Overview of PV developments

In 2022, Denmark took a big leap and entered the club of GW-scale markets. This crucial milestone has been driven by utility-scale solar, which continued a strong growth path and more than doubled the yearly installed capacity – all based on subsidy-free projects. Besides the large-scale solar segment, rooftop PV of all sizes also demonstrates significant growth with a nice potential for continued expansion in the future. The residential market peaked in 2012 and, except for a small decrease in 2013, has only regained momentum in the last three years.

By the 1st quarter of 2023, the accumulated utility- scale capacity in Denmark was 2.88 GW [13] distributed over 76 parks, including 1.56 GW installed in 2022. Also, the yearly installed capacity of all rooftop segments more than doubled in 2022 with 139 MW added, reaching a total capacity of 3.97 GW. From 2021 to 2022, the residential, commercial, and industrial market segments have experienced very high growth rates, close to 290%, 160%, and 180% respectively. This is largely because of the overall interest in supporting the green transition, and realisation of energy independence through a high degree of self-consumption.

Drivers for solar growth

Growth in the residential rooftop and commercial segment has slowed down significantly during the previous months. While the first month of 2023 still demonstrated strong growth compared to the year before, customer interest is now significantly lower, mainly due to lower electricity prices and overall constrained economic conditions.

Based on information collected from all major solar developers in Denmark, the strong growth in the utility-scale sector is expected to continue over the coming years. The total pipeline of projects is very strong, and the Danish utility-scale market benefits from well-functioning and transparent regulations, with respect to planning permission and grid connection procedures. For this reason, the experienced developers have provided estimates for each of the coming years, on the number of projects which may reach ready-to-build status [14]. According to this analysis, the Danish utility-scale market has potential to surpass the 2022 record level after two years of market contraction or stagnation.

Although the processes required to develop utility- scale projects to reach ready-to-build status is well understood and to certain extent quite predictable, it is becoming increasingly difficult to predict if these projects will pass the final investment decision. The high uncertainty comes from a change in the overall business environment in relation to realisation of such projects related to several factors:

The new tariff scheme for grid connection of electricity production, which has now been implemented as of January 1st 2023, implies that all producers must pay a per-MWAC grid connection charge between 17,600 EUR and 329,000 EUR. This fee depends on the connection voltage (from 10 kV at DSO level to 400 kV at TSO level) and geographic location of the project. If a project is to be installed in an area where the grid capacity is dominated by other existing electricity generation, the grid connection fee is higher than for consumptions dominated areas.

• The overall costs related to value loss compensation for neighbours and financial support to municipalities are quite high and may become even higher.

• The financial conditions in relation to inflation and interest rates have reduced investors’ appetite for these projects.

• The lowering of the electricity price and projected cannibalisation effect will have a strong negative impact on the profitability of the projects. It is expected that the electricity prices in the future will significantly reduce the spot price of solar for many hours during the year.

• The overall increased activity in the electricity sector will also increase the cost and risk of delays in preparing for grid connection.

• Many of the large projects from 2025 onwards rely on the assumption that there will be a sharp increase in electricity consumption (e.g. functioning market for hydrogen and other Power- to-X technologies at the end of the decade). Political action to secure a speedy framework and the development of a hydrogen pipeline is a necessary condition.

• The optimistic outlook on medium to long term installation (from 2025) also relies on the delivery of other political promises such as the realisation of state energy parks, mandatory targets of installed capacity for municipalities, and other announced changes.

The extent to which these risk factors may negatively impact the presented optimistic deployment forecast is difficult to assess. Because of this, the outlook must be considered as an upper limit to the deployment.

One of the key differentiators between the well- functioning utility-scale Danish market and others, is the less restrictive approach to temporary use of agricultural land for solar purposes. The requirements and formalities in general are not less demanding than in other EU solar markets, but the Danish municipalities and utility providers have a reputation for efficiency, which ensures a faster process.

Outlook

With 2022 as the first year solar reached the GW scale in Denmark, it is expected to continue during the coming years, following a strong drop in installations in 2023. The utility-scale sector is expected to be the main driver of the growth, as it is foreseen that the market will reach 1.4 GW in 2024, set a new all-time high in 2025 with 3.3 GW and increase further to 3.7 GW by 2027 (as illustrated in Fig. GW16). The annual rooftop market is expected to stay almost constant from around 141 MW in 2023, to close to 153 MW by 2027.

Authors: Thomas Aarestrup Jepsen, Director, VE- production, PA and Communication, Green Power Denmark; Flemming Kristensen, Chairman of the Board, Danish PV Association.

Global Market Outlook For Solar Power 2023 - 2027