2018 was a unique year for the entire global solar industry as we were able to exceed the magic installation mark of 100 GW per year for the first time. This led the solar power generation fleet to grow to over 500 GW or 0.5 TW. We were again seeing strong cost improvements, new applications unfolding, such as floating solar, corporate renewable Power Purchase Agreements reaching a double-digit GW level, and a market for merchant solar starting to emerge in several markets.
2018 will also likely go down in history as the year solar took a short ‘break’ for the next growth phase. A total of 102.4 GW went on the grid around the world last year (Figure 1). That’s still 4% more than the 98.5 GW installed in 2017 but compares to two years with very high growth rates – around 30% in 2017 and 50% in 2016.
Despite its rather low, one-digit year-on-year growth, solar was again the power generation technology with the largest capacity additions globally in 2018. More solar was deployed than any other single technology. In fact, solar additions were more than twice as high as net additions for coal. Like in 2017, solar alone installed more capacity than all fossil fuels and nuclear together in 2018, although the lead was paper-thin: less than 1%.
Also on the plus side, solar’s power generation cost (LCOE) decreased by around 14% year-on-year in 2018, according to Lazard Capital, now enabling power prices in the 2 US cents per kWh range in many sunny places around the world, increasingly making our technology a cost leader today – and with costs continuing to decrease (Figure 2).
But low generation cost alone is not enough to facilitate growth; it also needs the right policy frameworks and energy market designs. The administration in China, the world’s largest solar market for several years, pulled the brake on its generous feed-in tariff incentive scheme in mid-2018 to make itself fit for the grid parity age, looking into tools to better steer growth and have generation closer to where demand is. At 44.4 GW, China’s market shrunk by 16% compared to its record 52.8 GW in 2017. China was responsible for nearly 55% of new installations in 2017; in 2018, its share went down to 44%.
While other leading solar markets also stagnated (US) or shrank (India, Japan) for various reasons, many new and emerging markets more than compensated for the weakness of the tier 1 group. In 2018, 11 countries installed more than 1 GW of solar; that’s two more compared to the nine GW-scale solar markets in 2017. Our Medium Scenario estimates that the number will significantly increase to 16 countries in 2019 (Figure 3).
Europe is one of the new solar growth regions. Driven by the European Union’s binding national 2020 targets, the continent added 11.3 GW in 2018; a 21% rise above the 9.3 GW installed the year before. This year, our Medium Scenario sees demand surge by over 80% to 20.4 GW, and for 2020, we see 18% growth to 24.1 GW, which would be a new installation record, surpassing the 22.5 GW Europe added in 2011.
While several emerging markets showed impressive growth in 2018, Australia was the solar shooting star of last year. The country and continent accelerated its stellar growth pace in 2018, adding 5.3 GW, up nearly 300% from 1.3 GW in 2017 – and this high demand is supposed to continue.
Double-digit growth ahead of next 3 years
In our Medium Scenario we anticipate around 128 GW of newly installed PV capacity in 2019, which would translate into a 25% market growth over the additions in 2018. Next to many other markets, we are also more upbeat about solar in the world’s largest solar market China. in 2019 than in last year’s GMO, anticipating a newly installed capacity of 43 GW. That’s because the Chinese administration seems to be restructuring faster than anticipated.
On a global level, we are optimistic about solar. For the Top 20 largest solar markets, we only see rather negative prospects for Turkey, primarily due to the financial downturn in the country. For the majority, the forecast is very sunny, with China, India and the US anticipated to carry the bulk of the growth in the next five years (Figure 4). Our Medium Scenario anticipates demand to rise by 12% to 144 GW in 2020, 10% to 158 GW in 2021, 7% to 169 GW in 2022, and 6% to 180 GW in 2023 (Figure 5).
Entering the TW age in 2022 – but faster growth needed to meet Paris Agreement targets
Like in previous years, the scenarios of the Global Market Outlook 2019 show higher growth than in last year’s edition of the GMO. In 2019, we estimate a cumulative installed capacity of 645 GW for the Medium Scenario, which is about 4% higher than in last year’s GMO. Our new 5-year global market outlook anticipates for our most likely Medium Scenario that global solar power generation plant capacities will reach 1,297 GW in 2023. Under optimal conditions, we estimate that the world could reach 1,610 GW by the end of 2023 and enter the terawatt production capacity level already in 2021. However, the year that will be more likely remembered for entering the solar terawatt age is 2022.
We have the solar TW age in sight, but we need to grow further and faster to tackle the climate crisis.
Together with wind, which again added only half of solar’s capacities, and the others in the clean energy team, net capacity additions from renewables basically stagnated in 2018. In this environment, solar – the most versatile and often lowest-cost power generation source – contributed a little over 2% of the global electricity output (Figure 6). At the same time, global CO2 emissions did not decrease but rose by around 1.7% to another record high.
It is obvious that renewables have a key role to play in cutting global greenhouse gas emissions; it is simply the most efficient way. According to the International Renewable Energy Agency (IRENA), an average of over 400 GW of renewables must be installed per year until 2050 to keep temperature rise below 2°C. However, last year saw additions of only around 180 GW of renewables.
What’s needed to put solar in the fast lane?
First: While it is a good sign that most analysts consider solar as the major pillar in their long-term power scenarios, this may be too late in regards to the climate urgency – solar, in concert with storage, wind and others, is ready to satisfy the need for much more renewable energy today. And this message needs to be conveyed to policymakers and the public! And this is possible as we’ve been seeing in recent weeks – the new head of the European Commission Ursula von der Leyen has put climate protection high on the agenda of her upcoming term, proposing to reduce CO2 emissions by 50-55% by 2030, rather than the targeted 40%.
The main reason for last year’s low solar market growth was the sudden and unexpected double-digit contraction in the Chinese solar market. Despite causing some turmoil for the entire solar sector over the last months, this PV market restructuring effort has been necessary. The strong demand was mostly incentivised through inappropriately high feed-in tariffs, with the solar power plants mostly installed in very sunny but distant regions that require long-distance transmission lines that had not been fully available and led to unwanted high curtailment of power. The transition to a new market design that will be based on tenders and merchant solar backed by green certificates and financing schemes is exactly what’s needed to make the Chinese energy market fit for the next solar growth phase.
The European Union – where the solar market has been in a transition phase for many years – has just completed a legislative energy transition exercise. After successful lobbying by SolarPower Europe and others, the Clean Energy for All Europeans Package was passed, providing a framework with reliable governance and a modern market design that is aimed at enabling all stakeholders – from large corporates to active consumers at household level – to invest in renewables in the power, heat and transport sectors. The onus is now on member states to put these mostly solar-benefiting guidelines into action – and here renewable stakeholders are again needed to make sure this happens appropriately.
Because again, for flexible solar technology and its peers to be able to grow as fast as possible, it is of the utmost importance that infrastructure and market design are working effectively, and this is often not yet the case. One example is tenders, a key dissemination tool for solar and wind in the post-feed-in tariff world. In India, the world’s third largest solar market, demand decreased in 2018 among others, because its tender scheme showed serious flaws. Distribution companies retroactively asked for retendering to get better prices or tendered volumes have been combined with requirements to set up local manufacturing, which has made the process very complicated. However, if tenders should play a role in areas with large penetration of renewables, we need intelligent tenders that make use of solar’s flexible nature to avoid extensive new power lines people often oppose. Moreover, tenders have to be open to combining various generation technologies and storage to offer different grid services.
There are still some barriers that need be cleared to free up the fast lane for solar, but that depends on policy frameworks. We have again become more optimistic in our Global Market Outlook 2019 compared to last year’s version. But again – those growth rates are not enough to stop the climate crisis. Today, solar is ready from a technology and cost side for a much steeper growth curve. Let’s make it happen!
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