Solar power surge leads to decline in fossil fuel generation

The important second-order effect is not just that renewables are taking share, but that marginal electricity pricing is starting to detach from fossil-fuel volatility in the fastest-growing load centers. That tends to compress peak power prices, weaken merchant gas economics, and reduce the value of fuel-flexible generation assets precisely in markets where capacity additions have been priced off a “scarcity persists” assumption. The beneficiaries are likely to be the balance-sheet owners of grid equipment, storage, and interconnection bottlenecks rather than pure-play panel makers, which are usually the first to get commoditized.

The supply-chain implication is more nuanced: a faster buildout of solar plus batteries shifts bottlenecks upstream to inverters, transformers, HVDC gear, and permitting/land acquisition, not modules. That is where pricing power should persist for 12-24 months, while module ASPs remain vulnerable to overcapacity and policy retaliation. On the demand side, faster clean-energy penetration also creates a reflexive effect on EV adoption and industrial electrification because lower power-cost expectations improve payback economics for downstream electrification capex.

The biggest risk to the thesis is policy/geopolitical, not technology. If tariffs, local-content rules, or anti-dumping actions slow Chinese supply flow, the near-term consequence is actually higher system costs and delayed deployment, which would help incumbent generators and utilities at the margin. Conversely, a sustained decline in fossil generation pressures high-cost LNG, coal, and peaker assets over a multi-year horizon, but the market may underappreciate how much of their valuation still embeds mid-cycle utilization that could prove too optimistic.

Consensus is probably too focused on the clean-energy winners and not enough on the stranded capital problem in conventional power. The under-discussed trade is that the fastest earnings risk may sit in merchant generation, coal-linked logistics, and gas infrastructure exposed to lower load factors, while the better risk/reward is in grid-enabling infrastructure and power electronics. This is a slow-burn transition, but once load growth is met by zero-marginal-fuel resources, the repricing in thermal assets can be abrupt.