‘Solar booming in real economy in spite of bad news in climate negotiations’

However, finance was also highlighted as one of the major barriers to solar adoption across the world. For this reason, GSC launched the International Solar Finance Group at COP, which aims to bring down the cost of capital for solar projects in developing countries from around 15% to 5%.

COP29 also had the additional significance of being the first climate change conference since the world agreed on tripling its renewables target to 11.5TW by 2030 at COP28 in Dubai last year. Solar is expected to contribute considerably to meeting that target.

“We think solar, in a high scenario, could do about 8TW by that date,” claims Dunlop.

The other standout news for the PV industry was the global pledge to double investment in grids and build 25 million kilometres of grid infrastructure by 2030. There were also major drives for both battery storage and long duration storage, with a set target of 1.5TW of storage deployment by the end of the decade. Though not supported by all 200 governments, these targets were backed by 50-60 key governments, Dunlop claims.

“The grid is the biggest barrier for solar to get deployed around the world and solar and storage are like two peas in a pod – we desperately need each other,” she adds.

Cost of capital

The number one barrier to the deployment of solar in almost all developing country markets is that the cost of finance is too high, says Dunlop, which is why it was central to industry messaging this year. Furthermore, PV is unique amongst energy technologies in that almost all its costs are upfront. After installation, there are only relatively minor costs to operations and maintenance (O&M), which makes PV “incredibly sensitive” to the cost of finance.

“In Indonesia, where a solar farm might be offered a 15% weighted average cost of capital loan, that makes the solar completely unaffordable, because all of that expenditure is all right at the beginning of the project.”

Thus, the International Solar finance Group brings together public and private financial institutions with the solar industry to explore how to bring down the cost of capital for solar globally, but particularly in the poorest developing countries.

What’s needed for 1TW annually?

Off the back of the 2TW deployment announcement, Dunlop emphasises the massive scale of additional capacity still required, whilst also noting that the industry could be installing 1TW of capacity annually within the next two years.

“To do that, we need to bring down the cost of finance, find a solution to the grid integration challenges, both in terms of good connection queues and [price] cannibalisation challenges, find a solution for the trade barriers we’re facing, and to mature as an industry in the way we train and skill up our workforce,” she says.

Cannibalisation refers to the phenomenon where, in the middle hours of the day, there is so much solar power generation flooding the system that the power price in the wholesale market either falls to zero or becomes negative.

One solution is to bring more flexibility into the power electricity system using energy storage for load shifting, says Dunlop. Cross border electricity interconnections can also help power flow back and forth between countries to even out power prices. Digitalisation can also be used to match demand with supply, and smart meters can be used to optimise response to time-of-use pricing in electricity.

Balancing trade barriers and employment

The prospect of global geopolitics becoming increasingly strained is a major snag in the proliferation of solar PV at present.

“The US-China relationship is already strained and will become more so when Trump properly takes over,” says Dunlop. “We are very much caught in the crossfire, because [solar is] the most strategic energy technology going forward, which everyone can see in the data, but also, at present, about 80% of solar components are made in China.

“There’s often a narrative, which I don’t think is helpful, that solar is great but too much of it is made in China.”

As a result, GSC is promoting the notion that when a country decides to invest heavily in solar, it is investing in local jobs, since 70% of the sector’s jobs are in the downstream part of the value chain.

“There aren’t that many jobs in manufacturing,” explains Dunlop. “Most of the jobs are in installation and so this idea that, if you invest in solar, all the jobs are just going to China, is not true. Most of the jobs are local jobs: electricians, roofers, construction workers, agricultural workers, building solar farms and building rooftop solar.”

There are already a record number of trade barriers for solar PV around the world, with the US, India and Brazil all having barriers on Chinese imports. Even during COP, news came in that Brazil had hiked import tariffs on Chinese modules to 25%.

Dunlop says that the GSC is trying to change attitudes around these barriers with the council’s motivating factor being the necessity to deploy solar PV around the world as quickly as possible.

She explains that when investigating trade barriers, the council focuses on whether the tariffs are helping or hindering PV deployment in affected countries and that is the measure of whet her the barriers are beneficial for the energy transition at large.

“We need to come together at global level to think about what the solar PV supply chain strategy is for the long term so we can move beyond these very blunt trade barriers and where everyone has their role to play in the value chain, and we have a much more resilient and stable supply chain. China will, of course, always be at the heart of that.”

In pursuit of a long-term strategy that works for everyone, GSC has been meeting with the head of the World Trade Organization (WTO) and talking to governments bilaterally. However, the difficulty is that solar is “the most politicised technology” when it comes to trade disputes at global level.

Solar progress independent of COP gloom

At the macro level, the headlines from COP29 were fraught with negativity.

“If you look at what’s happening in the very technical, intergovernmental United Nations Framework Convention on Climate Change negotiations, it’s all pretty bad news,” says Dunlop – pointing to the US planning to pull out of the Paris Agreement and possibly the United Nations Framework Convention on Climate Change (UNFCCC), Argentina’s delegation being withdrawn from Baku and resentments over to what degree rich nations will support poorer nations financially in mitigating and adapting to climate change.

However, Dunlop explains that official intergovernmental negotiations and the real economy are “almost on twin tracks that run independently of each other”, adding that in the real economy, “solar is booming”.

“The people building solar farm after solar farm and installing solar rooftop after solar rooftop are paying absolutely no attention to what’s happening in Baku,” she says. “In the US, even with the Trump administration coming in, we’re still expecting solar deployment to probably grow year on year. The economics speak for themselves, and [solar has] become such an affordable technology that the projects make financial sense irrespective of what’s happening in terms of politics and policy.

“We’ve almost become, in many markets, resilient to political and policy changes.”

Dunlop also highlights solar energy’s relevance to all three tenets of the Paris Agreement. While it primarily helps to reduce emissions, in its distributed and smaller-scale forms, PV can make electricity systems more resilient to climate impacts and natural disasters in general.

“This is especially important for the tiniest small island states and the very poorest developing countries that are incredibly vulnerable to droughts, floods and hurricanes.”

Meanwhile, the economics for solar are now so attractive that the world is investing US$500 billion annually into PV worldwide.

“That shows how the US$300 billion target for international climate finance is pretty small compared to the amounts of money that private finance is pouring into just one energy technology,” says Dunlop. “So, we are keen to make sure that of that US$300 billion a year, we use the subsidised finance, concessional finance and grant finance to help small-scale solar take off in off-grid communities and in the various least-developed communities that need it the most.”

Looking ahead to COP30 in Brazil

Trump being in power by COP30 will make navigating negotiations trickier and the main talking points are hard to predict. But Dunlop says Brazil’s president Lula is turning out to be a leader in climate change, bringing some hope for the next edition of COP.

“There’s going to be a lot of emphasis at COP30 Brazil on nature, forests and forest finance, so it might be a moment for us to show how there are huge biodiversity benefits to solar, and how you can combine agriculture and solar with agrivoltaics.”