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Analysis

Global Trends in the Solar Industry

Wed, 02/19/2014 - 11:55

Solar technology is becoming increasingly competitive and the market expects to keep seeing cost reductions in the near future. Emerging economies are starting to make efforts to contribute to create a cleaner environment, but where countries such as China and Japan are strengthening policies for renewables, some European countries have reduced incentives for these projects. Japan has introduced feed-in tariffs for different renewable technologies to accelerate the diversification of its energy mix away from nuclear power, while China has made efforts to provide grid connection for 10GW of solar energy. However, investment fell sharply for photovoltaic projects in countries such as Germany, Italy and Spain. The International Energy Agency (IEA) recommends that by 2020, 10% of the global electricity generation should come from wind and solar technologies, increasing to 30% by 2050. For 2020, the IEA has set the objective of reducing the cost of solar power to make the technology cost competitive with wind power. Despite the fast-paced growth of the solar photovoltaic sector, concentrated solar power (CSP) experienced a slower growth of 20%. Further R&D investment is needed to increase the competitiveness of the CSP technology, which has many excited as to its potential.

Europe is still the leading region in photovoltaic installed capacity, surpassing 70GW and representing approximately 70% of the world’s total up to 2012. China, the USA and Japan are the next countries leading the global solar energy market. Two-thirds of the global solar market is concentrated in Germany, China, Italy, the US and Japan. In this sense, the Asia-Pacific region follows Europe, with North America as the third leading region due to developments in Canada and the US. However, countries like Mexico, Australia and India have barely scratched the surface of their enormous potential for solar energy.

Solar energy investments represent 16% of total global renewable energy investments, ranking just behind wind. In 2012, US$143 billion were invested in solar projects with investment expanding in many emerging markets such as Brazil and other countries in Latin America due to rising electricity demand and falling solar technology costs. Capital costs for solar PV technology continue to fall, experiencing the most important cost reductions in comparison with other renewable energy technologies. The costs of solar technology for utility-scale projects are still higher than traditional power generation, although off-grid solutions have become increasingly competitive. For example, in Mexico, solar technology is garnering a lot of attention due to the widespread availability of the solar resource and important differences between solar energy’s cost per kWh and certain electricity tariffs. This allows fast payback periods, especially in the large residential consumer sector.

The sun offers 885 million TWh globally per year, approximately 4,200 times the expected global energy consumption in 2035, which means that the amount of energy provided by the sun is enough to meet all human electricity needs for a year in one hour and 25 minutes. Different scenarios have been created to forecast the growth of the global PV energy. The European Photovoltaic Industry Association forecasts that the market will grow to 200GW by 2016 in a business-as-usual scenario and if no further efforts to incentivize the market are made, or to 420GW in a policy driven scenario if new guidelines are promoted in the next two years. Increasing cost competitiveness of solar technology is the key to unlock new markets. Based on its location in the Sun Belt, strong environmental commitments, and its attractiveness as a foreign investment destination, Mexico has caught the attention of the global solar industry.