A little more than a decade ago, solar power was also included in the global energy race. At less than 1 percent, it had the smallest share of generating capacity of any major power source.
But all that has changed. According to the International Energy Agency, next year, solar photovoltaic capacity will leapfrog hydropower. In three years it will overtake the gas-powered generation. And, in four years, it will push back coal to claim the largest share of generation capacity of any electricity source.
A buildup of solar installations – from Arizona in the US to Anhui, China – has been at the forefront of a renewable energy charge that has muscled in on the old energy order.
Now, as Russia’s invasion of Ukraine pushes energy security concerns to center stage, the growth of solar looks set to pick up speed — with a record-breaking number of installations in each of the next five years.
“There is a boom, there is exponential growth, there is acceleration,” says Hemi Bahar, senior analyst for renewable energy markets and policy at the IEA. “Solar energy accounts for about 60 percent of every power plant to be built in the coming five years.”
While its intermittent nature means solar won’t immediately produce more electricity than coal or gas – which can be turned on and off as needed and will churn out electrons whatever the weather – the scale of the installation booms in power generation. Underlies the seismic shift.
Rapidly falling costs have been the primary driver of solar manufacturing in recent years. According to financial advisor Lazard, the average unsubsidized lifetime cost to build and operate utility-scale solar in 2021 was just $36 per megawatt hour – down nearly 90 percent since 2009. This compares to $108/MWh for coal, $60/MWh for combined. Cycle gas, and $38/MWh for wind.
Costs went up last year as the price of component parts, especially polysilicon, went up. But utility-scale solar was still the cheapest option for new electricity generation in much of the world. Consultancy S&P Global Commodity Insights says the rate of installations more than halved last year.
Aggressive climate goals and related policies, along with generous subsidies in jurisdictions around the world, have helped.
Vladimir Putin’s weaponisation of gas exports to impress Ukraine’s allies has further encouraged the EU to set tough targets, as the bloc seeks to reduce its reliance on Russian fossil fuels by 2027. Russia supplies the continent with 155 billion cubic meters of gas in 2021, or 40 percent of its consumption, mainly in electricity and heating.
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Under its RePowerEU plan released last May, the bloc now wants to generate 45 percent of its electricity from renewables by 2030, with a focus on doubling solar installations to 320GW by 2025 and 600GW by 2030. The gas alone would cut consumption by 9 BCM by 2027, Brussels estimates.
Solar, with its low cost and ability to be built at any scale – from a single panel on a roof to a massive multi-gigawatt array – will account for the bulk of EU electricity additions over the coming years, according to S&P. Be held responsible.
“In the past, the big driver for renewable energy was decarbonization,” says Ardern Zoko, S&P’s executive director for clean energy technology. “What has changed since 2022 is that energy security has also become a big driver of policy for renewables – particularly solar.”
Energy security isn’t just driving solar installations in Europe. China also made it a central priority in its 14th Five Year Plan released last April.
Graham Price, senior equity research associate, says, “Even though China has been able to import Brent crude from Russia at a substantial discount, their goal is to transition to a predominantly renewable and coal-based energy economy, with local have access.” For renewal at investment banker Raymond James.
And Chinese dominance of clean energy supply chains, and solar in particular, has prompted massive government support in other parts of the world for the development of local solar manufacturing industries.
In the US, President Joe Biden’s landmark climate legislation, the Inflation Reduction Act, will pump $369bn in clean energy subsidies over the coming decade. For the first time solar developers will have 10 years of certainty on generous production and investment tax credits, allowing them to plan for long-term, large-scale construction.
However, as growth accelerates, solar faces a growing list of challenges. Obtaining permits is becoming an increasing problem for developers around the world, causing bottlenecks and driving up costs. Skilled workers struggle to keep up with the pace – pushing up wages and creating additional spending that puts some of the cuts in capital spending at risk.
As a result, some listed companies, such as US-based SunPower, have found profitability over established establishments in a competitive market.
Developers say the trade conflict puts development at risk. US restrictions on imports from China’s Xinjiang region, in response to reports of forced labour, have led to massive seizures by US customs and long delays for some projects. In addition, a ruling that Chinese importers were evading tariffs by finalizing assembly of some parts in Southeast Asia, before the US has grown its own solar industry, risks a sharp increase in import costs. Is.
Nonetheless, analysts remain optimistic. “Our expectation is that solar will continue to grow — big time,” Zoko says.
