Solar power will become the largest source of global electricity generation by 2035, surpassing coal, oil and natural gas, according to a BloombergNEF report. The report projects that solar's cost advantages alone will drive the shift, with panel prices expected to drop by 30% by 2035.

Solar panels are expected to generate more than twice as much electricity as natural gas by 2050, the report said. The transition could accelerate further if countries implement more aggressive carbon emission reduction measures.

"Costs fall with every doubling of installed capacity," said Matthias Kimmel, head of energy economics at BloombergNEF. "In the case of solar, it has gone even faster than that," he said.

China's industrial policy has subsidized solar manufacturers and increased market supply, contributing to falling costs, alongside the broader effects of mass manufacturing, according to the report. Pakistan added 25 gigawatts of solar power in the last two years after natural gas prices spiked following Russia's invasion of Ukraine.

Data centers are expected to drive an additional 400 gigawatts of solar power generation, along with 370 gigawatts of natural gas and 110 gigawatts of coal capacity, the report said. BloombergNEF expects gas and coal to provide 51% of incremental power generation for data centers by 2050. Long-duration energy storage, geothermal power and nuclear power are competing for a share of the data center energy market. Google included $1 billion of 100-hour batteries from Form Energy in a recent data center project.

In Spain and Italy, standalone solar farms have become unprofitable as surplus solar power has driven down daytime electricity prices, according to the report. Developers have begun building hybrid renewable plants that pair solar panels with batteries to take advantage of higher evening prices. In the past year, 112 gigawatts of grid-scale batteries were installed worldwide, and BloombergNEF expects global grid-scale battery installations to nearly triple by 2035. Redwood Materials and Ford have launched energy storage businesses.

BloombergNEF tested two scenarios—an economic transition scenario and a net-zero scenario—to assess countries' dependence on energy imports. Under the economic transition scenario, every country, including Saudi Arabia, would reduce reliance on foreign energy, while the net-zero scenario would see countries virtually eliminate energy imports. "The transition, which in many ways is cost efficient, is actually good for energy independence," Kimmel said. Investors view energy as one of the biggest growth opportunities in recent decades, the report said.