The Dual Effect: Butterfly and Domino in Energy's Big Shift

Introduction

Renewable energy has just crossed a historic inflection point: for the first time, renewables generated more electricity than coal on a global scale. According to new data from Ember, solar and wind together produced 5,072 terawatt-hours (TWh) of electricity in the first half of 2025, surpassing coal’s 4,896 TWh. The change was driven largely by China and India, where solar generation rose by 43% and 31% respectively, while coal use fell. Globally, solar’s share in the electricity mix now stands at 8.8%, up from a mere 0.01% in 2000, reflecting an exponential growth trajectory over the past two decades.

At the core of this transformation lies a radical fall in price—the single biggest enabler of the energy transition. The solar photovoltaic module that once cost over $100 per watt now sells for under $0.20.

Analysts often credit this price reduction to R&D-led efficiency gains, favorable policy incentives, and economies of scale. Those factors are central, but they tell only part of the story. A deeper look into what caused these “causes” reveals a series of serendipitous and sequential historic events that set off what are called butterfly and domino effects. Think of a “butterfly effect” as a small, improbable trigger that sets big unexpected changes in motion, and a “domino effect” as a chain reaction of adoption where each step makes the next one easier.

These serendipitous events were in no way guaranteed to lead incrementally to today’s ultra-low prices, but amplified by the domino-like sequential adoption, they unexpectedly did.

In this article, I trace how those twin effects drove the drastic fall in prices for solar and batteries, and how the same dynamics could soon repeat in Battery Energy Storage Systems (BESS), the next frontier of falling clean-energy costs.

The Solar Story: Butterfly & Domino Effects

The history of solar is essentially the history of a price free fall. The technology itself has existed for decades. However, a series of improbable events created a butterfly effect, which, combined with the domino-like adoption, shaped the modern solar price curve.

Butterfly triggers (root causes of cost decline)

The story begins in the early 1970s. The oil embargo of 1973 jolted the world’s energy consciousness and prompted the U.S. to launch its Flat-Plate Solar Array research program, which developed the core laminated module design—a protective layering system that remains the backbone of modern solar panels. A decade later, the Chernobyl accident (1986) reignited global interest in non-nuclear energy alternatives, spurring new funding for renewables including solar. Japan seized this moment with its “Million Roofs” initiative in the 1990s, which put photovoltaic panels on ordinary homes, normalizing rooftop solar for the public. Then came Germany’s Renewable Energy Sources Act of 2000, introducing generous feed-in tariffs that created a viable market and drew manufacturers into the fray.

In the early 2000s, a generation of Chinese entrepreneurs, many trained abroad, spotted the opportunity and–backed by U.S. venture capital–scaled production beyond anything seen before. Oversupply crashed costs, forcing survival-of-the-fittest innovation and permanently altering global solar pricing.

Martin Green, often referred as 'the father of modern photovoltaics', explains this series of events in his paper, “How Did Solar Cells Get So Cheap?” published in Joule (2019). He argues that without these fragile linkages—the oil shock, a nuclear accident, political vision in Japan and Germany, and the perfect timing of China’s industrial rise—photovoltaics might have remained a promising but expensive technology. Instead, a series of butterflies flapped in just the right sequence, creating the cost revolution that underpins solar’s dominance today.

Domino cascade (amplifier of the price fall)

As prices kept falling, solar adoption took off like a row of dominoes across sectors and geographies. Early on, usage was limited to satellites and remote off-grid sites, where solar was virtually the only option. By the 1990s, national rooftop programs and feed-in tariffs had made residential solar PV mainstream in places like Japan and Germany. In the 2010s, competitive auctions and big investors drove the construction of massive solar farms in China, India, the Middle East, and the United States. Solar leapt from rooftops to utility-scale farms and then into hybrid systems paired with storage. Every new application opened the door for an even larger one. Each step forward lowered prices further for the next step. Cost declines and adoption reinforced each other in a feedback loop.

Combined effect

The result shows up in numbers: over roughly 45 years, the cost per watt of new solar modules dropped about 500-fold, halving roughly every five years. Prices fell 96% between 2000 and 2020, taking modules from more than $100 per watt in the 1970s to below $0.20 per watt today. The dual effect ultimately made solar one of the cheapest ways to generate electricity.

The Battery Story: Butterfly & Domino Effects

A similar story unfolds with batteries, particularly lithium-ion. When analysts talk about falling battery prices, they point to better chemistries, bigger factories, and government subsidies. They're not wrong, but they often overlook the chance events that started it all.

Butterfly triggers (root causes of cost decline)

The 1984 Bhopal chemical disaster forced Union Carbide to sell its Sony battery joint venture, unexpectedly freeing Sony to pursue aggressive lithium-ion development without corporate constraints. Sony's parallel research approach in the late 1980s created the world's first commercial lithium-ion battery by 1991. A decade later, China's 2001 WTO entry paved the way for Robin Zeng to found Contemporary Amperex Technology Co. Limited (CATL)—now the world’s largest battery manufacturer. Building on that foundation, China introduced technology-transfer requirements for EV subsidies in 2011, forcing foreign automakers to localize know-how.

Nearly a decade later, Tesla’s 2020 decision to dual-source batteries from CATL conferred global legitimacy and accelerated the company’s scale. Soon after, Chinese producers expanded capacity aggressively, creating an enormous oversupply—3.1 TWh of capacity versus 1.2 TWh demand—crashing prices globally.

Domino cascade (amplifier of the price fall)

Like solar, battery adoption fell like dominoes, spreading sequentially across sectors and geographies, every application building on the last and pushing costs lower. Lithium-ion technology first gained traction in consumer electronics, where automated production lines developed for walkmans and early smartphones refined manufacturing precision and cell uniformity. Those same assembly methods were soon adapted for e-bikes and electric scooters across Asia, catalyzing a new wave of e-mobility. Lessons in thermal management, battery management systems, and modular pack design from electric vehicles then carried over to residential and utility-scale storage projects, slashing balance-of-system costs and opening markets in Europe and North America. A second-life battery economy followed, as aging EV packs found new value in behind-the-meter systems and microgrids, boosting cell utilization and reducing lifecycle costs. Finally, early success in heavy-duty trucking fleets and pilot electric ferries signals the next frontier for lithium-ion adoption—each wave of adoption refining performance and driving costs relentlessly downward.

Combined effect

The same duo of butterfly sparks and domino cascades is evident for batteries too. As a result, every doubling of deployment improves energy density by 7–18% and reduces costs by 19–29%, reinforcing the cycle. Overall, cell costs have dropped from $7,500 per kWh in 1991 to $150 by 2024—an enormous 98% decline, while energy density has risen fivefold.

How About BESS?

Combine solar and batteries, and you have what we today call Battery Energy Storage Systems (BESS). BESS refers to large-scale integrated battery installations that store electricity for later use, often to complement renewable generation. BESS carries a double inheritance: the butterfly sparks and domino cascades of batteries, plus its own.

Butterfly triggers (root causes of cost decline)

The early sparks have already appeared. The 2016 South Australia blackout triggered Elon Musk’s now-famous Twitter bet to build the world’s largest battery within 100 days—a promise fulfilled with the 100 MW Hornsdale Power Reserve, which saved $40 million in its first year and proved grid-scale storage viability. Around the same time, California’s deepening “duck curve”—caused by midday solar oversupply—forced the state’s grid operator, California Independent System Operator (CAISO), to implement mandatory storage targets. As a result, the state grew from 0.5 GW in 2018 to over 15 GW by 2025, establishing batteries as a core tool for grid balancing. The Texas Winter Storm Uri in 2021, when 82% of blackstart units failed, exposed similar vulnerabilities. In response, Texas accelerated its storage buildout, and by 2025, BESS had become central to ERCOT’s reliability strategy and set new grid performance records.

Domino cascade (amplifier of the price fall)

BESS deployment has been cascading across continents and sectors. Early adopters included telecom towers in Sub-Saharan Africa and off-grid mining camps in Australia, where diesel costs made batteries cost-effective. In China’s manufacturing hubs, industrial parks installed megawatt-scale systems for peak shaving by 2015, reducing demand charges and serving as virtual power plants. By 2018, European wind farms in Germany and Spain paired with BESS to firm output, smooth intermittency and access ancillary markets. Utility-scale projects then surged in the United States after Hornsdale’s success, with 4 GW of new storage added by 2022 to support PJM and ERCOT markets. Mandated procurements in California and competitive auctions in India and the Middle East drove hybrid solar-plus-storage farms, unlocking grid flexibility. By 2022, behind-the-meter residential and commercial systems proliferated in Japan, South Korea, and Brazil, enabling self-consumption and time-of-use arbitrage.

Combined “early” effect

Between 2010 and 2024, the cost of grid-scale storage plunged more than 90%, from over $2,500 per kWh to nearly $200. The current prices $150–$236 per kWh for U.S. installations already dwarf NREL’s 2025 projections of $255–$308 per kWh. China’s record monthly installations have further accelerated cost declines, establishing multi-gigawatt projects as the new industry benchmark. The same cost-learning pattern is emerging; each new deployment driving the next.

The story of BESS is still unfolding. Its next butterflies and dominoes are yet to land. But the early chapters look familiar: unpredictable triggers giving way to compounding adoption, costs falling faster than models predict, and a reinforcing loop between adoption and costs.

If history is any guide, BESS is next in line for a steep price slump—becoming exponentially cheaper, surpassing even the most optimistic models, writing its own chapter in the butterfly-domino playbook, and reshaping how the world powers itself.