Listen: Exploring the unprecedented growth of global solar PV

View Full Transcript

Lena Dias Martins:

Hello and welcome to the Platts Future Energy Podcast from S&P Global Commodity Insights. Today we are discussing solar photovoltaics, taking a look at the scale at which the technology is expected to grow globally and how this will impact the future power market.

I am Lena Dias Martins, an associate editor on the Platts European Power Team, where part of my focus is on the solar module market. I will be your host today. I'm joined by my colleague Josefin Berg, who is an associate director for solar research here at S&P Global Commodity Insights.

There is a worldwide push for solar deployment as decarbonization deadlines draw closer. Global investment for solar PV now surpasses all other generation technologies combined according to the IEA's World Energy Investment 2024 report. Josefin, with S&P Global's Q2 PV Installations Tracker report recently published, would you mind telling us how much your team expects solar to grow globally to 2030?

Josefin Berg:

Of course. Hi, Lena. It's great to be here. Yes, solar is growing very quickly and has been doing so over the past years. Just to give some figures here, in 2022, and we had global installation as 245 gigawatt and last year we were at 424 gigawatt of installations. That was only from '22 to 2023. This year we're expecting installations to increase to 520 gigawatts. 2023 was spectacular.

We are seeing now that installations continue growing in terms of gigawatts of capacity, but just because of this larger installed base that we have now, we're seeing maybe slower percentage growth than what we've seen over these past record years. That said, by 2030 we'd expect installations to go beyond 700 gigawatts per year.

So it's a very quick ramp up. There are even possibilities that we're going to see more than one terawatt of installations in 2030 because we know from our experience that solar power installations can increase very rapidly.

Especially that there are new markets that haven't had many installations so far that there's enough to have a policy change and markets can grow extremely quickly. Right now we're there at around 700 gigawatt by 2030, and a global spread with a couple of leading markets. That being China, the United States, and India driving a large part of that growth.

Lena Dias Martins:

Amazing. So you mentioned obviously China as one of the leading markets. It's been at the forefront of the solar transition for some time and the momentum doesn't seem to be slowing too much yet. However, the Q2 report does state that the biggest uncertainty lies in China with a forecast of only a 1% increase year-on-year in PV editions. Would you mind perhaps talking us through some of the context around this prediction?

Josefin Berg:

It sounds very negative to talk about 1% growth in the leading PV market of the world, but you have to take into consideration that last year, China more than doubled its annual installations from 104 gigawatts in 2022 to 238 in 2023. With that growth, we don't see that much room for additional growth. We've seen the residential segment, which has been a very prominent segment. We see that slowing down and we see China being a very stable market.

That said, China always surprises us. Things can happen in very short time frames. Especially right now when we have global oversupply situation and China is of course the center of solar manufacturing in the world. There is a need to find an outlet for those modules and for manufacturers to sell modules. We know that China is able to boost domestic demand quite quickly. So we're on the safe side. We're expecting a very flat outlook for 2024, but this could be 10% higher if we see more momentum now in the second half of the year.

Lena Dias Martins:

I think also over on the module pricing side, oversupply is also having an impact on solar module prices which have dropped significantly in recent years as manufacturers navigate the saturated market. To help tackle this, China's Ministry of Industry and Information Technology recently submitted a policy revision on PV manufacturing requirements to tighten investment regulations. Which includes that, for example, existing capacity has to achieve efficiencies of no less than 25%, which is up from 22.3%. That's for N-type monocrystalline silicon cells. So there is work done to tackle the oversupply situation in China.

Turning back to the report. Expectations of weak PV demand growth in China, obviously noted, and you've mentioned before. With China as a solar powerhouse, what impact could this have on PV supply on a global level?

Josefin Berg:

It's what you said. In terms of module manufacturing, we had very strong module manufacturing capacity in China. That is calming down a little bit now when we are getting more requirements on a manufacturing side. China has been providing the world with modules and created somewhat of a dilemma in many markets where there's been a need to ramp up renewable power capacity quickly. Such as in Europe after 2022, but that there's also been a push for having more local manufacturing or try to secure more jobs locally.

Europe has so far kept its dependence on China manufactured modules. This has made absolute sense in terms of the pricing that you can get and the cost for the end consumer and also the availability of modules.

Other markets, we are seeing a different approach. So the US, for example, has taken a more of a protective approach. Also with the IRA, there are also incentives now to support local manufacturing in the US. So that means that the US market, it's already been a few years, which has been kind of shielded from the modules manufactured in China and imports that have been coming from Southeast Asia and other markets.

I'll come back to that. Then also other markets such as India, like I said, China, India, and the United States, those are the big markets and the strong markets that can keep up the global growth figures that we've seen and that we will see. India is also increasing its push for local manufacturing and limiting the ability of Chinese manufacturers to sell modules in the market.

Which means that this oversupply situation, there's less of an outlet for China manufactured modules. So you're looking now very much at the domestic demand in China, looking at Europe, and then a lot of the emerging markets across the world where still have a lot of growth potential, a lot of sun, and very big demand for power.

Lena Dias Martins:

Brilliant. I know you mentioned the US market, I look forward to going into that into a little bit more detail a little later on. If we move back to Europe, could I ask what S&P Global analyst predictions are on solar capacity increases in Europe and perhaps maybe a bit about how that's changed between forecasts in Q1 compared to Q2 this year?

Josefin Berg:

Europe has seen exceptional growth of PV over the past years. Europe used to be, I mean it was the first large solar market globally when solar took off around 2008, 2009. After that there was a slump in installations from 2013, 2014 because the subsidy costs were becoming so high because the growth was supported by very generous subsidies. Then there was a slump.

As we became closer to 2020, the different countries needed to meet their targets and started pushing for more solar installations. After 2022 with the energy crisis, installations are really taken off because you no longer needed to rely on subsidized electricity prices for solar power or auctions. You can make money just by installing solar power plant and getting paid through the electricity market, which hadn't really happened before, to have pure merchant PV power plants.

On the residential side and on the commercial side, because that's one of the amazing things with the solar power is that you can install very big plants, but you can also install enough for your house. Some of the listeners already have panels on their roofs. When consumers saw that electricity prices were very volatile, resorting to solar power became very popular.

Our latest numbers for 2023, there's still some uncertainties across some markets. There's a lot of uncertainty on exact numbers for distributed generation because not all countries have registers of how many households are installing solar power and what's kind of happening on the roofs. They only track the big power plants.

Our estimate here is that we had about 72 gigawatts of solar installed in Europe last year. This is all Europe's, not just the European Union but all Europe, including Turkey. In 2024, we could see this number getting closer to a hundred gigawatts. A lot of uncertainty here. We've seen the residential market is not as strong as it was 2022, 2023. Power prices have come down across a lot of markets.

So this push to build for a merchant plant is not as strong anymore, but corporates need solar power. They're signing power purchase agreements. Auction projects, like sponsored by government auctions still need to be built. Like I said, this big need to find an outlet for modules across the world has continued the push to install solar in Europe.

Lena Dias Martins:

Absolutely. To your point on a bigger push to meet decarbonization goals, there have been a number of government announcements in Europe supporting the advancements of clean technologies. Recently, the Net-Zero Industry Act, which came into force in June and aims to boost Europe's manufacturing capacity of clean technologies.

A little after this, the UK government announced a 50% increase to the budget of its renewable auction, the contracts for difference, setting it to record levels and including a 65 million pound uplift in the funding pot for established technologies such as solar PV.

So there's a lot of promise in Europe for the growth of solar, but the report, the Q2 PV Installation report that's mentioned, PV demand growth in Europe could slow from 2025. Is this a similar situation to China where this isn't necessarily bad news, it's just a slowdown on the exceptional growth that proceeded this year?

Josefin Berg:

You're right, growth continues. It's just not as strong as we've seen in these exceptional years of 2022, 2023, even some of 2024. We're seeing more of a moderate growth in Europe. I want to come back to these policy announcements because these broad and big policy commitments are very important.

In the European Union, the 2030 targets are driving a lot of the push that we see in different countries. We even see countries now increasing their targets in their national plans because they've seen how quickly solar can grow and also that the cost is far from what it was 10 years ago. They see solar PV as a way to quickly reach those targets because time is an issue here and other renewable sources are more complex to roll out with this timeframe.

We've seen big pushback against onshore wind. The development times are very long. Offshore wind, we have very many products that are planned, but exactly how much of that capacity that can come online before 2030 to really contribute to those targets, we don't know.

Whereas solar, it's scalable, it's easy to build and install. So we see those bigger commitments as very important, and also for providing stability to the industry. So for the developers, for the investors to know that there's a framework here to work within. At the same time, you cannot just talk about one number or this know broader gigawatts. You have to look at the different segments and what's driving different segments of PV.

Coming back to what I mentioned before about rooftop solar residential installations, commercial installations, they're very much dependent on specific policy to roll out and to subsidize and support those smaller installations. It doesn't always have to be direct subsidies, but just making it simpler in terms of permitting. What you can do with your roof and how to really boost that households and small industries or small businesses can install solar on their roofs to cover some of their electricity bills.

We see that in the European Union now that there are mandates that are going to support the build out of rooftop solar. So on new buildings, they have to be solar ready. There's an overall idea within the European Union to really push for distributed generation. At the same time, the growth that we've seen has been so strong that it's hard to expect growth at similar rates in these segments because it'll also depend a lot on the economy and how households prefer to spend their money right now.

On the other side, we have the big utility project. So big ground mount project. Here we have other issues, which is on permitting, on having installers that can install the amount of capacity required or that we forecast. We expect that a lot of the installations that will take place over the next years in utility scale project, those are the low hanging fruit. Those are the easy plants, or they have had the permits, but it's going to be more difficult to find land and get permits, get connections in the later years, and that there's also regions with a bigger pushback against large solar plants.

I'm based in Spain. There are villages that just have gigawatts and gigawatts of applications for building solar plants. That creates a lot of anxiety among the local population. So that's why we're a bit cautious on the utility scale segment after 2025, 2026 overall because it is going to be harder to build those projects. Also, the economics, they're not as clear as they've been over the past year.

So seeing this increase of funding in the UK, that's fantastic because it really means there's going to be more funding for these plants in the auctions. We'll see how other markets are able to really support new auctions going forward. That will depend a lot again on how close countries are to reaching their 2030 targets.

Lena Dias Martins:

It seems like streamlining planning processes for utility scale solar is also something that looks to be a consideration for further solar growth. You mentioned earlier the strong support in domestic solar manufacturing over in the US, namely this is through the Inflation Reduction Act or IRA, which was signed into law in 2022 and offers subsidies to both private and public entities, building domestic solar. Josefin, could you let us know at what speed you are seeing PV installations taking place in the US and what's supporting this growth?

Josefin Berg:

When we're talking to our US analysts, they're really seeing how the US is working on the limit in terms of how much capacity it can install right now because we've seen this very strong growth, again, similar to other markets over the past years. That we're now around this 37, 40 gigawatt per year market where it is very tough even just to find the people to install that capacity. The pipeline of project is huge.

There are some clouds here for the US market and a lot of uncertainties for 2025 and 2026, and that has to do with availability of modules. So the IRA has a very strong incentive for manufacturing to build up local manufacturing plants, but you don't do that overnight. So a lot of the initiatives that have been announced, they're still in planning. Some have started construction, some are starting operations, but you don't do that overnight.

For the market to continue, you need to have a continued supply of modules and a stable supply of modules for the timeframe before you can rely fully on local manufacturing. The US has been relying a lot on modules coming from Southeast Asia because of high barriers for the import on modules from China.

Since last year, there's an investigation to also impose duties on those modules coming from Southeast Asia depending on the manufacturer and a lot of other conditions there. Because there is this investigation, first we saw a big influx of modules from Southeast Asia imported into the US last year.

Right now we've got into a period where production in Southeast Asia has been paused because nobody knows exactly what the new tariffs are going to be, if it's going to make sense to manufacturing in Southeast Asia. That means that there are less international modules available for the US market. This creates some uncertainty than for what's going to happen in 2025 because there are enough modules in the US market for 2024 where we expect 46 gigawatt of installations.

In 2025, we're not sure if there'll be enough modules, what the tariff levels are going to be, when tariffs are going to be introduced on the Southeast Asia modules. So it's not really clear where modules are going to come from in 2025 and 2026 because we also don't see the local manufactured modules be enough, that there's going to be enough capacity to really sustain growth. That's a bit of an uncertainty for 2025 and '26.

We know that solar developers can be very creative when they need to find modules. There are also other markets like India that could start selling more modules to the US market. So yeah, it'll be very exciting to see how that turns out.

Lena Dias Martins:

On the pricing side, we're also seeing the impact of impending anti-dumping and countervailing duties imposed on some manufacturers in Southeast Asia. As from my understanding, these duties are retrospective. So solar modules sold today will be taxed, but the level of tax is unknown until the announcement later this year.

Josefin Berg:

Exactly. So that's why they're not importing anything right now because you don't know what the tariffs could be. Once the tariffs have been announced, then you can adapt business to the tariffs. Until then, we're seeing this pause.

Lena Dias Martins:

This should be announced end of October, beginning of November, I think?

Josefin Berg:

I talked to our US analysts and they expect this to go on for quite some months still. I'm not sure if it's going to... If you're really going to have an announcement by October, but we'll see. It's a long process.

Lena Dias Martins:

Well, something that may shift the US solar market is the US election, which is taking place in November. Josefin, do you have any forecasts on what will happen or what could happen depending on who gains office?

Josefin Berg:

We don't forecast the elections, but we don't see that much of an impact near term on the US solar market. The IRA itself is not that much at risk. Unless Republicans would really sweep the house, the senate, the president, and really push for major changes to the IRA, we don't see the IRA itself at risk because it would really require to have a full majority across the legislative bodies.

Then at the same time, a lot of so-called the red states, they're benefiting from the IRA, the local manufacturing that is being built up. These factories are being built in a lot of traditionally Republican states. They also go in line with the argument of having more US made production. So it's not a total in contrary to what the Republicans are proposing. So we don't see that part as being very threatened.

In terms of solar development and deployment of solar plants, again, a lot of the solar plants are being installed also in red states. Texas is one of the largest states for solar plants. So a lot of money and investment is going into these states for solar development. So we don't think that there's that much of a threat, at least not in the near term, and we don't expect the impact to be that significant.

If we look at the long term, there will be a lot more uncertainty because it'll depend a lot on longer term targets, objectives. A lot of different interest groups there that will have their say in how much renewables that will get installed in the US but right now we don't see the elections as that much of a change.

Lena Dias Martins:

Thank you. That was a really interesting insight. Just to begin concluding the episode, looking forward, we've only got five months left of 2024. What is required to meet the 520 gigawatt forecast for this year and perhaps continue the solar momentum to 2030 and beyond?

Josefin Berg:

To reach the 520 gigawatt? Well, first of all, China needs to keep up the rate of installations that we've seen so far this year, and it needs to now at least stay stable compared to last year. Even with the possibility of China also growing a bit further than what we forecasted so far. So China of course, will be always a large piece of the puzzle, let's say.

Then we have to see at other markets how they can overcome installer shortages. We talked about permitting. A lot of the economic uncertainty around solar, whether you should install solar now or if it's better to wait a bit. Our solar modules, are they going to get cheaper? Is that going to improve the economics of your investment? So there's some uncertainty there in terms of the timing of installations.

In some markets you have to install now because of deadlines and policy requirements, but there might be markets where plants or installations are going to get pushed into next year just from an economic standpoint. So that's a big uncertainty. Right now we see now with the module prices that we have, we do see a lot of interest from large developers to just procure now and get the installations done as soon as possible. So we'd see that definitely being a part of our 520 gigawatt forecast.

Lena Dias Martins:

It seems clear that solar's increasing presence in the global electricity mix means that the technology is set to be a major influencer on power prices in decarbonized electricity systems. We're already seeing some impact. So July was a record month for European solar power production.

It helped dip hourly prices to zero euros per megawatt hour between midday and three PM. So when the sun is at its highest in central Western Europe, and this is compared to evening spikes in the same month, which surpassed a hundred euros per megawatt hour, which is according to exchange data.

Additionally, in the US there was a June report from the Lawrence Berkeley National Laboratory, which found that using solar as a zero fuel cost generation resource could provide hedging opportunities against wholesale cost increases.

So to help track the solar revolution, Platts has recently launched a daily solar module assessment, which will help provide transparency in the market with daily prices for utility scale solar modules across Europe, China, and the US. So listeners, if you're interested in learning more, please do take a look at our offerings.

Thank you very much, Josefin, for joining me in this conversation and of course, thank you for listening. This episode of The Future Energy Podcast was produced by Felix Fernandez and Dipthi Bhat.