The Renewable Landscape: Solar at the Threshold

Table of Contents

DATAMONITOR VIEW

CATALYST

SUMMARY

SOURCES

ANALYSIS

• Solar operates in a dynamic environment in which long-held assumptions are being eroded
  • The global renewable energy industry is growing rapidly on the back of political will, subsidies and technological advancements
  • Long derided as uneconomic, the nascent solar PV market is also gaining significant ground thanks to its strong green credentials
  • 2008 was an exceptional year for the global PV market, driven by political will and strong subsidies, mainly in Spain and Germany
  • Silicon wafer-based PV, thin-film PV and concentrated solar thermal power are competing for cost leadership
  • There has been a lack of solar thermal investment over the past 20 years, but conditions now seem right for it to prosper
  • As technologies improve and the cost of fossil fuel electricity rises, solar energy gets closer to grid parity
• The extent and speed of this emerging sector' s growth is dependent on political frameworks and its ability to keep driving down the cost of solar power
  • There are nine main EU-sponsored mechanisms that promote the development of solar power by means other than direct subsidy
  • Still, the direct subsidy FiT is the most powerful mechanism to rapidly grow grid-connected solar power markets
  • Solar technologies are still expensive and, for the moment, remain more expensive than most competing technologies
  • For solar power generation, true grid parity depends upon the evolution of solar power costs, carbon costs and power prices
• Strong global growth is likely to continue on the back of technology maturity, policy incentives and heightened investor appetite, yet the industry' s 2020 targets are unlikely to be met
  • Having developed at a rapid pace, solar now faces key challenges, many of which will be offset by even larger opportunities
  • A change in Spanish solar subsidy levels is threatening the development of an entire and largely undiversified industry
  • At best, global solar PV market growth in 2009 will fall back to 2001 levels - the lowest levels on record for the past decade
  • In the longer term, solar has a role to play in meeting future sustained increases in power demand across EU27 Member States
  • Attitudes and behaviors will continue to be aligned with the benefits that zero carbon solar energy can bring
  • To offset tight capacity margins, solar power generation can be deployed more rapidly than conventional power generation
  • Most importantly, solar energy is one of only three means of achieving the EU' s 20-20-20 climate change political ambitions
  • Growth levels are expected to pick up in 2010, yet the industry' s target of 12% of final EU electricity demand by 2020 will not be met
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FIGURES

• Figure: Wind power, biomass and solar have been the real driving forces behind the growth in renewable power generation
• Figure: The global solar PV market has been booming over the last decade and is likely to continue this trend in the coming years
• Figure: In 2008, with more than 5.6GW of installed capacity, the global solar PV market had more than doubled compared to 2007 (2.4GW)
• Figure: Technology advances and changing industrial processes are driving costs down and PV adoption (notably thin film) up
• Figure: There is little doubt that, with sufficient investment, solar thermal generation can ultimately provide an economical source of power
• Figure: For solar power to reach grid parity, production costs need to be reduced considerably so that it can penetrate the major electricity markets
• Figure: Currently, RES targets contribute most to the development of solar energy
• Figure: Direct subsidy FiTs also facilitate R&D funding, greater solar production levels and lower costs
• Figure: California - one of the most favorable regions for solar power generation - had comparatively high installation costs in 2007
• Figure: In 2007, solar power generation in California was still a few years away from true grid parity
• Figure: A SWOT analysis reveals several challenges which are expected to be offset by even larger opportunities in years to come
• Figure: The economic downturn and the Spanish market freeze will cause a drop in market growth: +4,620MW forecast in 2009 (+5,559MW in 2008)
• Figure: Over the next seven years, power consumption levels are expected to rise in all but two European countries
• Figure: Member States highlighted in the top-right hand corner show concern about global warming and are willing to act accordingly
• Figure: Solar can play a part in offsetting tight capacity margins in countries such as Finland, Slovakia and Hungary (2008 capacity margin data)
• Figure: In 2008, solar, wind and energy efficiency measures failed to meet EU emission targets: EU ETS installations were short by 145mt CO2
• Figure: It is estimated that, with adequate support mechanisms, the market can grow at an annual average of 32% from 2008 to 2013