WoodMac: Emerging Solar Markets to Come of Age in 2020s

27-Feb-2020

As more countries join the “gigawatt club” this decade, new markets will bring new kinds of challenges for solar.

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.