has significantly reduced global production costs. Additionally, it hosts the world’s top 10 suppliers of solar PV manufacturing equipment, further solidifying its leadership in the sector.

This combination of growth, investment, and cost reduction is redefining the global solar market and accelerating the adoption of renewable energy worldwide.

Real and projected annual solar capacity - Source: IEA World Economic Output Yearly reports

Solar Will Soon Saturate the Grid—What Does That Mean?

The rapid growth of solar is creating challenges in its current use cases, particularly in grid-connected systems.

The Cannibalization Effect

Solar panels generate power only when the sun shines. Adding more solar panels will increase supply for the exact same times of the day. This abundance drives down electricity prices during peak solar hours, eroding the economic incentives to build additional capacity. In extreme cases, excess generation can lead to negative electricity prices, disincentivizing further solar deployment.

Yearly occurrences of negative prices as a function of their duration in consecutive hours in the EU-27, 2019-2023 (sum of occurrences per bidding zone) - Source: ACER report

Limited Grid Capacity

Solar farms can be built quickly, but connecting them to the grid is a slow and expensive process:

• In the UK, it takes over five years to secure a grid connection.

• In the US, the interconnection queue for renewable projects has grown sevenfold in the past decade, with 95% of queued projects being solar, wind, or batteries.

Installed US electric generating capacity compared to interconnection queue capacity (2010 and 2023) - Source: Berkeley Lab

Both the cannibalization effect and limited grid capacity, combined with supply chain challenges, have driven Power Purchase Agreement (PPA) prices for solar well above historical lows. This trend is particularly evident in the United States, where the average solar PPA price reached $56.58/MWh in the third quarter of 2024—significantly higher than the $20/MWh prices seen in early 2020.

In the U.S., these factors are further compounded by additional pressures:

• High Tariffs on Imported Solar Cells, particularly from China, are expected to increase under the coming administration.

• Shortages of Essential Equipment, such as breakers and switches, despite earlier improvements in battery and transformer availability.

• Persistent High Demand, especially from data centers, which prioritize speed and reliability over cost, further inflating prices.

Together, these dynamics have created a challenging environment for solar PPAs in the U.S.

Off-Grid Solar: The Answer to a Saturated Grid

Faced with these challenges, the future of solar lies in off-grid applications. By bypassing the grid, we can unleash solar’s full potential.

Solar + Storage

Solar panels, paired with increasingly affordable lithium-ion batteries, offer a seamless solution. Batteries smooth out solar's variability, enabling a reliable energy supply without relying on expensive and slow-to-build transmission lines. Remarkably, battery prices have plummeted to $45/kWh, making solar-plus-storage competitive with traditional energy sources.

Lithium-Ion Battery learning rate - Source: Casey Handmer’s Solar and batteries for generic use cases

Intermittent Processes Powered by Solar

The transformative potential of solar energy lies in embracing its intermittent nature—leveraging the "golden lump," the quarter of the day when sunlight is at its peak. During this window, solar electricity is not only highly abundant but also extremely cheap, and in some sunny locations, nearly free. By aligning energy-intensive processes with this peak solar generation, solar becomes more than a replacement for existing energy sources; it becomes a primary, cost-effective driver of industrial and economic activity.

Adapting to intermittent solar power requires two key innovations:

1. Lower Capital Expenditures (CapEx): Design systems that can operate cost-effectively with lower utilization rates.

2. Throttle-able Processes: Ensure processes can match power availability, scaling operations up or down as solar output fluctuates.

Off-grid solar is particularly suited to such processes, which can thrive on intermittent energy supply. Key applications include:

• AI Data Centers: Gigawatt-scale solar installations paired with batteries can power data centers, reducing reliance on the grid. Companies are already paying premiums for fast, renewable energy availability, as seen in Microsoft’s recent Three Mile Island deal, where rates exceed retail power costs by two to three times.

• Industrial Heat: Solar-powered resistive heaters can reach temperatures of up to 2800°C, making them a low-cost, low-emission alternative to coal for industrial processes.

• Desalination: Solar-driven desalination can address water scarcity by creating artificial rivers and stabilizing ecosystems, offering sustainable solutions in water-stressed regions.

Off-grid solar can also be used for water electrolysis, generating green hydrogen, a critical building block for multiple applications:

• Synthetic Fuels: Cost-competitive solar-driven hydrogen and CO2 reduction can produce aviation fuel and industrial chemicals.

• Fertilizer: Solar-powered nitrogen production can disrupt traditional methods, helping to feed the world’s growing population.

• Plastics: Solar-derived hydrocarbons can provide sustainable alternatives to fossil-fuel-based monomers.

By localizing solar power directly to these applications, we eliminate the inefficiencies and costs associated with grid integration, paving the way for transformative changes in industries and economies worldwide.

A Paradigm Shift Is Needed to Unlock Solar Power

Transitioning to a solar-powered future requires innovation in two critical areas:

1. Intermittent Processes: Developing systems that can efficiently leverage free energy during peak solar hours.

2. Cost Efficiency: Ensuring that the capital costs of off-grid solar applications remain competitive as battery technology continues to advance.

As Casey Handmer highlights, this shift challenges conventional approaches. Traditional engineering optimizes for continuous operation and costly inputs, but solar’s intermittent nature calls for a new focus on low-utilization systems that capitalize on abundant, low-cost energy.

The central question is whether we can design processes that operate profitably during solar’s peak generation hours. While aligning infrastructure to intermittent energy supply may initially extend payback periods, the opportunity to harness near-zero-cost energy opens a largely untapped frontier. Engineers, entrepreneurs, and policymakers have the chance to rethink and innovate, unlocking the immense potential of solar in ways previously unimaginable.