Solar PV Becoming the Most Popular Renewable Technology
The current backdrop of global energy crisis apparently brought solar PV to the fore instead of causing a reversal. BNEF projections, revised upwards by 7.5% from those in beginning of the year, suggest 245GW of new PV capacity by end-2022. A slower growth in onshore wind (due to regulatory delays or infrastructure) adds to the equation reinforcing solar PV’s position in the evolving energy scenario. The fundamentals for solar PV market are thus being shaped by its relative position in the prevailing economic conditions. By most accounts, a predominant share of total global renewable capacity addition in 2022 will be through solar PV. Meanwhile, the market will evolve in varied ways in terms of the technology, business model, demand segments or cost economics.
Solar PV Prices are on a Downward Trajectory
Progressively utility-scale solar PV plants are cheaper than new coal-based generation capacity. As per the International Renewable Energy Agency (IRENA), almost three-quarters of the new competitively bid solar PV projects that are due for commissioning over the next two years will have prices lower than that of a newly built coal-based power plant. Such a cost implication can be understood in the context of a trend that shows 86% decline in the capital cost of solar PV projects during 2010-2021. The trend is likely to sustain with improvements in technologies as well as economies of scale.
Evolving Industry Dynamics
The maturity in the business sets a strong ground to phase out the policy support and incentives. The Chinese PV market’s planned phaseout of subsidies stands out as the notable example of the shift. In the European Union, all new utility-scale capacity allocations are done solely through the auction route. The unsubsidised merchant-based projects find greater traction than before. Closely related to this, is the advent of corporate power purchase agreements (PPA). Between 2018 and 2021, solar-based corporate PPAs rose by over three times in capacity. With greater market orientation, developers are trying out different technology configurations. One such trend is the deployment of hybrid projects – involving a battery- based energy storage project paired with solar-based generation unit. In other cases, hybrid projects involve a combination of the wind, solar and battery storage technologies
Regulatory & Policy Support is Vital Going Forward
While growth is almost assured, the path will be one of a rapid and often drastic transitions that will necessarily rely on enabling policy and regulatory interventions. Some of the areas of active policy focus requirement include transmission infrastructure (not only capacity but also stability), seamless international trade (ensure globalized manufacturing chains in solar equipment), and power market development/reforms. With different countries adopting their unique routes, it will be interesting to observe the emerging solar PV landscape in the overall energy system and its balance.
