The price of producing electricity from solar energy has dropped rapidly in the last several years, and nothing is stopping it from dropping even further, an expert recently told the hosts of "Energy Evolution," an S&P Global Market Intelligence podcast.

There is still room for reducing the cost of solar, both by improving the physical workings of the technology itself and by reducing the cost of production and deployment of solar photovoltaics, said Greg Nemet, a professor at the University of Wisconsin-Madison who researches technological shifts and how public policy can affect those changes. Once denounced as too expensive, solar energy is already displacing other fuel sources as the cheapest form of generation in some regions.

"I think there's a lot more room to run in terms of continued cost reductions in solar and advances in the technology," Nemet said. "The real story after that is kind of new applications and then widespread adoption of solar."

Nemet, who wrote the recently published book How Solar Energy Became Cheap, noted that one of the challenges with solar energy is that once it is installed, it essentially becomes a zero variable cost source of electricity. That could contribute to underinvestment on the part of utilities. Nemet said the solution is to modernize utility regulations that in many cases were created decades ago in order to better accommodate renewable energy resources and other technologies.

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"Solar has been a success. It's been something that seemed really hard, and it's turned out to be something that's worked out in terms of it becoming a serious part of our energy supply with a lot more room to run on that," Nemet said. "So it provides lessons for technology policy and how we could foster innovation."

The Los Angeles City Council, for example, recently approved the purchase of power from a solar and storage facility in the Mojave desert at a cost of about $33/MWh to nearly $40/MWh. Comparatively, on Nov. 7, Lazard Ltd. released its annual outlook comparing energy costs that estimated the average levelized cost of energy for solar in the U.S. is about $40/MWh. That stacks up against about $56/MWh for natural gas, $109/MWh for coal and $155/MWh for nuclear energy.

The development of battery storage, which allows otherwise intermittent power resources from wind and solar to be stored and deployed when needed, is enabling the expansion of renewable energy generation. About 40 power projects pairing 1,242 MW of solar photovoltaic capacity with 533 MW of battery storage were in operation in the U.S. as of late September, a recent S&P Global Market Intelligence analysis found. Meanwhile, companies were developing at least another 85 co-located solar and storage projects combining 4,175 MW of storage with 8,921 MW of solar.

"We now have this low-cost energy source that seems like it's almost infinitely scalable," Nemet said. "So, we can imagine if we give it a few decades we could be producing easily half of our electricity from solar."

At the moment, however, solar energy is a minuscule part of global electricity generation. In the U.S., solar energy accounts for approximately 2.4% of total power generation, according to the Solar Energy Industries Association. Nemet said getting to about 50% of electricity generation from solar energy would really only require the technology to continue at the growth rates achieved in the last few decades. Lower costs will facilitate that, he added.

"Almost every technology when you look at how it's adopted — like the percent of people that use the technology over time — it's not linear, it doesn't continue steadily. It starts out slow and then it takes off. Then it slows down again, once you get to some saturation point," Nemet said. "It really does seem like we're at this ramp-up stage with solar where it could really take off because the costs are coming down."