EU solar markets 2020
Solar power in the European Union has shown strong resilience in 2020 despite Coronavirus negatively impacting everyone’s lives in many ways. While the solar industry has successfully worked on further reducing costs for solar power generation, commercial power plant developers and operators have been dealing with unexpected competition in 2020. Due to
lower economic activities, industrial and wholesale electricity prices dropped dramatically across the Continent.
In 2019, large-scale solar power plants easily outcompeted both industrial and wholesale
electricity prices in southern and northern Europe in basically any interest rate environment. Only a few months later, the business case for large scale solar was different, requiring much better financing conditions to beat wholesale power prices. But this and other challenges brought upon the European solar sector through Coronavirus have had less impact than anticipated.Surprisingly, demand for solar power technology in the European Union did not decrease but rather increased notably in 2020. EU members states installed 18.2 GW in 2020 – that’s an 11% improvement over the 16.2 GW deployed in the previous year (see. Fig.2). This makes 2020 the second-best year ever for solar in the EU, only topped by 2011, when 21.4 GW was installed. The number is about 12% less than what we had forecasted in last year’s Medium Scenario of the EU Market Outlook, but higher than in our Global Market Outlook published in June, when we had strongly revised the number downwards after the first
Germany is again the largest solar market in Europe, a position it held for most of the time over the last 20 years, interrupted only six times, once by Italy, twice by Spain and three times by the UK. After a consolidation phase following the first full feed-in tariff based European solar boom, the Continent’s largest economy’s solar sector has been experiencing a second boost as of 2018. This is due to a combination of self-consumption with attractive feed-in premiums for medium- to large-scale commercial systems ranging from 40 kW to 750 kW.
It is also due to auctions for systems up to 10 MW and a tried and tested regulatory scheme on the one the hand and solar’s steadily improving cost competitiveness on the other hand. After a first small subsidy-free system of 8.8 MW was installed in 2019, several more powerful ones have followed in 2020, with the country’s largest solar power plant, a 187 MW utility-scale system starting to feed its first electricity into the grid in November while still being under
construction. These developments have enabled Europe’s dominant solar market to grow by around 1GW per year for the last 3 years, reaching 4.8 GW in 2020, 25% more than last year, and 74% higher than the second largest European market.
The EU-27 member states’ cumulative installed solar capacity ranking in 2020 has remained basically the same Germany keeps the major share, operating the largest capacity of solar power plants in the European Union, with 54.6 GW of total installed capacity. Germany’s distance from the far off second place is getting even larger, as Italy’s solar fleet, which
added only around 0.8 GW, now consist of 21.3 GW.ne major difference in our ranking is due to Brexit,which means that last year’s No. 3, the UK, is not listed anymore. Instead, Spain takes over the third rank in the EU with 13.2 GW, which is still a few hundred MW behind the UK. While one two-digit GW market was lost, another one has come up. By the end of 2020,
France is estimated to generate solar electricity from 10.9 GW. The only other EU market about to touch the two-digit GW level in 2021 is the Netherlands with a 2020 year-end cumulative solar capacity of 9.2 GW. All Top 10 EU markets operate over 1 GW of solar power capacity, with Belgium above the 5 GW level, Poland, Greece and Hungary in the 2-4 GW range, and
the smallest one, Portugal now estimated to own 1.4 GW. Other GW-level EU solar fleets are generating power in Austria, Bulgaria, Czech Republic, Romania and Sweden, with the latter exceeding the GW threshold for the first time in 2020.
Solar per capita The EU country with the largest population, Germany continues to rank highest for another comparison of total installed solar capacity, though in this regard its lead
is much less prevalent. Germany has more solar installed per capita (651 W) than any other Union peer. But the Netherlands has been catching up very quickly on this metric, coming close with 539 W/capita, after each citizen installed an average of 384 W in 2019. All other
Top 10 EU solar markets have per capita installed capacities between 466 W (Belgium) and 283 W (Spain).
The next 4 years of our Medium Scenario can be divided into 2 phases. In a catch-up phase we will see solar projects being built after they were originally delayed or even cancelled due to COVID-19 but are offered new opportunities primarily through incentives from economic stimulus funds. This 20% plus growth phase will be trailed by a more moderate phase, involving a 13-14% growth period in 2023/24. Demand in those 2 years will be driven mostly by customers attracted to solar’s very flexible potential to reduce their energy expenses and improve sustainability. This will involve even more energy companies, investors and corporates as well as residential prosumers, while member states will have implemented the necessary
framework conditions to push and pull renewables in order to meet their 2030 EU climate targets.
In line with our general very positive EU Market Outlook, we are more upbeat on the solar developments of the largest 10 EU markets For most of these markets, the 4-year installation forecasts from 2021 to 2024 (listed in the order of the Medium Scenario assumptions) expect more power additions than in the previous outlook. We now anticipate Germany to be the largest market for the coming years in all 3 scenarios, despite the uncertainties along the EEG
2021 revision, which contains several provisions that will make life much harder for solar investors.
changes for the C&I sector have triggered many companies to look into solar self-consumption systems. Moreover, the utility-scale solar sector is finally seeing renewed interest after the brief 2011-12 FiT boom on expectations of rising wholesale prices and a coal phaseout after 2025. With very little solar traction in Bulgaria in the last few years, our model
shows a large spread from the Medium to the Low Scenario.
horizon (Germany, Italy, Belgium), the rest is supposed to enjoy truly sunny weather. The choice might seem odd at first glance, but these are the EU member states with the lowest growth expectations (Italy 7%, Belgium 10% and Germany 11% CAGR). Nearly all others are expected to boost demand by over 20%. Indeed, Germany will continue to dominate Europe’s solar sector by far. We anticipate the country will reach 81.5 GW of its 98 GW Climate Law target for 2030 already in 2024. But Germany, which met its 2020 climate goals only with the help of COVID-19 impacting its economy, is about to pass a revised EEG 2021 law that
puts several obstacles in the way for its solar sector, which has just recently recovered from a several yearlong market slump (for details, see feature on Germany, p. 45). Italy, despite its ambitious goals for solar, 51 GW by 2030, has seen little progress. A tax incentive as part of the Economic Stimulus for small solar and storage systems somewhat helped, but the long awaited
auctions, which were technology neutral tenders, turned out to be disappointing for solar so far. Different schemes in Belgium’s regions make it difficult for solar investors. The country does not have a federal auction plan for the entire country, the NECP targets are unambitious, among other reasons.
Key policy files
It has been a big year for energy and climate policies, following the announcement in November 2019 that the EU would commit to achieving climate neutrality by 2050, and convert these climate ambitions into a new growth strategy for Europe: the European Green Deal. Following this, key initiatives have been rolled out in 2020, starting with the publication of a European Industrial Strategy in March, the publication of an Energy System Integration Strategy and Hydrogen Strategy in July, and the publication of a European Renovation Wave in October. More critical initiatives are on the way: in December 2020, the European Commission will propose a new framework for EU electricity grids (TEN-E) and review the Clean Energy Package legislation to cope with new ambitions with a view to propose a “Fit for 55 Package” in June 2021.
How can solar companies navigate in this legislative jungle?
SolarPower Europe has cleared the way and summed up the Top 10 policy trends for solar in Europe.
- Clean Energy Package 2.0: reviewing ambitions for 2030 In September 2020, the European Commission proposed to increase the 2030 GHG emissions target from at least 40% to at least 55%. The Commission has updated its Climate Law Regulation proposal from March to include the new 2030 target, in addition to the climate neutrality target by 2050. The Climate Law is due to be negotiated between EU Member States and the European Parliament, with the former not yet settled on a specific figure, and the latter supporting an even greater ambition of 60% GHG emissions reductions by 2030.
- Bridging the gap on carbon pricing Increasing the EU’s 2030 GHG emissions reduction target from 40% to at least 55% means that EU policymakers need to reinforce decarbonisation action across all economic sectors.
- Grid modernisation: building the energy transition’s hardware The increased penetration of variable renewables in the European energy mix to at least 40%, largely driven by decentralised solar capacities, and the high level of electrification of end-uses to around 60%, will deeply change the structure of the energy system by 2030. The limited grid capacity is already becoming a concern, especially in member states that have seen rapid growth of solar installations in the last few years, such as the Netherlands, Spain, and Portugal.
- Solar roofs in the spotlight Achieving climate-neutrality requires additional action across all key sectors of the economy. The European building stock, which currently represents approximately 36% of the EU’s GHG emissions, has struggled to efficiently decarbonise itself over the past decade. Emissions from the building sector are still higher than in 20147 with the rate of new energy renovation in the EU stuck at about 1% of the EU building stock per year.
- Digitalisation, cybersecurity and interoperability: the glue to foster energy system integration
As part of the European Green Deal, the Commission presented a strategy for Energy System Integration on 8 July 2020. An effective, smart, and well-coordinated integration of the energy system will be crucial if we are to decarbonise our economy by 2050 in a cost-effective manner, and transform our energy system to become more secure, resilient, and competitive for the future.
- Solar to Hydrogen: unlocking solar’s potential beyond power The direct electrification of our economies and massive uptake of renewables and solar by 2030 will be the primary driver to achieve climate neutrality by As the most versatile and competitive electricity source globally, solar energy will be a key pillar of this transition.
- Sustainability and circularity: solar products under scrutiny In the context of increased climate ambition and the transition to a renewables-based energy system, the EU is stepping up its game on the sustainability front.
- Rethinking the role of State Aid State aid has been instrumental to improve the costcompetitiveness of solar and kick-start the solar PV market in Europe. In 2020, utility-scale solar installations are competitive with fossil fuels in most countries and subsidy-free solar PPAs develop at a fast pace throughout Europe. The future energy and environment state frameworks must adapt to the maturing solar market yet also address new challenges such as the support of innovative solar technologies (AgriPV, floating solar, BIPV), storage, and renewable hydrogen.
- An EU Industrial Strategy for Solar: reshoring a strong industrial value chain and supporting exports of solar goods and services By 2050, solar energy is expected to become Europe’s prime energy source, with the potential of supplying more than 60% of Europe’s total energy demand.
- Financing gets greener One of the aims of the European Green Deal is to create a conducive policy framework to transition to sustainability. The topic is of importance for solar: to provide a long-term signal to direct financial and capital flows to green investments, the Commission
has announced it will mobilise over EUR 1 trillion of private and public investments towards climatefriendly assets over the next decade.
Assessment of the National Energy and Climate Plans
Solar PV energy holds immense potential for the future European energy mix, driven by falling costs (reaching USD 4 cents/kWh in 2019 according to Lazard) and scalability on rooftops, carports, water surfaces, and many other innovative applications. It is now widely acknowledged that solar, together with wind, will significantly grow in the coming decade: the
IEA forecasts that solar will be the first electricity capacity installed in Europe by 202510, and SolarPower Europe’s European Market Outlook projects doubledigit growth of the annual total solar market over the same period of time.
The NECPs lack clarity on the measures aimed at improving administrative processes, with several plans including very little information to no information. Several plans do not clearly state how they will implement the Clean Energy Package one-contactpoint system for the permit-granting procedure (Article 16 of the Renewable Energy Directive). In general, plans fail to tackle the growing challenge of administrative procedures, across all dimensions: the complexity of permit-granting processes, often involving several layers of regional authorities; the lack of measures to facilitate access to land, such as energy zoning or facilitated environmental permits; and the adaptation of procedures for revamped or repowered projects. In addition, the challenge of access to land for the development of new solar projects is not addressed in the plans.
Flexibility and storage All NECPs include at least some general reference to measures addressing flexibility in the energy system, and the majority refer to actions to implement flexibility provisions from the Clean Energy Package. On the other hand, assessing the current status of storage capacity or demand-side response available for system flexibility is not a common practice. A handful of best-performing countries include exhaustive information on actions to enhance system flexibility, including specific measures and objectives to promote battery storage and demand-side response. However, several NECPs do not make specific reference to battery storage and address the flexibility issue at a general level.
In 2020, four EU solar markets installed more than 1 GW of solar – Spain, Germany, the Netherlands and Poland. While the number has remained unchanged from last year, partly due to the impact of COVID-19 on EU solar markets, the order and composition of the largest markets has changed. Germany and the Netherlands have gained the first and second position
respectively, whereas Spain dropped to rank 3. The latest market to enter the GW-scale is Poland, while one country, France, installed less than the year before and less than 1 GW. For 2021, we expect France, which was the fifth largest solar market in the European Union in 2020, to expand that group again.
Overview of PV developments In 2020, Germany regained its role as the largest European PV market by overtaking Spain. A steep growth trajectory starting in 2018 with 2.9 GW installed (+1.1 GW YoY) continued steadily in 2019 (3.9 GW, +1.0 GW net increase) and is estimated to
reach 4.8 GW in 2020 (+0.9 GW net). Today, Europe’s largest economy not only has the largest operating PV fleet in the EU (54.6 GW); the country with the European Union’s largest population also has the highest ratio of solar capacity per capita – 0.65 kW per inhabitant. Leaving behind uncertainties around the 52 GW cap issue that characterised last year’s policy
debate, a government agreement in July lifted the cap and set a new target of 98 GW by 2030 (which the EEG 2021 draft slightly extends to 100 GW).
Drivers for solar growth Up until now, three types of tenders were held for large-scale solar in the past years: regular solar tenders for projects between 750 kW to 10 MW, special tenders for projects of the same size, and mixed wind and solar tenders. Regular tenders took place three times a year with a volume of 2 x 150 MW, 1 x 175 MW and 2 x 500 MW.
The biggest market segment in 2020 was the commercial rooftop market, with a share of almost 50% (1.2-1.4 GW). The residential market had a share of nearly 30% (0.8-1 GW). Finally, the market for ground-mounted and floating solar PV accounted for more than 20% (0.5-0.7 GW). These estimates are calculated, based on data for the completion of 2020 projects as far as this was available.
The different administrations (central, regional and local) shall put efforts into reducing their terms through digitalisation. They should also review their contracting framework, to have the agility to hire new personnel and substitute sick leaves and retirements. In addition, the design of the authorisation process itself must be reviewed. As it is now defined, the previous steps are a requirement for the next ones, creating bottlenecks all along the process. A higher degree of simultaneity should be introduced so the developers can advance in parallel avoiding getting trapped by a particular question that is being delayed.
Drivers for solar growth This substantial increase in PV capacity is mainly due to a favourable self-consumption scheme for prosumers, which balances out across the year the energy that was delivered to the grid and those purchased from the grid. A discount mechanism allows prosumers to exchange the energy surplus fed into the grid with free electricity in times of purchase from the grid at specific ratios. The size of the discount depends on the system size: 0.8 for systems below 10 kW, 0.7 for systems between 10 kW and 50 kW and 0.6 for small and medium-size enterprises. DSOs have the obligation to purchase energy from these micro-installations. The expansion of the definition of prosumers to include SMEs has encouraged this segment to generate renewable electricity for their own energy needs.
Drivers for solar growth Calls for tenders are the main driver for achieving these targets, with 2.9 GW scheduled every year. Two-thirds of these tenders will be ground-mounted installations. The remaining third will be attributed via calls for rooftop installations. For many years, the French renewable energy association (SER) advocated that projects for rooftop installations below 500 kW be exempt from tendering procedures and eligible to a feed in tariff (FIT), in line with the current State Aid Guidelines. This year, the French Government finally agreed to move forward on this topic, and work is currently ongoing regarding the concrete implementation of this change. This should make things easier for this market segment, where projects were previously limited by the tendering procedure.