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Global solar installations set to double by 2021, hit 7% of electricity production – Navigant

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Community solar installations are on the rise, even in non-traditional markets like Minnesota. Sundial Solar photo.

Utility-scale solar power now cost-competitive with wind, natural gas, new coal in many markets

Constraints to the adoption of solar power generation are set to weaken and accelerators are growing in strength, according to Tyler Ogden, Lux Research analyst, whose recent study forecasts solar installations worldwide to double over the next five years.

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Tyler Ogden, Lux Research.

Worldwide solar capacity has already more than doubled over the past three years and now stands at 1.3 per cent of electricity generation, according to the BP global statistical review. Photovoltaic (PV) installations surged to 75 GW in 2016, 49% year-over-year growth.

Ogden expects global market penetration to reach seven per cent.

The most significant accelerator to adoption has been lower cost, driven by a huge increase in Chinese production of solar modules.

“The biggest outcome that we’ve seen in the industry is not so much a technical innovation, but manufacturing scale and the solidification of a robust supply chain, specifically in China, where we have module manufacturers now producing panels below $0.40 per watt,” Ogden said in an interview. 

“That’s led to significant cost reductions in terms of utility-scale projects.”

Ogden thinks solar module costs could drop as low as $.30 per watt over the next year or two.

Highlights from the study:

Cumulative installations double by 2021

Utility-scale PV installations will steady over the near term, with cumulative installations set to reach almost 800 GW by 2021. Solar generation will provide more than 7% of global electricity. India is growing at a 26% compound annual growth rate and will account for 18 GW in 2021, becoming the third-largest market for PV.

North America grows faster as Asia-Pacific declines

Despite being the dominant player from 2015 to 2016, demand in China will slow due to grid issues and lower feed-in-tariffs. Canada, Mexico, Thailand, the United States, and India will pick up the slack.

Multi-crystalline silicon continues to dominate market

Steadily decreasing module costs have kept multi-crystalline silicon the leading PV technology. While multi-crystalline will remain the dominant player making up 65% of total installations, thin-film cadmium telluride (CdTe) will grow its market share to 7% by 2021.

I interviewed Ogden In July. The interview was edited for clarity.

Markham: Please give me an overview of your study.

Ogden: Our study looked at photovoltaic installations over the next five years considering three scenarios: 1) a baseline which takes trends as they are in the present and extrapolates them into the future; 2)  – a second scenario that considers negative solar policy in the United States and more positive policy in the Middle East; 3) a scenario that looks at how storage can be implemented in certain key markets specifically China, Japan, Chile and Australia to alleviate some of the problems the grids are facing there and lead to increased deployment. 

Markham: What are some of the technical innovations driving solar adoption?

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Enmax home solar program part of slow shift to renewable energy in Calgary. Photo: Enmax

Ogden: The biggest impact that we’ve seen in the industry is not so much a technical innovation, but the growth of manufacturing scale and the solidification of the robust supply chain, especially in China. That’s led to significant cost reductions for utility-scale projects, which has led to record low feed-in tariffs.

There is one incremental innovation manufacturers are adopting, which is PERC (Passivated Emitters, Rear Connect) architecture. It’s a relatively low-cost upgrade fthat adds a couple additional efficiency points increase, part of the general trend in the industry to slightly higher efficiencies. 

MarkhamI’ve been following the levellized cost of energy (LCOE) estimates basically from EIA and Lazard, which show solar costs coming down quite a bit. Are we going to see those costs continue to drop?

Ogden: Costs will continue to decline, though we are bottoming out in terms of how low module costs can go. Possibly as low as $0.30 per watt.

But costs vary quite a bit by region and country due to labour and construction costs, for instance.  India is setting up solar farm projects where land acquisition costs are essentially zero, thus leading to record low tariffs. Some countries the greatest amount of sunlight, specifically Chile, the Middle East and southwest US, where a robust supply chain and experienced labour force have driven down utility-scale prices to nearly $0.02 per kilowatt hour in terms of LCOE. We’ll probably see two cents over the next couple of years, if not in 2017. 

solarMarkham: Are we going to see a big build out in those markets with an excellent resource, but less rapid adoption in the Pacific Northwest, British Columbia, Alberta, markets where the resources is not as robust?

OgdenThis is where policy and storage come into play. A market like Chile, which has seen record low bids in the second half of 2016 and a pretty rapid deployment of utility-scale photovoltaics in the northern part of the country where the resource is excellent. However, there are some constraints that prevent a more rapid build out there. For instance, most of the population lives in the south. And there are some constraints around grid transmission, which suffers congestion at times of peak PV generation.

Australia and China have similar problems.

If storage is combined with solar to alleviate transmission line congestion, that could ultimately lead to greater PV installation.

solarMarkhamDo you see anything on the storage side that could be a significant accelerator for the adoption of solar?

Ogden: If you look at the market as it is now, solar plus storage is economic in regions where electricity is expensive because fuel has to be imported. Like island nations, for instance. There have been a couple of Solar City installations in Hawaii  deploying Tesla batteries. There have been similar installations in the Caribbean islands, as well. Then there’s Southeast Asia. Countries like Indonesia, the Philippines, and Malaysia which are more sizeable markets but have similar characteristics of high electricity costs because they are island nations.

Markham: Will power grids be a constraint to the spread of solar power?

Ogden: Solar’s relationship with utilities varies from region to region. They can prove to be a very significant constraint to adoption. In certain markets there has been a lot of push back from utilities to the costs associated with intermittent renewables. In developing markets like the Philippines, Vietnam, and Indonesia you might see utilities fighting against the early steps of deployment.

Within the very scattered landscape of the US, we had some utilities that have fought against promoting solar, looking to scale back net metering, for instance. But US utilities are largely moving towards supporting solar now. There’s a growing acceptance that solar is here to stay. Utilities realize they either have to learn to redefine their business model and incorporate solar into their existing businesses.

Markham: It sounds like solar started as a solution for high cost markets or countries where policy (including subsidies) supported earlier adoption, but now costs have fallen enough that solar is becoming more mainstream?

OgdenI think so. Utility-scale photovoltaic deployment really began in markets that passed early supporting policy – Germany, Spain, Italy, Japan, even China. But now we’re now at the point where solar is becoming economically competitive in certain regions without any policy support because of the maturation of the industry. Photovoltaic systems are no longer a niche solution, but are becoming the next common sense option for energy generation over the coming decades.

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