TL;DR:

Solar power has become the cheapest source of new electricity generation in many parts of the U.S., but adoption depends heavily on market structure. Deregulated markets, where entrepreneurs and independent power producers can directly pursue profitable opportunities, have rapidly embraced solar, while regulated utilities remain slow to change due to legacy investments and bureaucratic oversight. To accelerate the shift to renewables and a cost competitive future, the U.S. should pursue greater deregulation, enabling private capital to build a cleaner, larger-capacity grid. This is essential to meet rising energy demand from emerging technologies and to ensure American competitiveness on the global stage.

Solar power was once a niche technology. In the 1990s, module prices hovered around $5–6 per watt, making solar prohibitively expensive for mainstream use. By the mid-2000s, costs had dropped to about $3 per watt - still steep for most utilities and developers. Then, around 2010, prices fell off a cliff, dipping below $1 per watt in many cases.

By 2019, solar had become cheaper to build than nearly any other new electricity source across many parts of the United States, consistently outbidding fossil fuels on a cost-per-Wh basis. This turning point shifted the renewable energy conversation and began reshaping the grid. For a broader picture on Solar, I highly recommend reading Construction Physics’ piece on Solar Energy. But here's a critical point: Solar’s rapid and sustained drop in cost-performance is unprecedented in energy history; no other electricity generation technology has ever experienced such a dramatic improvement in affordability.

This chart shows the dramatic price decline of solar modules over time. In 2019, solar reached around $0.40, making it cost-competitive with traditional energy sources in many regions.

In the U.S., electricity markets generally fall into three categories: regulated, deregulated, or partially deregulated. In regulated markets, a vertically integrated utility owns and operates generation, transmission, and distribution, with state commissions overseeing rates and investment decisions.

Deregulated markets, which might be better described as “differently regulated” markets, separate these concerns. Independent power producers (generators) build and sell electricity wholesale to Retail Electric Providers (REPs), who sell to households, while utilities manage the transmission and infrastructure. Partially deregulated markets introduce some competition at the wholesale level, but local utilities still control many aspects of generation and distribution.

These market dynamics affect how capital is allocated and who invests in new capacity. In a fully deregulated environment, entrepreneurs and independent power producers can pursue profit opportunities directly with fewer regulatory hurdles. In regulated systems, a single utility proposes major assets - coal, gas, nuclear, or renewables - and recovers costs over time, with strict public commission oversight. This difference in who drives investment decisions influences the pace of renewable deployment.

For decades, regulated utilities stuck to coal, nuclear, and natural gas, facing little pressure to replace legacy generation unless absolutely necessary. Large capital outlays required state approval, and for a long time solar wasn’t cost-competitive. Some projects moved forward thanks to subsidies and regulations, but these were generally limited in scale. Once solar module prices dropped enough to outcompete fossil fuels on cost, developers and investors flocked to build renewable capacity in open markets.

Before 2019, solar adoption was modest. Regulated, partially deregulated, and fully deregulated markets added renewables at a measured pace. Even as solar became price competitive, many regulated utilities still relied on older resource plans favoring existing assets because their fixed cost structures discouraged new investment. In the Tennessee Valley Authority (TVA) territory - a federally owned utility with a monopoly on power in several states in the region - solar remains a small fraction of the mix. TVA benefits from existing capex in large nuclear and hydro plants, enjoys low rates, and has little incentive to change.

However, when solar reached cost parity, deregulated markets saw shipments skyrocket. Texas, under the Electric Reliability Council of Texas (ERCOT), runs a deregulated, energy-only market. If you can produce power cheaply and sell it at market rates, you’re free to build. That open approach, plus Texas’s abundance of wind and sunshine, triggered a huge wave of new renewable projects.

This chart shows the total PV shipments by market regulation type over time. Note how adoption patterns changed after solar became cost-competitive in 2019, with deregulated markets showing stronger growth compared to regulated markets.

Deregulation enables entrepreneurs, independent power producers, and utilities to build solar and battery projects with the possibility of economic upside. Not every consumer in a deregulated area is forced to navigate dozens of rate plans; many stick to a default provider. Cheaper renewables become a win-win, providing clean electricity and strong returns for these builders, and more energy abundance for consumers.

One important way deregulation can accelerate renewable adoption is the use of corporate power purchase agreements (PPAs). In deregulated markets, tech companies and retailers can directly contract with generators, securing energy at predictable, fixed prices. Crucially, PPAs allow developers to finance projects using traditional lending, since banks can lend against a guaranteed revenue stream. Without this pricing certainty, large-scale generation buildouts—most commonly solar, due to its low cost—struggle to secure financing. Regulated utilities can also sign PPAs, but the lengthy and complex regulatory approvals make the process so cumbersome that few investors or developers actually pursue this option.

Centralized, regulated grids that plan decades ahead made sense for capital-heavy coal and nuclear facilities. But once solar and wind became the cheapest new generation, that structure turned into a liability. A regulated utility can theoretically add lots of renewable capacity, yet in practice they’re slow. TVA is a prime example of this inertia. Critics argue that by moving slowly, TVA misses economic development opportunities, especially when developers in neighboring states are financing solar at record levels, boosting tax revenue, and driving further demand to produce even more generation capacity.

California, with a partially deregulated market, occupies a middle ground. The California Independent System Operator (CAISO) handles wholesale competition, while the state imposes top-down renewables mandates. Even before solar was cheap, California required utilities to meet escalating clean energy targets - pulling the technology forward by years. California hit its early goals ahead of schedule, but this resulted in some of the nation’s highest electricity rates.

Normalized by total generation capacity, deregulated markets still show stronger growth compared to regulated markets.

In Comparison to Other Fuels

A decade ago, coal provided about 42% of U.S. electricity; today it’s closer to 15%. New coal plants are almost nonexistent because financing and insurance are hard to secure, and coal can’t compete with solar or wind on levelized costs. Natural gas was made more affordable through the fracking revolution, so many utilities started to treat gas as a “bridge” fuel. But gas’s star is fading too. States and utilities aiming for net-zero by 2045 or 2050 hesitate to invest in gas plants that may be retired early. In ERCOT’s queue, 85% of all interconnection requests are solar, wind, or battery storage.

Nuclear often emerges in discussions of zero-carbon solutions. However, the Vogtle plant expansion in Georgia - billions over budget and years behind schedule - shows how complicated and expensive these projects can be. Advanced nuclear designs may hold promise but likely won’t arrive at scale anytime soon. Solar, wind, and batteries remain the primary tools to meet soaring demand.

Meanwhile, solar's exponential price decline continues to broadly follow Swanson’s Law, which states that solar module prices decrease approximately 20–25% with each doubling of cumulative manufactured volume. This creates a powerful flywheel effect: more solar deployment drives down prices further, spurring even greater adoption. Deregulated markets, which have installed more solar and grown faster than regulated markets since the turn of the century, are uniquely positioned to leverage this dynamic. Unlike traditional energy sources such as coal, nuclear, or gas—which lack a comparable cost curve—solar's economics fundamentally realign market incentives. Over time, we should expect deregulated markets not only to outgrow regulated markets but to deliver dramatically cheaper electricity.

Since 2001, deregulated markets have slightly outgrown regulated markets, a trend which we should expect to continue.

China has become a global powerhouse in solar manufacturing, producing about 80% of the world’s panels through a blend of direct subsidies, cheap loans, land grants, tax breaks, and preferential energy pricing. Over the next decade, China could add almost 3 terawatts of new renewable generation capacity—mostly solar—which is several times what the U.S. will build: less than 0.5 terawatts. This is a huge problem for American competitiveness. Everything from heavy industries like aluminum & steel to data centers for AI training & inference depend on the price of energy. Expensive power ultimately means weaker manufacturing, slower growth, and less abundance.

China’s success in solar production also leads to the second issue: supply chains. If a conflict were to arise with China, relying on its panels for America’s most cost-effective energy source would pose a huge risk. Since 1992, the U.S. has employed incentives for renewables, including the Production Tax Credit (PTC) and Investment Tax Credit (ITC). The PTC and ITC helped commercialize renewables by pulling forward supply. Without China, those tools might no longer be necessary - solar is now cost-competitive on its own. But with China, the calculation shifts. The 2022 Inflation Reduction Act made domestic production a condition for receiving subsidies, requiring batteries and panels to be built in the U.S., to address this concern. That’s probably the right call. This, combined with additional tariffs (that Biden actually first implemented, and Trump later doubled down on), forms a more revenue neutral approach to incentivize solar production.

Incentives to accelerate solar capacity are essential—not just to improve quality of life in the U.S., but because of direct competition with China. Ultimately, building out U.S. solar panel manufacturing capacity is essential, both to ensure resilience against geopolitical disruptions and to keep domestic energy costs as low as possible. By and large, Solar already offers the cheapest pathway to expanding generation capacity. The U.S. should aggressively support entrepreneurs who want to deploy solar at scale, using every tool available—from tariffs and subsidies to regulation—to accelerate growth and narrow the gap with China.

Critics cite blackouts and high prices in Texas and California as evidence that deregulated models fall short. Yet most of these grid disruptions arose from extreme weather made worse by climate change that regulated markets also would have struggled to handle. In Texas, the 2021 deep freeze stressed a state unprepared for deep freezes; in California, rolling blackouts in 2020 exposed a vulnerability to heat waves across the Western grid. No market design is immune to unprecedented weather. Reliability hinges on resilient infrastructure, robust resource planning, and enough storage to buffer variability, all of which additional capital in a free market can provide.

Transmission remains a major bottleneck: moving large amounts of solar or wind power from remote sites to urban centers is no small feat, and is worth an article in its own right. Long term, renewables won’t scale as quickly as they should if they are held back by transmission bottlenecks.

Despite these hurdles, the sheer volume of clean capacity in deregulated regions shows how profit-driven developers respond when solar, wind, and battery projects pencil out economically. Texas’s utility-scale batteries jumped from near zero to multiple gigawatts, smoothing short-term imbalances in solar generation and helping avert blackouts. Ultimately, markets can incentivize further innovation - whether through advanced energy storage, flexible demand, or new transmission paths - provided policymakers address weatherproofing and cost-sharing mechanisms to ensure reliability keeps pace with rapid renewable growth.

Conclusion: A Freer Market for Renewables

We did it. We rode the cost curve of renewables to a cost-competitive threshold. We owe thanks in large part to early regulation - like California’s mandates, or US environmental restrictions on coal - that helped push solar to scale. But now it's time to let markets do what they do best: invest profitably in renewable technology at a scale the public sector can’t match.

The American energy sector faces intense pressure in the coming decade. Coal is uninvestable, nuclear lags under regulatory burdens, and new gas plants may become stranded assets. Solar or wind plus storage are the only large-scale solutions able to come online fast enough to handle rising demand from AI clusters, electric vehicles, and industrial electrification. Yet in many places in the US, entrepreneurs can’t easily profit from fixing capacity and reliability shortfalls if regulations on generation and transmission remain too tight.

A freer market for building solar, wind, and battery projects - alongside more open transmission development - would unleash the capital needed to expand capacity and resolve congestion.

For an innovation-driven country with rapidly growing electricity needs, allowing private capital to deploy cheap solar and wind backed by advanced storage may well be the quickest route to a cleaner, more resilient grid - and the only way to meet the coming wave of demand.

If you have questions, comments, or feedback, please reach out: sobannon6 [at] gmail [dot] com.

Thanks to Aldrin Clement and Max Minsker for their feedback on this article.

Data from EIA

Graphs Available Here