Solar panel costs have plummeted from $6 per watt in 2000 to just 12 cents today

Cheap solar panels are quietly breaking how power grids are supposed to work

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The big picture: Cheap solar panels are reshaping the way electricity systems operate from Pakistan to Australia. Businesses and households are generating more of their own power, reducing daytime grid purchases while still relying on utilities to maintain networks and supply electricity when solar output falls. The shift is making demand harder to forecast and prompting grid operators to invest in better system visibility, storage, and new pricing models.

At Bestway Cement's plant in Chakwal, Pakistan, solar already supplies more than a quarter of the electricity used to make cement. The company has 26MW installed and expects to add another 6.34MW by the end of the year.

"It's the only way we can compete," Abdul Waheed, the plant's general manager, told the Financial Times. "Our rivals have already gone in this direction."

The economics are driving the shift. Solar panels that sold for $5 to $6 per watt around 2000 now cost about 12 cents per watt, according to Dave Jones, co-founder of Ember. China's manufacturing expansion is behind much of that decline. Wood Mackenzie estimates Chinese solar manufacturing capacity at roughly 1.36 terawatts.

The lower prices have made rooftop and on-site solar practical in countries where power is costly or unreliable. By the end of 2025, installed small-scale solar capacity worldwide had reached nearly 1.2 terawatts, according to the Energy Institute's Statistical Review of World Energy. While solar does not generate at full capacity around the clock, the installed total is about three times the size of the global nuclear fleet.

Credit: The Financial Times

Businesses have been among the fastest adopters because their peak electricity use often occurs during sunny hours. Ember expects Africa to add about 17GW of solar this year, largely through smaller systems at factories and commercial sites.

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In the Philippines, rooftop solar capacity may have nearly doubled in the 12 months through April, Ember says. Meralco, the country's electricity distributor, said rooftop systems generated 372 gigawatt hours in the first six months of the year. Ember estimates that residential systems can now pay for themselves there in a little more than three years.

India is scaling rooftop systems through a national subsidy program launched in February 2024. The program has installed panels on more than 5 million homes and is adding about 500,000 homes a month, according to Tata Power chief executive Praveer Sinha. "It's a democratization of the use of electricity," he said.

But the same trend is putting pressure on utilities. Customers who can afford solar systems and batteries often use less grid power. That reduces utility revenue even though those customers still rely on the grid at night, during cloudy weather, and when their batteries run low.

K-Electric, which supplies Karachi, has seen solar spread through the city's affluent Defence Housing Authority neighborhood. Chief executive Syed Muhammad Taha called solar panels a "curse and a blessing." The customers installing them are among the utility's best-paying users, but they are buying less electricity.

The risk is that costs shift to people who cannot install solar. In Karachi's Lyari district, K-Electric says it loses Rs30 to Rs40 ($0.31 to $0.42) for every Rs100 ($1.04) spent providing electricity. Azem Baloch, a mechanic who rents a flat in the neighborhood, said, "I am spending more than half of my income on power."

South Africa is dealing with a similar problem. Shoprite has installed solar panels on buildings and trucks in South Africa and Namibia since 2015. The retailer now has about 43MW of peak capacity and is considering batteries.

For Eskom, the country's state utility, less demand from businesses and wealthier customers means less revenue for power plants and grid maintenance. Eskom estimates rooftop solar and batteries accounted for around 7% of its 11.7 terawatt-hour decline in electricity sales in the year ended March.

Grid operators also have a technical problem. Solar production can change sharply as weather changes, especially in places with high rooftop adoption. In Australia, midday solar output can push grid demand so low that it becomes harder to operate conventional plants needed to keep the system stable.

Credit: The Financial Times

Rooftop systems can also send excess power from local distribution networks into high-voltage transmission lines, increasing voltage and limiting how much electricity households can export. Forecasting output from millions of small systems has become a major task for grid operators.

Pierluigi Mancarella, chair professor of electrical power systems at the University of Melbourne, said the risk becomes clear when clouds move over areas with heavy rooftop solar use. "If you have a massive cloud formation, the rooftop PV production can drop by so much that it looks like you have lost basically almost a nuclear power station."

Utilities are responding with batteries, new tariff models and better forecasting tools. UK Power Networks recently completed a £389,000 ($523,992) study on machine-learning models to estimate how much solar capacity is connected to its network. Solar forecasting company Amperon retrains its models every hour to account for changing conditions.

The shift is unlikely to slow. Solar is becoming a standard way for businesses and households to lower energy costs, but it is also turning the traditional power grid into a more complex system – one that must handle electricity flowing in both directions.

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