A surge in installations across the US and China propelled the global photovoltaics (PV) market to record levels in 2016, according to a new analysis penned by Solar Power Europe.
For the first time ever, installations of PV capacity around the world exceeded those of wind power as the cost of solar electricity – particularly that generated by utility-scale plants – dropped to record lows.
“Never before have we seen more solar power being installed in a single year than in 2016,” wrote Solar Power Europe CEO James Watson and co-author Michael Schmela in their executive summary. “The global solar PV market grew much more than expected - by 50 per cent, to 76.6 GW.”
Jobs ‘machine’
They added that solar power has become a “jobs machine” in countries that are currently embracing the technology, claiming that a remarkable one in 50 of all new jobs in the US last year was created by the solar sector.
But it is China that has become the real powerhouse of the global market, with the country connecting 34.5 GW of PV capacity to the grid in 2016 – more than double the 2015 total of 15.1 GW, assuming that the figures provided by the China Photovoltaic Industry Association (CPIA) are accurate.
The booms in China and the US, where 14.8 GW of PV was added, mean that a cumulative 306.5 GW of grid-connected PV capacity was in place at end of 2016 – equivalent to around 2 per cent of the world’s electricity demand.
The report says that the strong growth rate in China came as a surprise, and was triggered by a cut to the country’s feed-in tariff in the middle of the year that saw Chinese developers rush to install more than 20 GW alone in the first six months of 2016.
“After demand almost paused in Q3, strongly falling module prices enabled a year-end run that led to an annual installation volume in China representing nearly half of the entire world’s new solar capacity in 2016,” explained the report authors.
Meanwhile, the PV added in the US accounted for 39 per cent of all new capacity for electricity generation. The sharp rise was also triggered by a looming change in support mechanisms, although as it turned out the anticipated expiration of the 30 per cent solar investment tax credit was deferred.
Support schemes
Japan represented the third-largest market for PV installations in 2016 (at 8.6 GW), but capacity additions are now expected to shrink as the government there cuts support and the energy market is reformed.
“As Japan will move from a feed-in tariff to a tender scheme for large-scale solar this year, the PV rooftop segment will soon play an increasing role in the country’s solar market,” states the report.
Over in Europe, the downward trend has already been in evidence for several years, and at only 6.7 GW last year, installations across the continent were down more than one-fifth on the 2015 total of 8.6 GW.
“The European market decline in 2016 is primarily a result of the UK terminating its attractive solar incentive program,” the report noted. Although the country still ranked highest in Europe in terms of 2016 PV additions, UK installations of around 2 GW were only half the 2015 total.
While India did not hit its government’s ambitious 12 GW target for annual installations, connections there are growing quickly.
“India’s government is systematically addressing the teething problems of the country’s solar sector as it quickly advances towards its national Solar Mission’s (nSM) goal of 100 GW total installed solar capacity by 2022,” states the report, noting that utility-scale projects are responsible for 90 per cent of that total.
Outlook to 1 TW cumulative capacity
Looking to the near future, it appears that the continued rapid decline in the cost of PV will outweigh imminent cuts in government subsidies and support mechanisms, with Solar Power Europe predicting that global installations will rise to 80 GW this year.
That overall market depends to an increasing extent on developments in China, which now accounts for a quarter of total installed PV capacity. The CPIA has forecast 2017 installations of anywhere between 20 GW and 30 GW, and even though the feed-in tariff is expected to be cut next month, the Solar Power Europe analysts see significant upside potential in the second half of the year.
In the longer term, they anticipate that PV installations will continue to rise, hitting a cumulative 1 TW sometime around the middle of the next decade as annual connections to the grid surpass 100 GW. But if – as in 2016 – growth continues to outpace expectations, that 1 TW milestone could be reached as soon as 2021.
That said, the market remains dependent on only a handful of large countries offering helpful support schemes, and the Solar Power Europe report warns against any complacency.
“Despite solar power costs continuing to go down rapidly and today already out-competing centralized, inflexible new power generation plants, sustainable growth can only take place with a stable policy environment,” its authors wrote.
“The lower prices don’t help if a government puts obstacles in the way of solar, as is the case in sunny Spain where the market has been negligible for several years, or if it disadvantages solar by subsidizing centralized power generation, such as new nuclear in the UK.
“With the top three solar countries responsible for over 75 per cent of global demand in 2016, it needs only one major market making the wrong policy decisions to disrupt the entire solar sector.”
As a result, the report’s “low scenario” outlook suggests that annual PV installations may even shrink to 65 GW by the end of the decade.
What does look certain is that the bulk of future demand will arise from the Asia-Pacific region, and from China in particular.
