Emerging solar markets will come of age in the 2020 as countries from Saudi Arabia to Pakistan to Malaysia join the “gigawatt club.”
Outside of the OECD, there are now auctions planned in 44 countries, and a solar project pipeline of 180 gigawatts in almost 120 countries, according to Wood Mackenzie.
However, new markets will bring new kinds of challenges for solar. These include the risk of weak offtaker finances leading to power-purchase agreement renegotiations (as in South Africa and India) and rock-bottom auction prices (mostly in Gulf Cooperation Council countries) setting unrealistically low price expectations from governments in more challenging markets.
Reflecting on the 2010s
In the 2010s, solar defied expectations. Cumulative global solar installations have now surpassed 600 gigawatts, up from around 20 gigawatts at the end of 2009.
At the beginning of the last decade, Germany accounted for 52 percent of global solar installations and was the only country to install more than 1 gigawatt of solar annually. Fast-forward to 2019, when 16 countries across all major regions installed more than a gigawatt of solar over the course of the year.
It was also the decade that saw China become the dominant force in PV, both up- and downstream. In 2009, China accounted for 2 percent of global installations. Just eight years later, it claimed more than half of the market.
Solar's success in the 2010s resulted in a boom-and-bust cycle in many markets as governments introduced subsidy programs just as solar costs dipped, which caused markets to surge briefly before the subsidy programs were taken away.
The boom-and-bust fluctuations of that period have largely come to an end, with the latter years of the decade seeing a comprehensive shift away from feed-in tariffs and toward competitive auctions. These offered policymakers a more effective tool to control deployment rates and a way to procure increasingly low-cost power.
Costs will continue to fall in the new decade, though more slowly than before as industry focus shifts away from capex and onto levelized costs.
As the new decade begins, solar PV projects in some markets are now being developed without any kind of government support, which is indicative of the progress the industry has made over the last 10 years.
New applications for a new decade
The extractive sector will present an opportunity for solar in the 2020s. Social concerns and the high cost of oil-based power are leading to companies in extractive industries such as mining to look to PV-based systems as a cleaner — and in many cases cheaper — alternative.
Hybrid solar PV systems will become the solution of choice for an increasing number of applications. Pairing PV with ever-cheaper batteries can offer firm zero-carbon power; pairing them with existing fossil-fuel generators can reduce the carbon intensity of power supply.
Floating solar and related technologies are poised to accelerate as well. "Floatovoltaics" and "agrivoltaics" will allow investors in solar PV to compete for a wider array of opportunities than ever before.
Finally, off-grid solar presents a major opportunity. Off-grid solar PV-based installations for those currently without power supply, or where the service from existing suppliers is inadequate, will bring solar to places it hasn’t been viable before.
While the coming decade undoubtedly looks rosy for solar PV, actions by policymakers could pave the way for even stronger growth.
New companies are lining up to enter the grid-connected solar market. The pipeline of development projects is growing by the day, and there’s plenty of low-cost finance available. But a lack of investment in grid infrastructure can hold investors back.
Decades of under-investment in grids and burdensome connection processes are putting the brakes on markets around the world. To realize the levels of investment in solar PV, wind and energy storage needed to decarbonize power markets, policymakers will need to prioritize the build-out of both transmission and distribution networks.
Finally, economywide net-zero emissions targets will be on the agenda at the UNFCCC’s 26th Conference of Parties held in the U.K. later this year. A positive outcome from the talks would lead to more action from financial institutions and investors to redirect capital toward zero-carbon energy.
In turn, some of the world’s largest energy companies that have so far — at best — just begun to dabble in solar PV markets, may double down on their commitments. This could be transformative for the sector.
Tom Heggarty is a senior solar analyst at Wood Mackenzie. His research insight on solar trends in the 2020s is available for free here.