Global Market Outlook For Solar Power 2021 – 2025

Global solar market In 2020, a year the world suffered from a severe health and economic crisis, solar was again the power generating technology with the highest net installed capacity, with a 39% share of all new installations for the year (see Fig. 1). This is more than twice as much as all new fossil fuel capacity combined. Like nuclear, coal does not even appear on the chart anymore, as its decommissioned capacity outweighs new installations. Despite its considerable growth rate in 2020, solar’s dominance decreased compared to the year before, when it took 48% of all new energy capacity. But this is mostly due to an exceptional year for the wind energy sector, which grid-connected a hitherto unseen record level of 114 GW, based on a volume from China where the end of its FIT subsidy programme for onshore wind triggered a rush much larger than expected. When summing up all new renewable power generation capacity shares, we see a steady upward trend in recent years. In 2020, 83% of new installed capacity belonged to renewable technologies, up from 59% in 2016.

Global solar market While solar’s leadership in annual global installations for the last few years is indeed a very positive development, this needs to be taken into perspective. Solar was able to increase its share among operating power generation plants by 1.5 percentage points last year, but the total capacity amounted to only 10% by the end of 2020. In terms of actual output, solar improved by 0.5 percentage points year-on-year, but cumulatively it barely generated 3.1% of last year’s global power production (see Fig. 2). This is also valid for renewables as a whole, which improved by 2.3 percentage points to 39% of total generation capacities, and by 0.9 percentage points to 29% of the world’s total power generation. The good news when taking a much bigger and longer perspective is that solar’s share of the market is continuously increasing. And with no end for improvements in cost competitiveness in sight, the potential for solar power is only growing.

Regional Update The strong performance of China in particular more than compensated for India’s losses, pushing up demand for solar in the Asia-Pacific region (see Fig. 9). Through the addition of 84.9 GW, the world’s largest solar region expanded its dominance by 4 percentage points to a global share of 62%. This means a halt on the downturn of the previous two years characterised by China’s weakness that followed its record year in 2017, when three quarters of the global solar capacity was installed in Asia-Pacific, and 52% in China alone (note that due to its large size, China is listed separately from the Asia-Pacific region). In 2020, Asia-Pacific was again home to 6 of the top 10 solar markets and
7 countries that added GW-scale capacities, unmatched by any other region.

The Middle East and African (MEA) region absorbed 3.5 GW of new solar power capacity in 2020, about half of the 6.8 GW installations in 2019, and falling back close to the level of the 2018 market volume of 3.1 GW. Though covering over 60 countries, the analysis of MEA’s negative market performance is rather simple, and its outcome has little to do with COVID-19. Both Egypt and the UAE turned into GW-scale markets in 2019, when each finished a major solar power plant project: in Egypt, the Benban Solar Complex with almost 1.5 GW was fully commissioned; in Abu Dhabi, the 1.17 GW Sweihan project entered commercial operations. While several very large-scale projects are being developed in the UAE and other countries on the Arabian Peninsula, nothing major was grid-connected in 2020. The Middle East’s largest solar market was Israel despite a 20% drop in newly installed capacities to 505 MW in 2020.The African Continent was dominated by South Africa, which exceeded the GW-level deployment for the first time by installing 1.3 GW in the utility and distributed segments, a 154% improvement over the previous year. South Africa has seen the start of a solar renaissance under its current president. After solar project PPAs from the 4th round tender in 2015 were finally signed in 2018, an Integrated Resource Plan with a 6 GW by 2030 solar target was passed in 2019, and a 5th round tender launched in 2021.

However, examining closely the installed PV capacity from a per-capita perspective, the global solar picture looks completely different. Despite its strong dominance, none of the global top 3 markets – China, USA and India – figures on the W/capita top 10 list (see Fig. 13). While three of the four countries with the highest installed system capacities per inhabitant – Australia, Germany and Japan – also belong to the 10 world’s biggest solar markets, several others do not, including the new No. 3, the Netherlands, which, if all goes as forecasted, will end the year even in the second place. The old and new per capita solar leader will again be Australia, with an impressive installation level of over 1 kW per inhabitant.

In China, the transition from the uncapped feed-in tariff system to a new regime of auctions and subsidy-free projects did not prevent the ground-mounted sector from expanding significantly. The Chinese market still largely relies on large-scale projects, which made up an even higher share in 2020 than the year before — about 70% of the annual capacity. Hard deadlines for subsidised utility-scale systems propelled gigantic demand. However, support for rooftop solar had this segment grow as well on absolute terms, by over 3 GW year-on-year. In the United States, the 2nd largest solar market, a deadline for the ITC that was surprisingly extended end of December 2020 at the same 26% level did trigger a run on ground-mounted solar. At the same time, demand for residential rooftop systems grew less, while the C&I segment even declined. In sum, over 15 GW of utility-scale projects were installed, increasing that share to 81% in the United States last year. While the two largest solar markets, China and the United States, saw an expansion of large-scale projects, ground-mounted installations experienced a sudden slowdown in many other geographies.

with tenders for utility-scale solar and frequently struggle to set up the distributed rooftop segment, even if politicians generally prefer PV on rooftops as it avoids any potential conflicts on land use. A good example of such a development is India, which targets 100 GW of solar by 2022 with 40 GW coming from rooftop solar. However, with less than 5 GWAC of rooftop systems reportedly installed at the end of 2020, reaching this target is basically impossible. Not differently from 2019, the Indian rooftop market failed to grow in concert with its solar ambitions. While the utility-scale segment dynamics have been quite varied across the world, rooftop solar has experienced growth almost everywhere. The most notable improvement comes from Vietnam, which entirely shifted its market segmentation towards distributed solar, with over 8 GW of rooftop systems installed in 2020 alone. Vietnam is a very encouraging example, showing that the solar industry is now ready to develop even more sophisticated market segments like rooftop PV from basically zero to world record levels in a very short time – all it needs is the right policy and technical framework conditions, and a workforce with the right skillset.

Off-grid solar

Introduction Achieving the goal of universal access to affordable, reliable, sustainable, and modern energy by 2030 (UN Sustainable Development Goal 7) is a key target for emerging markets when laying the foundations for sustainable development. There are currently an estimated 759 million people worldwide without access to electricity and around 1 billion people with access to an unreliable grid. With progress on economic development and electrification stalling over the COVID pandemic, the World Bank forecasts roughly 100 million people in emerging markets and developing economies (EMDEs) will have fallen back into extreme poverty, increasing the importance of affordable electricity solutions. Off-grid solar installations, that are not connected to a utility grid, will be key in answering this energy demand and achieving universal energy access. While off-grid solar plays an important role in the electrification efforts of emerging economies, significant amounts of off-grid installations can also be found in the Global North. This section of the Global Market Outlook will investigate Chapter supported by GET.invest. off-grid solar’s role in supplying global energy needs in a sustainable and affordable way.

Market Analysis
In 2020, the global installed capacity of off-grid solar continued to increase with more than 1.5 GW added. However, annual growth in new capacity only saw a 9% increase from 2019, whereas between 2017 and 2019, growth had consistently been in double digits. This slowdown can largely be ascribed to the effects of the COVID-19 pandemic, restricting the activities of businesses. The most successful areas for the off-grid solar market are currently the Asia-Pacific and Sub-Saharan African regions, which made up over three quarters of the 2020 annual off-grid solar PV market collectively. This is largely due to the number of people and businesses that either do not have access to electricity or suffer from unreliable grid connection and the fact that off-grid solar forms a key pillar of national electrification efforts.

Solar investors in emerging markets face various economic, financial, institutional, and technical challenges, including limited political will and institutional capacity, political and economic instability, a lack of transparency, ineffective regulatory frameworks, and poor grid capacities. Fortunately, there are several international support bodies and instruments that exist to help overcome these obstacles. One of these instruments is GET.invest, a European programme that supports investments in decentralised renewable energy, supported by the European Union, Germany, Sweden, the Netherlands, and Austria. Services include market information, a funding database, matchmaking events and access-to-finance advisory via the GET.invest Finance Catalyst.

Commercial & Industrial The commercial and industrial (C&I) off-grid market is a relatively young one and, unlike SHS and mini grid systems, does not serve bottom-of-the-pyramid customers in rural areas. Instead, C&I projects aim to provide power to corporates such as hotels, industry, shopping centres, small and medium sized cold storage facilities, telecoms towers, mining companies and larger SMEs with the capital available to pay for the installation or with strong balance sheets to access financing for these projects. However, the segment also extends to public buildings such as universities, schools, and hospitals. Particularly in Sub-Saharan Africa, many of these entities suffer from expensive and unreliable grid connections, leading them to install and rely upon expensive diesel generation to answer their power needs. As private and public entities seek to improve their emissions profile and bring down costs, the C&I segment of the off-grid market is expected to boom.

Cells PERC – the workhorse With basically all the recent gigantic solar cell manufacturing capacities based on Passivated Emitter Rear Contact (PERC), this cell architecture has become the state-of-the-art cell technology. A considerable price drop for PERC production equipment paved the way for multi-GW scale expansion in China. PERC has progressed at a rapid pace in terms of efficiency improvement of
greater than 0.5% absolute per year. While the pace has slowed down, several manufactures have already exceeded 23% efficiency in commercial production of PERC cells. With PERC technology being flexible towards production using larger wafers, it has further strengthened its position. Another bonus is its bifaciality, as it is very simple to tweak PERC into a cell that produces power on both sides without any additional costs. With that said, the bifaciality of this technology is on the lower side of crystalline solar cell varieties.

COVID-19 impacts on solar Prospects for solar power shine brighter as industry’s expansion accelerates even during the COVID-19 pandemic. Resilience and historically-low costs make solar PV the new “new king” of electricity markets but there is ample scope to improve policy support. The solar sector was impacted hard in 2020 due to the COVID-19 pandemic, with companies experiencing severe disruption in their day-to-day operations and supply chains, yet it demonstrated impressive resilience nonetheless, emerging at the end as one of the few bright spots in the global economy. One year later, as vaccines and stimulus packages are phased in globally, the prospects for the global solar PV industry have grown brighter as industry sentiment improves and policymakers in various regions endorse investments and concrete measures to support dramatic growth in renewable energy. The upbeat outlook emerged clearly in a survey in Q2/2021 carried out by the Global Solar Council which heard from its members – comprised of national and regional solar associations – as well as solar business leaders around the world. The engagement initiative was aimed at producing a snapshot of the sector’s current health and gathering insights into possible post-pandemic scenarios for the solar market to ultimately understand the opportunities and barriers to solar development at this very important stage for the energy transition.

How to accelerate solar growth What kind of support are industry participants expecting from governments? To be sure, there is a big focus on better permitting and simplification of authorisation procedures, improved power market access rules, better financing conditions and mechanisms, tax reductions and incentives for PV investment and self-production. Overall, there is certainly an expectation that the policy ambition needs to be raised in many countries, with a majority of respondents saying renewable energy and PV targets were not high enough. Indeed, 18% said their government had no specific target and another 46% stated there needed to be a “significant” raising of ambitions (see. GSC SURVEY QUESTION 2).

GW-scale markets In 2020, 18 countries installed more than 1 GW of solar; one more compared to the 17 GW-scale solar markets in 2019 (see Fig. 19). The negative impacts from COVID-19 on solar demand were not as bad as we forecasted last year, when we expected the number of GW-scale markets to decrease. Based on this more positive outlook, we also expect growth to continue reaching 20 GW-scale markets in 2021, 23 GW-scale markets in 2022 and at least 29 GW-scale markets in 2023.

Like in the previous Global Market Outlooks, national solar associations from markets that have added more than 1 GW in the previous year have been invited to present their local expert views on their home’ markets (which sometimes differ from our estimates that are based on several sources). Many of these associations, like our organisation, are members of the Global Solar Council (GSC), which is a long-time supporter of the Global Market Outlook. For the GW-scale countries for which we did not receive contributions from local associations (this time, China, Germany, South Korea, Taiwan), we have written the overviews based on our SolarPower Europe research.

China Overview of PV developments China installed 48.2 GW in 2020, representing a 60% increase from the 30.1 GW installed in 2019. Affected by the COVID-19 pandemic, most of the installations were completed in the second half of the year, with a monthly record of 29.5 GW installed in December alone. Approximately 68% of the annual added capacity concerned large-scale ground-based power stations, while distributed power stations accounted for about 32%. Regarding cumulative capacity, China reached 253 GW at the end of 2020, accounting for almost one-third of the global PV installed capacity. This translates to a 23% increase from 2019. From the 253 GW, utility-scale PV represents 174 GW and distributed PV accounts for 78 GW. With these numbers, the market almost returned to the record-level it experienced in 2017, ending two years of slower growth. China remains the world’s Number 1 in terms of both annual installed solar PV capacity and total operating solar PV capacity.

Driver for solar Growth In China, solar and wind are already cost-competitive with fossil fuel generated power and will soon be cheaper than coal – with or without CCS – even with the most conservative assumptions on annual full load hours. Projections by the National Development and Reform Commission (NDRC) illustrate a steadily decreasing levelised cost of electricity (LCOE) for solar and wind, with solar being the cheapest option. The two renewable generation sources are considered as key pillars of the future energy system, as demonstrated by China’s National Energy Administration (NEA) target of installing at least 90 GW wind and solar in 2021.

Global market outlook 2021 – 2025 Solar is back and stronger than ever before. The coming years will see much more solar power plant capacity come online than anticipated in the GMO 2020, which was written in the middle of the first wave of COVID-19 last year. In this GMO 2021, we forecast larger growth for each of the coming years than last year (see Fig. 23). The deployment assumption is ‘only’ 9% higher for 2021, but that is because 2020 turned out to be such a surprisingly good year. Between 2022 and 2024, our growth expectation for new installations is between 20–23% higher than in last year’s report. While last year we forecasted global demand to reach 200 GW in 2024, we now expect this level to be reached two years earlier, by 2022. We also expect new annual installed capacities to reach 266 GW in 2025 in our Medium Scenario; to put this into perspective, only six years ago, in 2015, this was the world’s total installed solar power generation fleet.

Solar’s cost leadership improved again in 2020, now outcompeting fossil fuels and nuclear in any unsubsidised investment case, and it will continue its cost-reduction path for many years to come. The current silicon supply shortage and other material constraints that have led to temporary solar product price hikes, are only brief incidences that are already being resolved. Many recent product innovations across the value chain – as highlighted in our chapter on technology trends – further support solar’s leading role. The latest major trend in the energy transition is ‘green hydrogen’, which refers to hydrogen produced from renewables, mostly solar and wind. If only a fraction of the plans recently announced, in particular in Australia, come to fruition, solar installation numbers towards the end of that 5-year forecast could be significantly larger.

In conclusion, we need to be more ambitious when it comes to solar deployment with more support from policymakers, in order to implement better policy frameworks that enable solar to reach its full potential; COVID-19 recovery packages are a good opportunity to take advantage of the job intensity of solar. While it is certainly impressive that solar adds larger year-on-year power generation capacities than any other technology, with 70% of global power still coming from non-renewable polluting energy sources, with solar making up just 3% of the power output, there is an urgent need to accelerate growth rates to keep the 1.5°C global warming limit within reach.


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