Is Big Solar Beating Big Oil in 2024?

Some of the world’s biggest and oldest oil & gas companies aka Big Oil are credited with powering the Second Industrial Revolution that kicked off in the late 19th century and ushered in the modern tech era as we know it. Oil accelerated industrial production and reshaped networks by allowing faster transportation thanks to being cheaper and packing a much higher energy density than other fuels. However, solar energy could become the primary power source of the Fourth Industrial Revolution, thanks to its simplicity, longevity, low cost, and overall efficiency. Indeed, Bloomberg has revealed that the seven largest solar companies--all located in China--already are supplying more energy to the world than the seven biggest fossil fuel producers.

According to Bloomberg, the biggest solar panel manufacturers consisting of Tongwei, GCL Technology Holdings (OTCPK:GCPEF), Xinte Energy, Longi Green Energy Technology, Trina Solar, JA Solar Technology, and Jinko Solar (NYSE:JKS) produce enough panels to generate 5 exajoules of electricity every year. In comparison, the seven oil giants including Exxon Mobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX), Shell Plc (NYSE:SHEL), TotalEnergies (NYSE:TTE), BP Plc (NYSE:BP), ConocoPhillips (NYSE:COP), and Eni S.p.A (NYSE:E) extract around 40 exajoules of petroleum energy from the ground per year, or just shy of 18 million barrels per day.

At first glance, it appears that Big Oil has got Big Solar easily beat; however, that conclusion fails to take into account several important factors. First off, only about a quarter of the energy coming out of an oil company’s wells gets turned into useful power with the vast majority lost as heat. Electric motors convert over 85 percent of electrical energy into mechanical energy compared to less than 40 percent for a gas combustion engine.

According to the EPA, the average electric car is two to three times as efficient as the average conventional car with an internal combustion engine. Second, the majority of solar panels carry 25 year warranties whereas fossil fuels are mostly used up in a matter of months. If you look at the long-term flow of energy into the global economy with each solar cell produced, solar companies come out well ahead if you consider oil reserves owned by these oil companies as well as taking into account what each sector can produce without major additional investments.

On a company basis, Bloomberg estimates that Tongwei–the world’s largest solar panel manufacturer– will soon provide over 9 exajoules of energy annually when its 400,000 ton polysilicon plant in Inner Mongolia comes online, surpassing Exxon’s 8.3 exajoules.

Cheaper Than Oil And Gas

Last year, the International Energy Association predicted that the amount of capital investment flowing into the solar sector would overtake the amount of investment going into oil production for the first time ever in 2023. Speaking to CNBC, the IEA’s executive director Faith Birol said there was a “growing gap between the investment in fossil energy and investment [in] clean energy. Clean energy is moving fast--faster than many people realize. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels. For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy.”

A big reason for the rapid growth being witnessed by the solar sector is the dramatic fall in costs. Last year, a report from Ernst & Young (EY) showed that solar remains the cheapest source of new-build electricity despite persistent inflationary pressures. According to the report, the global weighted average levelized cost of electricity (LCOE) for PV is now 29% lower than the cheapest fossil fuel alternative. Solar LCOE has rapidly fallen in average globally, from more than $400/MWh in the early 2010s to about $49/MWh in 2022, a huge 88% decline. Wind power LCOE has fallen roughly 60% over the same period.

Cheaper Than Oil And Gas

Last year, the International Energy Association predicted that the amount of capital investment flowing into the solar sector would overtake the amount of investment going into oil production for the first time ever in 2023. Speaking to CNBC, the IEA’s executive director Faith Birol said there was a “growing gap between the investment in fossil energy and investment [in] clean energy. Clean energy is moving fast--faster than many people realize. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels. For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy.”

A big reason for the rapid growth being witnessed by the solar sector is the dramatic fall in costs. Last year, a report from Ernst & Young (EY) showed that solar remains the cheapest source of new-build electricity despite persistent inflationary pressures. According to the report, the global weighted average levelized cost of electricity (LCOE) for PV is now 29% lower than the cheapest fossil fuel alternative. Solar LCOE has rapidly fallen in average globally, from more than $400/MWh in the early 2010s to about $49/MWh in 2022, a huge 88% decline. Wind power LCOE has fallen roughly 60% over the same period.

By Alex Kimani for Oilprice.com