GLOBAL SOLAR MARKET UPDATE 2000 – 2019
Overall, 2019 was a decent growth year for the global solar sector, improving with a low two-digit rate after it basically paused the year before. Looking beyond the newlyinstalled worldwide solar capacity, solar developments look much brighter. Despite China’s dramatic
demand decrease last year, global installations grew by two digits, showing that the world’s desire for solar power is diversifying, with an increasing number of countries turning towards the sun.
Solar’s success story over other technologies has a variety of reasons, but a key factor is its rapid cost reduction over the last decade, which has finally led solar to become the cost leader.The latest Levelised Cost of Energy (LCOE) analysis, version 13.0, released in November 2019 by US investment bank Lazard, shows utility-scale solar’s cost improving over the previous version by 7%. Utility-scale solar is again cheaper than new conventional power generation sources nuclear and coal, as well as combined cycle gas turbines (CCGT) (see Fig. 4).
However, solar has started to compete with another fossil fuel segment: gas turbines used to meet peak demand. With the rapidly decreasing cost for batteries, solar + storage can outcompete gas peakers, depending on region and framework conditions. Last year in Arizona, for instance, a utility ordered a 100 MW/4 hour battery storage system to provide peaking capacity of its solar power generation fleet.
The general rule is that solar power prices are considerably lower in economies with stable policy frameworks and high credit ratings compared to developing countries. But in recent years there have been an increasing number of examples showing impressively low PPAs in developing countries as well. With support from international lenders, primarily development financing institutions (DFI), the risk for solar projects can be substantially reduced in these
All other solar markets considerably lag behind the top 5 In that group, there are only two noteworthy changes: following Italy at 20.6 GW, Australia at 16.0 GW and UK at 13.2 GW, South Korea now turned into a 10 GW+ solar power generation capacity market of 10.9 GW by the end of 2019. Moreover, Spain, on grounds of its massive growth streak adding 4.8 GW, that led to a total installed solar capacity of 10.6 GW, re-entered this top 10 list, replacing France.
Forecast 2020 All leading solar market analysts have significantly decreased their 2020 forecast during the first 5 months of this year, some even twice, to account for the impact of COVID-19 on their market models. The largest shortterm corrections came from IHS Markit, which reduced its 2020 forecast by 26%, or 32 GW, to 109 GW in April, from 142 GW in December 2019. By the end of May, the estimates in the analysts’ medium scenarios ranged between 106 GW (Wood Mackenzie) and 111 GW (Bloomberg NEF), with one conservative outlier from the
International Energy Agency (IEA), which anticipates only 90 GW new solar this year, caused by supply chain disruptions, lockdown measures, and emerging financing challenges.Regional market developments 2020 Retrospectively, looking into a crystal ball to forecast the future of solar installed capacities has never been easy for industry experts – the solar market is too dynamic and still hinges on a few countries, in particular China, that can influence the course of the entire industry. However, our Medium Scenario forecast clearly shows that China and the rest of Asia-Pacific will continue to dominate global demand Once the Chinese solar market programme restructuring is completed, scheduled for next year, the country is also expected to
develop more smoothly. In 2021, Europe is expected to grow its shares slightly, while the American Continent is estimated to slightly lose shares.
We are also upbeat about the United States’ solar market developments, where we expect newly installed capacity to increase by 21% to 16.1 GW, from 13.3 GW in 2019 This is not as optimistic as the US Solar Industries Association (SEIA), which argues in their market analysis
that utility-scale solar will propel the US solar industry to a record 18 GW due to a project pipeline of 51 GW, despite massive job losses in the sector due to a decline in residential demand But our view is a bit more cautious, as COVID-19 was not over in the US in early June, and the safe-harbor provision offered companies to delay project completions.
India (103 GW) – and 10 countries to add around 20 GW or more – China, USA, India, Japan, Germany, Australia, South Korea, Vietnam, Spain and the Netherlands. The world’s top 5 markets combined are anticipated to install 625 GW until 2024 in the High Scenario and
368 GW in the Low Scenario, covering a share of around 60% and 68% of total additions in that period (last year it was 61% and 68%). In comparison, the top 20 are estimated to add 876 GW over the next five years until 2024 in the High Scenario and 473 GW in the Low Scenario
– this is 36 GW less and 9 GW more than our GMO 2019 5-year assumptions, due to the COVID-19 effect.
Despite the enormous burden of COVID-19 on the global economy, the top global PV markets’ prospects for solar continue to look very good for the next five years Nearly three quarters of the top 20 markets are expected to install at least 10 GW each between 2020 and 2024, according to our Medium Scenario, with new capacity additions anticipated to range from 281 GW for the first, China, to 5.9 GW for Israel, the last on this list.
FOCUS: THE SUB-SAHARAN AFRICAN SOLAR MARKET
Ensuring steady access to affordable, reliable, sustainable, and modern energy (UN Sustainable Development Goal 7) is a key milestone for emerging markets when laying the foundations for sustainable development. SubSaharan Africa is the region with the lowest rates of access to electricity in the world – in 2018, only 48% of the population had access to electricity. In fact, the electrification rate is increasing – between 2010 and 2018, it grew by 14%, from 34% to 48%, and five out of 46 Sub-Saharan countries have reached electrification rates above 90% (Seychelles, Mauritius, Cabo Verde, Gabon and South Africa). But these numbers show there is still a long way to go to power all people. Low-cost and versatile solar energy is a particularly
appropriate solution to speed up that process. The solar potential in Africa is immense thanks to high irradiation (ranging between 1,500 to over 2,000 kWh/kWp per year) and strong demand. Yet the continent’s installed capacity today (3.8 GW) represents less than 1% of the world’s solar capacity, and less than 3% of Africa’s power generation capacity.
The market growth in recent years was enabled by maturing national as well as international support instruments. Policies and regulations for off-grid solutions have improved faster than those for grid electrification. For rural and isolated communities, offgrid solutions such as mini-grids, solar home systems, and solar lamps have received a considerable level of attention as they allow for basic access to electricity even where there is no grid available. This was also the
case many years ago, but what has changed on the commercial side includes the cost of solar equipment, and the business models that are now often based on ‘solar as a service’ or ‘Pay-As-You-Go’ (PAYG) solutions, which have made solar power affordable to a much larger group of people.
HYBRIDISING HEAVY FUEL OIL PLANTS WITH SOLAR IN MADAGASCAR
Malile is a portfolio of three PV projects totaling 42MW that will hybridise existing heavy fuel oil (HFO) plants to grant cheaper and cleaner access to electricity, as part of the strategy of the government of Madagascar. Lidera Green Power PCC is a holding located in Mauritius and owner of the Malile portfolio. The project is supported by Finergreen as financial advisor.In order to meet the expectations of Malagasy authorities which consider these projects emergency projects, a pilot phase is currently under construction on each site combining 5.65 MW that will be commissioned in the coming months. For this, Lidera has already spent over USD 2 million on the 3 projects and now seeks to leverage them with USD 6 million debt. A long-term debt will be raised in the first half of 2021 to build the remaining 36.3 MW. The
bridge debt financing will be repaid or converted into a subordinated loan.
COVID-19 IMPACTS ON SOLAR
These are important questions for the global solar industry, which not only faces short-term challenges from lockdowns and similar restrictions on personal movement and economic activity but is also looking to benefit from an acceleration in the energy transition away from fossil fuels and towards clean energy technologies. The Global Solar Council has been active in analysing the impact that the COVID-19 pandemic has had on the PV industry worldwide, and gathering input on how solar businesses could best be supported at a policy level. There are immediate actions to help companies weather the short-term shock. Beyond this, however, many are looking to governments to seize the opportunity to promote clean energy and climate friendly investments that will accelerate solar projects.The situation was equally dire in Italy, one of the first European countries to be heavily hit by the pandemic. According to the Italia Solare association, one in five solar companies said they risked being pushed out of business by the prolonged disruption, with more than a quarter saying they were preparing to cut more than 25% of their workforce. That prompted Italia Solare to write to the prime minister and call for a “zero-cost” green stimulus package capable of creating 100,000 jobs.
Solar is key in protecting jobs, promoting health In the US, where the solar industry employed 250,000 people pre-COVID, and was on track to add nearly 50,000 more workers this year, the focus has been on protecting solar jobs and stimulating the economy. “As one of the fastest-growing industries in America, the solar industry is poised to lead the U.S. out of the massive economic recession caused by COVID-19,” stated the Solar Energy Industries Association (SEIA). “With the right policies in place, solar can be a crucial part of the solution to rebuild America’s economy and put people back to work.”
GW-SCALE SOLAR POWER MARKETS IN 2019
In 2019, 16 countries installed more than 1 GW of solar; a 45% growth rate compared to the 11
GW-scale solar markets in 2018 While we anticipate the number will slightly decrease to 14 this year due to negative impacts from COVID-19 on solar demand, we expect growth to continue reaching 19 GW-scale markets in 2021, and at least 21 GW-scale markets in 2022.
U.S. Solar Industry Poised to Lead Economic Recovery Efforts The world has changed dramatically since last year’s Global Market Outlook in small ways, as many of us adapt
to teleworking and socially-distant living, and in profound ways, as this public health crisis deepens and US unemployment reaches its worst level in generations. And more recently, our country, with notable activism around the world, is confronting racial injustice.
Overview of PV developments The average solar radiation in India is approximately 4-
7 kWh/day for about 300 days each year. In order to utilise this potential, the Union Government of India has identified solar as a key pillar for its power supply strategy and committed to one of the world’s largest solar energy capacity expansion programs. Over the
past five years, India installed around 30 GW of solar, with an annual capacity addition of solar in fiscal year (FY) 2018-2019 standing at 6.5 GW.
Solar/RE target By the end of 2022, India’s government targets 100 GW of solar installations, of which 60 GW will be from utility and 40 GW will be from rooftops. This ambitious goal has
triggered a high intensity of solar energy deployment in the country. India’s overall target by end of 2022 is to install 175 GW of RE. While solar will provide the largest share, wind power is targeted to contribute 60 GW, bio energy is planned to provide 10 GW, and small hydro power is foreseen to contribute 5 GW. It is envisioned that by 2030, 40% of India’s power needs – projected to reach 15,280 TWh – will be covered by renewable energy, up from 21.4% in 2019.
Utility-scale vs. distributed and rooftop solar development and plans For now, India’s solar market is driven by large-scale ground mounted projects. As of September 2019, 82.3% of India’s installed solar cpacity came from utility-scale plants. The country’s energy system is composed of an installed capacity of around 28.9 GW ground-mounted and 4 GW of rooftop solar electricity (MNRE 2019b; SPE 2019). With many utility-scale projects in the pipeline,
this trend is likely to continue. Ground-mounted solar projects, which predominantly operate under the Solar Parks and Ultra Mega Solar Power Projects scheme, are tendered by the government through a reverse bidding process.
announcement of a dedicated domestic module procurement scheme for CPSUs in India. The
government believes a comprehensive manufacturing policy is necessary to strengthen domestic manufacturing and position India as a quality producer of PV modules. Amidst the aftermath of COVID-19 the government has declared solar manufacturing as one of the champion sectors where special incentives will be given to this sector for making India self-reliant. A recent tender, where an Indian company has won a contract to develop 8 GW
of solar projects and establish 2 GW of additional solar cell and module manufacturing capacity at a cost of 6 billion USD, is an example of Indian government’s seriousness about solar manufacturing.
JAPAN Overview of PV Developments The Japan Photovoltaic Energy Association (JPEA)
estimates that approximately 7.0 GWDC (5.2 GWAC) was installed in 2019, resulting in a cumulative installed PV capacity of 63.1 GWDC at the end of 2019. After reaching the record capacity addition of 10.8 GWDC (equal to 9.8 GWAC) in 2015, the Japanese PV market has been trending downwards. This trend is likely to continue up until the mid-2020s, largely due to reduced FIT support for solar PV in Japan. With that said, JPEA expects that solar PV capacity will increase again in the late 2020s, due to the improving cost competitiveness and innovation of business models (e.g. from FIT/FIP based models to Corporate PPA type ones). Drivers for Solar Growth in Japan The FIT schem has been, and continues to be, the strongest support for solar PV growth in Japan. However, the role of FIT will gradually become smaller with the growth of other drivers, such as onsite self-consumption business models.
The self-consumption business model for commercial and industrial users is expected to grow
in Japan in the coming years. As the LCOE of solar PV is already comparable to retail electricity variable prices for commercial and industrial users, on-site self-consumption PV systems are becoming an attractive option for corporate users.
VIETNAM Overview of Solar PV Developments Solar development in Vietnam was at its infancy when, in April 2017, the government introduced its first feedin tariff (FiT) scheme. Under this support scheme, utilityscale solar projects that began operations before the
end of June 2019 have been granted a generous 20-year tariff at 9.35 US cents/kWh. In parallel, a net-metering scheme has been set up to support distributed generation, with buying and selling prices determined on an annual basis, depending on the VND/USD exchange rate.
international travel remain, but any delay caused by the health crisis is likely to be more than counterbalanced by the urgency of completing installations by the end of
GLOBAL MARKET OUTLOOK 2020–2024
When solar entered 2020, it was prepared for a solar decade. Impressive cost reductions have
made solar the lowest-cost technology in many regions of the world. The 1 US cent/kWh power price range was achieved in several tenders last year, and with the backing of developing financing institutions, the 2 US cent/kWh range was reached even in the first tenders in developing countries. Corporate solar PPAs had been increasingly finding traction in the market, and with the cost of battery storage quickly dropping as well, solar plus storage at utility-scale had been starting to become an attractive solution instead of gas peakers to utilities. In addition, residential and commercial rooftop systems, increasingly used for self-consumption after reaching socket parity and providing attractive returns, had proven to be
more and more popular, reaching around 33% of total solar power installations by the end of 2019.
But then the COVID-19 pandemic basically shut down the world’s markets, and disrupted solar’s hot streak – China was impacted the first quarter of 2020, and the rest of the world was hit in the second quarter. While the installation of large-scale power plants had been affected to a much lesser extent, the rooftop PV segment has been generally hit much harder, primarily in countries with full lockdowns, as the social distancing measures made it difficult for installers to get access to buildings. A poll conducted by the Global Solar Council showed that solar businesses around the world were heavily impacted by the lockdown. Depending on how bad the economic slump will turn out, homeowners and SMEs might delay or even cancel their solar investment plans completely. Also, the International Energy Agency (IEA) noted that the growth of renewables altogether may slow down for the first time in history, and distributed solar PV potentially taking the biggest shock. In our Medium Scenario, we estimate that new global solar PV installed capacities will drop by 4% year-on-year to 112 GW in 2020. When compared to last year’s GMO’s 144 GW forecast for 2020, this decrease would be much higher, at 22% or 32 GW. Now, governments have the opportunity to accelerate the energy transition and realise the structural benefits renewables can bring regarding economic development and job creation. With the right policies they can enable low-cost solar to reach its full potential and lead the energy transition.
But given that the right policy support measures are taken to accelerate the deployment of the lowest-cost clean power generation sources solar and wind – and enabling also the large scale production of renewable hydrogen to help decarbonise our society before 2050 –, the 2020s could indeed evolve into a solar decade, fully unleashing the power of the sun.
Source:Solar Power Europe