By: Michael Schmela, Executive Advisor
Looking back at 2017, many will probably say it was just another growth year for solar. Indeed, there were actually much stronger growth years for our sector. Take 2016, for example, when solar demand grew by an incredible 50% YoY – in 2017, newly installed capacity ‘only’ improved by 29%.
Yet, we need to put things into perspective – most solar analysts had expected no growth at all for 2017 only a year ago. In their ‘realistic’ scenarios for 2017 global solar market development, not one solar analyst predicted that annual capacity addition would be boosted by nearly one third in early 2017. In our Global Market Outlook (GMO) 2017-2022 published at Intersolar Europe 2017, we narrowly hit this number in the outer spheres of our High Scenario estimate with our prediction of 103.6 GW.
However, the focus of the story here is not why solar is notoriously being underestimated, and again surprised analysts, but why 2017 was indeed been a special year for the solar sector.
Here are my 10 main observations on solar markets in 2017:
1. Reaching the 100 GW level: As of 2017, we have to talk about a three-digit annual solar power production output and capacity additions. To be precise, 98.9 GW of solar capacity was installed in 2017, but shipments already exceeded the 100 GW level this year, with US developers ordering modules to prepare for Section 201 import tariffs. We’ve upped our forecast for 2018 already last December to 107.1 GW for 2018, 119.7 for 2019 and 132.6 for 2020, but will probably revise upwards again for our GMO 2018.
2. A cost leader – and still improving: We had highlighted in our GMO 2017, that ‘solar expands its cost leadership role’, using late 2016 awarded 2.4 US cents/kWh PPA in the United Arab Emirates tender as a reference, which meant that solar would be generally cheaper than new CCGT, coal, and nuclear power plants. After the solar industry has been beating the drums now for quite a while, we have now reached a point where an increasing number of serious business papers around the world have finally realised and reported on solar’s cost leadership. In 2017, we’ve seen a 300 MW tender in Saudi Arabia with sub-3 US cents offers from 7 of 8 bidders, with one even bidding under 2 US cents. While components manufacturers are under enormous pressure to continue their cost-cutting efforts at full speed, the race for lower prices is not going to stop anytime soon. This is especially relevant as fossil fuels are still being heavily subsidised, thus making it often still very difficult for renewables to compete on a level playing field.
3. The premier new power generation technology: With solar’s quickly improving cost competitiveness, in 2017 solar not only surged ahead of all other energy sources, the technology was also used for almost twice as much newly installed renewable power generation capacity, such as wind, which recorded 52 GW. Even more impressive, for the first time ever, more solar capacity was added than fossil fuels net generation capacity combined, which together only added 70 GW in the past year.
4. China makes the difference: The already strong dominance of China in the solar sector grew even further last year. After installing 34.5 GW, equal to a share of 45% in 2016, China surprisingly added as much as 52.8 GW in 2017, which expanded its global market share to over half of the world market (53%). A very important side note – if China had not invested so heavily in its domestic solar demand in 2017, offering very attractive incentives to developers, the global solar market would have only grown 5% to around 81 GW.
5. The rise of India. The solar seeds planted by the Indian government only a few years ago with the introduction of the 100 GW National Solar Mission have now flourished into a remarkable harvest, and it is only showing one direction – up. Last year, India was ranked for the first time among the top 3 solar countries in the world; in 2018, it will very likely claim the number two spot. The Indian example clearly shows that a truly ambitious national solar target can quickly boost the sector, turning a developing solar country into a global market leader. While the country has been seeing gigantic downstream and infrastructure investments, the long-term solar commitment of India’s government has also sent the right signals to both domestic and foreign companies, of which several recently announced to invest in new or the expansion of PV manufacturing facilities in the country.
6. The return of Europe: Although solar in Europe is still in its energy transition phase, with the sector stunted by inhibitive policies, as of last year it seems on a recovery path, leaving these sluggish years behind. In fact, the European solar market even improved at nearly the same growth rate as the global solar sector – growing by 28% to 8.6 GW in 2017, up from 6.7 GW of newly installed capacity the year before. Yet, the majority of this solar growth comes from countries outside the EU, either triggered by the low cost of solar and/or attractive inventive programs, like in Turkey. The EU and its member states still have a lot of regulatory work to do if they want to see sustainable solar growth beyond 2020 when binding national targets for EU member states are unfortunately planned to end.
7. How politics hurt a solar star: Solar, like all forms of power generation, is heavily dependent on policy regulatory frameworks. The impact of how a generally very positive economic environment and investment climate for solar can seemingly transform overnight to a very difficult market can be seen in the US. In the US, uncertainty and import tariffs implemented by a new administration, among other factors, have resulted in a 30% year-on-year market decrease in 2017 – and a very modest growth scenario for the coming years.
8. Consolidation continues: It was foreseeable – and it has now come to fruition. While Japan still belonged to the top global solar markets in 2017, it shrank again by around 20% to less than 7 GW, down from 8.6 GW in 2016. Similar to Europe, a solar pioneer, the Asian country is now working on regulatory schemes to transition from high-feed in solar tariffs to tenders and self-consumption.
9. From small to big: Usually emerging solar markets start with utility-scale solar and move towards small distributed installations. Yet, Australia has successfully done it the other way around. While solar has been competitive in the residential field for quite a while in the country and continues to thrive, Australia has been waiting for large-scale solar to become really cheap before it began to invest in this market segment as well. 2017 was the year Australia truly discovered utility-solar, developing projects of several gigawatts with more in the pipeline for the coming years.
10. Emerging stars on the horizon: A number of emerging solar markets finally added over 1 GW of solar for the first time in 2017 – most notably Turkey, Brazil and Australia. We predict that we will see several more reaching that level this year.
It’s way too early to say what will be part of the 2018 solar highlights, but Saudi Arabia’s incredible announcement looking into installing a 200 GW project by 2030 was already the first big surprise and will be very likely a hot topic. But we will have to wait and see – if 2017’s unexpected solar growth can teach us anything, it’s that solar shows no signs of slowing down and it will continue to surprise us.