The global solar PV industry is forecast to grow 26-fold over the next two decades – but could record even faster growth if the world acted to meet its climate change forecasts – according to the International Energy Agency.
In its 2012 World Energy Outlook released in London overnight, the IEA – a relatively conservative organization – says global capacity of solar PV could jump to 846 terrawatt hours in 2035, from 32 terrawatt hours in 2010. That translates into an increase of installed capacity to just over 600 gigawatts from 67GW at the end of 2011.
That though is what is painted in the IEA’s “New Policies” scenario, which describes what the world does if it holds to its recent commitments to act on climate change, but doesn’t move to limit global warming to an average 2C.
However, if it does take those measures, described as its “450 scenario” – limiting total greenhouse gases to 450 parts per millions, estimated by scientists as the limit to keep temperature rises to 2C – then the capacity of solar PV rises substantially to 1,371TWh, almost 50 per cent more than under the new policies scenario.
The IEA says that this extremely rapid expansion is in line with recent experience. Global solar PV capacity was just 1 GW in 2000 but in just the calendar year of 2011, solar PV capacity increased by about 30 GW. Around 60 per cent of the additions were in Germany and Italy, the world leaders in solar PV, with 25 GW and 13 GW of installed capacity respectively at the end of 2011.
The European Union accounts for over three-quarters of global solar PV capacity in 2011, and over the next two decades its total will grow to 146GW, but it will be challenged for leadership by China (113GW), India (85GW), the US (68GW) and Japan (54W). This is all in the new policies scenario. But just to highlight how conservative those forecasts are, a recent report by a Japanese agency predicted 100GW of solar PV by 2030, while solar industry associations in China predict that country could reach that level by 2020.
The IEA expects solar PV costs continue to fall over the projection period, although at lower rates as the oversupply situation is corrected. It says feed-in-tariffs, which have been largely responsible for the rapid deployment in EU countries – and now in Japan – will be wound back and in some instances have been overly generous. “It is essential to design incentives which attract sufficient investment while yet permitting adjustment of subsidies for new capacity additions as technology costs fall, to avoid unnecessary increases in electricity prices and maintain public acceptance,” it says.
The IEA also had some interesting observations about the “solar bubble”, the excess in manufacturing capacity which has seen many manufacturers go to the wall. The IEA noted that in recent years, manufacturing capacity has expanded much more quickly than actual demand for solar panels, mostly due to massive increases in China.
“By 2011, estimated solar cell production capacity was around 20 GW higher than production, two-thirds higher than the new capacity installed worldwide that year,” it wrote. And, since 2008, there has also been a very sharp fall in the cost of purified silicon, a key input for manufacture. These have combined, with reductions in cost from technology gains, to drive down the cost of PV systems sharply.
The IEA noted that there has been a wave of consolidation as companies seek to become larger and more competitive, but some have gone bankrupt, such as Germany’s Q-Cells – the largest solar cell manufacturer in Europe . Trade tensions have emerged between the United States, Europe and China, resulting in the imposition of import tariffs by the United States in 2012 on solar panels from China.
“Difficulties are likely to persist in the short term, while the imbalance between supply and demand endures,” the IEA concludes. “How quickly the balance is restored depends largely on the rate of growth of demand for solar PV. China represents a large potential market, but its demand for solar PV in the short term is uncertain.” It says that in the New Policies Scenario, at least, the oversupply continues over the short term.
The IEA report said that in the new policies scenario, renewables would eventually overtake coal to become the highest source of electricity by 2035, but in the more aggressive 450 scenario could provide nearly half the world’s electricity by 2050 – more if nuclear and CCS failed to deliver.
Giles Parkinson is the founder and editor of RenewEconomy.com.au, a website providing news and commentary on cleantech, climate and carbon issues. He is a journalist with three decades experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.
