Solar energy’s vital role in the global energy mix has been secured after recent figures showed it now accounts for 1% of all global electricity demand. This is the equivalent of 33 large, coal-fired power plants of 1GW. The 1% milestone has been a long time coming, but it finally puts to bed the question of whether solar is a mainstream renewable energy source. With the lure of solar power generation spreading worldwide, how long will it be until it reaches the next landmark of 2%?
Solar Power Europe’s Global Market Outlook for Solar power 2015-2019, which announced the 1% milestone, found that global solar capacity is now 178GW, which is 100 times more than it was 14 years ago.
GTM Research solar analyst Adam James told PV Tech that he expects global installed capacity to double by 2017. Thus, while it took 14 years to reach the 1% figure, solar will take just two years to reach close to 2%. However, James admitted that, in this case, GTM’s forecasts are more optimistic than most competitors.
Josefin Berg, senior analyst solar power at IHS Technology told PV Tech that she also expects global installed capacity to double in 2017/18, however, in the same period, overall power generation will increase worldwide. Furthermore, large-scale solar deployment in areas with poor solar irradiation won’t make a huge difference in reaching that 2% mark. As a result, IHS forecasts that solar will account for 2% of global electricity demand sometime before 2021.
China, Japan and the US are consistently cited as the main drivers of solar installations in 2015, and analysts agree that plenty is riding on China to keep the market growing. For example GTM’s latest report said that the Asia Pacific region will install 50% of all solar capacity in 2015 with China accounting for half of that. Clearly any changes in policies that support solar in China, is the biggest risks facing PV growth.
On the other hand, while there is a big rush to install PV in the US before the ITC tax credit expires, Berg said that any prolongation of this tax credit or an introduction of a grace period for certain projects could significantly help accelerate the PV market.
Meanwhile, in the background, developing countries are increasingly being earmarked as potentially major solar players. The key question with all of these emerging markets is when?
Finlay Colville, head of market intelligence at Solar Media’s new Solar Intelligence Group, said: “Reaching the 1% figure may seem rather small, but solar has barely touched most countries and regions globally. Until now, it is mostly contributions from a few individual countries that has driven deployment to this mark. Getting to 2% will likely see a much broader spread of countries adopting solar, in particular across the Middle-East, Africa and Latin America.”
James said that when you aggregate all of the smaller developing markets together, they will go from accounting for 1% of solar today to 17% over the next five years, marking a significant shift in the spread of the market.
India, with its enormous 100GW by 2022 target, could surprise all the doubters and contribute to a fast-approaching 2%, buoyed by the latest US$20 billion investment in the country’s renewable energy market by Japanese telecoms provider-turned solar developer Softbank. On the other hand, it could stall, hampered by the classic barriers of poor grid infrastructure, land availability and financing.
Berg said Chile is installing 1GW this year but is likely to calm down as a relatively small power market, while Brazil will only start impacting the global market in 2018.
More importantly, James highlighted that it is not yet known how fast solar can grow, with markets in Latin America having grown far faster in the early stages than Europe or Asia Pacific ever managed to.
He added: “Looking at historical installation figures does not give you any kind of guidance for the future.”
Clearly continued price declines in solar equipment and installation will play a major part in the transition, but in order to see the forecast levels of growth, James said companies must shift from the subsidised model to a customer focus.
In the old business model, mostly driven by feed-in tariffs, companies were largely insulated from market forces and they did not have to be particularly customer focused. Nowadays, however, without being able to rely on governments as an off-taker, firms must go out and find clients while competing with other energy sources and solar providers.
The result is the introduction of new financing vehicles such as yieldcos and securitization in order to bring in capital, keep projects moving, and make prices more competitive.
Meanwhile, new regulatory structures that are designed for more than one type of energy resource will be key to help integrate the intermittency of solar power generation.
James said: “What worked in the past isn’t necessarily going to work in the future.”
He added that this is why Europe, which may no longer be the largest solar market in the world, will still be critical as a pioneer of these developments in the solar model.
Reaching 2% of global electricity demand, is not simply a case of installing enough solar capacity, for with the rise of energy storage technologies, optimising the use of solar within grids could become a key accelerator.
Colville said: “The shift will be from installed capacity to energy supply, and this may see solar’s overall contribution being even more important than the 1% figure of today suggests.”
Chile's solar market has developed faster than the European market ever did. Source: SunEdison.