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Global Solar PV Market Report

Executive Overview

Solar PV, as a renewable energy technology, has recently taken the lead in the global renewable energy expansion plan. For the first time ever, solar power investments are expected to exceed that of oil production by the end of 2023. The progression toward this milestone is evident in the trend so far. By 2022, solar PV accounted for over two-thirds of the total clean energy investments. During the same year, total installed global PV capacity exceeded 1TW, surpassing many leading projections and achieving this milestone ahead of schedule. The growth has continued at the same pace, with nearly three-quarters of the renewable energy capacity of 2023 being attributed to solar PV.

China continues to play an outsized role in global solar PV capacity addition – the 86GW it added in 2022 dwarfs Japan’s total installed capacity for that year. A strong domestic demand, coupled with supply chain to meet the project requirements, helps sustain Chinese growth momentum. However, the growth pattern has changed since 2021, with rooftop/small-scale solar PV installations driving growth instead of utility-scale solar projects. The shift is the result of key challenges that plateaued the Chinese utility-scale PV segment, including volatility in capital costs, supply chain uncertainties, especially those related to the trade barriers, and transmission connectivity challenges, among others.

The challenges of an inflationary environment and supply chain bottlenecks are evident across markets. Capacity auctions, a preferred route in the policy-led procurement in European and Asia-Pacific markets, have experienced a decrease in participation, resulting in under-subscription. Similarly, high input costs have led to an increase in solar PV costs. In 2022, the price of polysilicon reached its highest level, while freight rates in 2022 were nearly six time higher than those in 2000. Consequently, solar PV prices can no longer sustain their historically declining trend. Nevertheless, the relative competitiveness remains unchanged. The capital costs of solar PV projects are the lowest when compared to other prevailing clean energy technologies.

The fundamentals regarding solar PV adoption remain robust. Market-based procurement is gradually making a dent in global procurement practices. This includes the growing trend of direct corporate power purchase agreements (PPAs), with the US leading the world in this market, as well as the emerging but promising sub-segment of merchant power sales, where developers aim to capitalize on opportunities in wholesale power market participation. Such a shift is progressively expanding the potential for various business models, such as virtual PPAs for corporate purchases. Furthermore, the reduction in subsidies has led to industry consolidation.

In recent years, there have been innovative developments in the configurations of solar power projects. The co-location of solar PV with battery, for instance, has been a rapidly growing segment in the US. Similar hybrid approaches, such as wind-solar and hydro-solar, are also being explored. These combinations enable developers to achieve cost advantages in terms of land use, transmission, or grid dispatchability of the projects. Additionally, floating solar PV has gained prominence as a potentially emerging and untapped opportunity worldwide. Realizing this potential could lead to a significant transformation in the current global solar PV market landscape. It is not only just the absolute capacities, but also the penetration of solar PV in total grid-connected generation that holds the utmost importance for the final outcome.

The global average solar PV penetration, as share of total generation, stands at about 6.5%. Remarkably, China is not among the top countries in terms of solar penetration, reflecting the practical challenge of integrating renewable energy into the grid’s power mix. Despite an appealing project pipeline, the global supply chain for solar PV equipment and materials, global capital flow (skewed by government support for localization) and investment commitments in transmission infrastructure are all prerequisites for the success of targeted expansion. Episodes of energy crises in 2022 have led to a shift in policy attention to expedite the energy transition, benefitting solar PV as much as other technology-based projects. However, achieving the ambitious goals of net-zero decarbonization requires a more concerted and larger-scale effort than ever before. With the right steps, the solar PV sector seems poised to play an instrumental role in the coming decades.