The new Lux Research Report, “Market Size Update 2011: Putting the Rest of the World on the Map of Global Solar Demand,” has reached a hypothesis that sees solar demand not only shifting to Asia and North America, but solar installations potentially growing to 37.5GW by 2016. However, even as installations have the possibility of achieving a compound annual growth rate of 15.5%, the report concludes that solar market revenues will remain fixed as price declines overtake volume growth.
Lux conceded that even as solar subsidies have been capped, cut and cancelled over the past few years, solar installations continued to grow. Germany was the driving factor behind the solar installation boom, but the report notes that as manufactures draw towards near-term limits on cost reduction, the German solar market will decline and open the door open for high demand to shift to Asia and North America. The report analyzed the levelized cost of electricity (LCOE) and the internal rate of return (IRR) across 156 countries, states and regions, which led analysts to predict the demand shift to take place over the next five years.
According to Lux Research, Japan, China and India will become influential players for significant volumes with the US joining due to its government’s support of tax equity through 2016 and several state-level programs. Combined, these factors should lead, according to Lux, to an increase in global megawatts installed, but revenues will remain sluggish as price struggles against volume growth.
“The global solar market for grid-connected systems will grow from 15.8GW in 2010 to 37.5GW in 2016, a compound annual growth rate of 15.5%,” said Lux Research Analyst Matt Feinstein. “However, price declines will outpace volume increases, at least at first – the industry will actually shrink on a revenue basis from US$64.4 billion in 2010 to US$56.9 billion in 2012 before recovering to US$65.4 billion in 2016.”
The new report additionally touches IRR markets, subsidies and grid parity and the commercial installation sector. Lux found that the primary IRR markets, such as New Jersey, Australia and Greece, would continue to be at the forefront for 2011. The research firm noted that with subsidies, many markets have IRRs that are worthwhile for investments by project developers. Per the report, appealing residential markets include Australia with a 52% subsidized IRR, Greece at 32% and Ontario at 27%. On the commercial side, New Jersey and Portugal, at 42% and 37%, respectively, are followed closely by Hawaii at 34%. Lux concluded that it foresees feasible investment targets increasing to make up 45 residential markets and 88 commercial markets by 2016.
The market report further advised that subsidies and grid parity are not essential to generate positive demand; rather it is the projected future increase in the cost of retail and wholesale power that is needed for positive demand. Lux pointed to Brazil, which is expected to attain a 12% unlevered, unsubsidized IRR for commercial mc-Si systems at the end of 2015, even though solar will not yet have reached grid parity.
The Lux report additionally commented on its findings that commercial rooftop markets will reach grid parity the fastest, growing from one in 2010 to 10 in 2016 and will include markets such as the Dominican Republic and Nicaragua. Hawaii, which is expected to become the first to accomplish residential grid parity in 2011, will join a total of seven other residential markets including Italy Denmark and the Ukraine. Lux did acknowledge that the same outlook is not yet foreseen for the utility ground-mount market, as its numbers remain small.