Solar power is often described as the cheapest source of new electricity. In many parts of the world, that is true. The price of a solar panel is only one part of the equation. The real cost of electricity depends on financing, storage, grid infrastructure and project risk. Those factors can determine whether solar remains the lowest-cost option or whether another technology delivers cheaper power over the life of the project.
A fair comparison between power technologies goes beyond construction costs. Investors typically evaluate projects based on several factors:
- Capital cost (CAPEX)
- Cost of financing
- Operating and maintenance costs
- Capacity factor (how often a plant generates electricity)
- Project lifespan
- Dispatchability (whether power is available when needed)
These metrics explain why two projects with similar construction costs can produce electricity at very different prices.
How the Main Technologies Compare
| Technology | Strength | Limitation |
|---|---|---|
| Solar PV | Low construction costs, fast deployment, minimal operating costs | Generates only when the sun shines unless paired with storage |
| Onshore Wind | Competitive electricity costs in high-wind locations | Performance depends on wind availability and suitable sites |
| Hydropower | Low operating costs and long asset life | High upfront investment, long development periods and vulnerability to drought |
| Natural Gas | Reliable, dispatchable baseload power | Exposure to fuel price volatility and carbon emissions |
| Solar + Battery Storage | Reliable renewable power beyond daylight hours | Higher upfront costs due to battery investment |
| Diesel Generation | Flexible and quick to deploy | Highest operating costs because of fuel consumption |
Where Solar Wins
On a pure generation basis, utility-scale solar is among the lowest-cost sources of new electricity globally. Module prices have fallen by more than 80% over the past decade, while construction times are measured in months rather than years. For countries seeking to add generation capacity quickly, those advantages are difficult to ignore.
Where Solar Becomes Expensive
The economics change when financing is added. Solar projects require most of their investment before producing a single kilowatt-hour of electricity. As a result, borrowing costs have a much greater impact on solar than on technologies where fuel costs dominate.
In many African markets, renewable energy projects face borrowing costs of 10–15%, compared with 3–5% in many developed economies. That difference alone can significantly increase the levelized cost of electricity (LCOE), even when the technology itself is inexpensive.
Storage also changes the equation. Batteries improve reliability and allow solar energy to be used after sunset, but they increase project costs. For applications requiring continuous, 24-hour power—such as data centres, hospitals and industrial facilities—solar often needs to be combined with batteries, gas or hydropower to provide firm electricity.
So, Is Solar the Cheapest?
In most cases, no. Utility-scale solar remains one of the lowest-cost generation technologies available. Wind can be equally competitive in areas with strong resources, while hydropower can produce very cheap electricity once built. Gas and diesel generally become more expensive over time because of fuel costs. The real challenge for Africa is that financing, storage and project risk can erode its cost advantage.
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The question is under what conditions it remains the cheapest. Where financing is affordable, grid infrastructure is available and storage needs are limited, solar is difficult to beat. Where capital is expensive, utilities are weak and long-term risk is heavily priced, the economics become far more challenging.
