Solar energy operations have been flourishing in recent years, following decades of sustained investment and recent innovations in solar panel technology. There has been a solar manufacturing boom, which is expected to continue at a faster pace. Countries worldwide are investing heavily in increasing their solar energy capacity in support of a green transition, with China and the U.S. leading the way.
The International Energy Agency’s (IEA) World Energy Outlook (WEO) 2023 explores the potential for growth in the solar energy sector, based on its already strong performance in recent years. Renewable energy sources are expected to contribute around 80 percent of new power generation capacity in 2030 based on the current project pipeline, with solar power making up over half of the expansion. However, the WEO highlights, solar energy has significantly more potential.
By 2030, there will be a global manufacturing capacity of around 1,200 GW of solar panels a year, but it is expected to deploy just 500 GW of this capacity. Yet, if it deployed 800 GW of new solar PV capacity by 2030, it could reduce coal-fired power generation in China by another 20% and by 25% in Latin America, Africa, Southeast Asia and the Middle East, based on an IEA projected scenario.
Investments in solar power have increased substantially over the last decade, allowing for a solar manufacturing boom. The annual deployment of electricity generation from solar PV sources has grown more than sevenfold. The pipeline for global solar module manufacturing is expected to increase from around 640 GW in 2022 to over 1 200 GW in the medium term, with significant expansion along the entirety of the supply chain, including the production of polysilicon to wafers and solar cells. This is expected to support several countries worldwide in their aims to undergo a green transition.
However, at present, five countries dominate the solar manufacturing industry – China, Vietnam, India, Malaysia, and Thailand. China has the capacity to produce solar modules with an output of over 500 GW every year, contributing around 80 percent of the global manufacturing capacity. This means that many countries rely heavily on the import of solar panels to develop solar energy projects. Increasing the manufacturing capacity of small solar manufacturing markets, such as the United States, Korea, Cambodia, Turkey, and the EU, could reduce the dependency on a select few markets and strengthen supply chains.
This month, Dan Shugar, the CEO of Nextracker – a company that tracks solar energy projects, stated the massive progress that’s being seen in the solar market. He said, solar power is on a path to double every two to three years amid an “unprecedented period of demand growth” for new electricity generation. He added, “Solar is unstoppable” and “The intrinsic economics of utility-scale are phenomenal both in the U.S. and overseas. It has never been as favourable as it is.” This followed the release of Nextracker’s quarterly report.
While there has been a decrease in the deployment of residential solar systems, there has been strong demand among large utility-scale customers, with an order backlog with Nextracker of over $3 billion. In the U.S., this demand has been driven by the rollout of data centres, the electrification of appliances and transportation, and reindustrialisation. Shugar emphasised that almost 300 GW of new power plants will be needed over the next five years, and 500 GW within the next decade, to meet the growing demand.
The solar energy market is expected to experience a CAGR of 26% over the next five years and become the principal source of electricity generation in the U.S. within the next decade. Further, recent innovations and the widescale rollout of solar operations are driving down production prices, with utility-scale solar costs sitting at between $24 to $96 per megawatt hour, without subsidies. This is around 56 percent cheaper than nuclear and gas power production and 42 percent less expensive than coal. With subsidies provided through the Biden administration’s Inflation Reduction Act, this makes solar power significantly cheaper to produce than many other energy sources.
Meanwhile, China is very much leading the world when it comes to solar power, setting an example for other countries to follow. Wind and solar power are expected to overtake coal plants this year, with China adding 217 GW in PVs in 2023, which is more than the rest of the world combined. The China Electricity Council expects solar and wind energy to contribute 40 percent of grid power production by the end of the year, compared to 37 percent for coal. China is expected to surpass its 1.2 TW target for wind and solar by 2030 by producing…
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