Over the next decade, the world's cumulative installed solar PV capacity is likely to expand from 1,710 GW in 2024 to 4,620 GW in 2033, according to a new report by BMI of Fitch Solutions. This 12.7% annual average growth rate of solar PV will be driven by distributed solar.
In 2033, global solar power generation will contribute about 15% of the total power mix, corresponding to 5,860 TWh, up from 2,070 TWh in 2024. By then, Asia Pacific will account for more than 60% of the global installed solar capacity, followed by 30% from North America and Europe combined, and the remaining from the rest of the world.
The BMI report calls solar PV as the 'premier' renewable energy choice for markets to advance their renewable power sectors, supported by the expanding supply chains and versatility of deployment.
The report writers cite headwinds faced by the wind power sector as pushing power companies towards solar to achieve their green energy targets. There is 'stronger than expected' support for solar in various major solar markets, according to the analysts that cite 2023 government data to make the claim.
However, in the times to come, it is not the large-scale projects, but distributed solar that will lead the expansion of solar capacity, as per BMI. The former, both wind and solar, encounter challenges related to timely grid connection, land availability and commissioning delays.
Distributed solar, on the other hand, benefits from household subsidies, net metering schemes and support from end users due to high electricity prices and drop in module prices.
"While fossil fuel prices will drop in 2024, we expect electricity prices to remain above historical averages, furthering the uptake in distributed solar to 2024," reads the report. "Over the long term, the growing availability and accessibility of solar equipment, through the global diversification of the renewables manufacturing chain will serve major solar markets well, with cascading results for residential and commercial consumers."
Among the major distributed solar markets in the next decade will be the US, even as its growth is dependent on a supportive policy framework that varies from place to place. Mainland China will be another big proponent of this segment where the government stance is more unified, both at the state and central levels.
In Mainland China, distributed solar has expanded from 13 GW cumulatively in Q1/2017 to 280 GW in Q1/2024. The government has had the ambition to mandate rooftop solar installations for residential and commercial infrastructure.
As the mandate continues, the report writers believe the Chinese distributed solar growth story will continue. It may even exceed large-scale solar capacity.
Japan is another market whose distributed solar outlook is bright as the capacity offered reduces in large-scale solar auctions. In 2020, it was offering 750 MW per auction. In the 19th solar auction, it dropped to around 100 MW. Analysts attribute it to high land costs and limited land availability.
Hence Japan is looking at distributed solar as BMI says utilization of solar panels in the country has consistently been used for distributed solar rather than solar farms since the middle of 2022.
Tokyo has made rooftop solar mandatory for new buildings and even the Ministry of Economy, Trade and Industry (METI) will set rooftop solar feed-in-tariffs at 20% to 30% higher than open land solar farms as of 2024, according to the BMI.
Among other trends, BMI sees battery energy storage systems (BESS) to be increasingly used to aid the solar power sector more. Drop in prices of raw materials will also lower the installation costs of storage over the next 5 years to boost hybrid renewable power projects, including for residential customers especially in markets with net metering arrangement.
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