2018 was a year of upheaval for the global solar PV market.
From Section 201 tariffs in the US to China’s 531 policy shift to India’s mega-tender cancellations to Japan’s FIT cut to the lack of clarity around the memorandum of understanding (MOU) between Saudi Arabia and Softbank’s Vision Fund for 200GW of solar PV with storage, the year was characterised by uncertainty.
But even just a few weeks into 2019, there are positive signs for the global solar market. We’ve already seen policy clarity in China and Saudi Arabia, highly aggressive solar-plus-storage pricing in Hawaii, and more bold plans for some of the world’s largest single-site PV projects in India. Here are some thoughts on the top 10 trends to watch this year:
1. The market will (finally) crack 100 GW for the first time
After a muted 2018 decline—the industry’s first ever—brought on by China’s policy brake, the global solar market will finally breach 100 GW in 2019, with Wood Mackenzie’s latest 2019 forecast topping at 103 GW. The global market continues to diversify. The top 20 largest global PV markets will account for 83% of new global demand to 2023, the fastest growing of which are concentrated in the Middle East and Mediterranean (Saudi Arabia, Iran, Egypt, and Italy).
China will remain crucial to global installations, but its market share will fall from 55% in 2017 to 19% by 2023. As emerging markets in Latin America, the Middle East, and Africa scale-up rapidly and begin to deliver results post-2020, installations will settle at 115-120 GW through 2023. We expect quarterly installations to break 30 GW for the first time in Q4 of 2019.
2. More sub-$30/MWh bids—and maybe even another record low
Although 2018 was the first year since 2012 which didn't produce a world record-low solar PV tariff, technology costs have continued to fall rapidly, with global average utility-scale solar costs falling another 15% last year. We believe that ultra-low PV costs still have room to fall as low as $14/MWh under optimised assumptions, and the recent cratering of average bids in Egypt, Jordan, the UAE under US $30/MWh suggest 2019 is likely to see more pricing at a similar level.
There are several upcoming tenders in the first half 2019 that could play host to more ultra-low prices. The twice-delayed auction in Mexico, to be held in January 2019, could deliver another record, as could the 2.25 GW of solar PV set to be auctioned in 2019 under Saudi Arabia’s revised renewable energy program. The first auction held in the country was won by ACWA Power for US$23.4/MWh. However, these ultra-low tariffs are starting to have broader market impacts. In Latin America, some developers are looking to PPA or merchant markets for higher returns on investment.
3. Oil and Gas majors embrace solar in upstream and power
As the energy transition accelerates, oil and gas majors are increasingly making strategic moves to adapt to the changing energy landscape. From large private utilities to battery manufacturers to EV charging infrastructure companies to rural solar home system companies in Sub-Saharan Africa, the most forward-thinking oil and gas Majors are moving into the electricity space. Despite a lot of challenges, including much lower rates of return than upstream investments, they are well-positioned to succeed because of their strong balance sheets, scale, global presence and brand, and commodity trading and risk management expertise.
There are also opportunities for renewables to complement oil and gas (and metals) extraction. Solar PV has been applied as a mainstream solution to offset diesel consumption for energy intensive mining operations in places like Sub-Saharan Africa, Australia, and Chile for several years. Increasingly, solar PV is also emerging as an obvious opportunity for upstream oil and gas companies to integrate with their extraction operations in remote areas. Wood Mackenzie has tracked over 50 planned or operational resource extraction projects (mining, oil, or gas) globally, powered in-part or full by solar PV.
Along those lines, solar PV, CSP, and wind projects will increasingly be co-sited at on and offshore oil and gas fields to power drilling and even hydraulic fracturing. On-site solar PV or wind capacity can reduce the need to burn oil or gas at the well head, freeing more fuel to be sold at international market prices. In countries with heavily-subsidised domestic energy prices, the export price delta is particularly high. These integrated projects will lead to a demonstrable reduction in scope 1 emissions (defined as direct emissions from owned or controlled sources) – this is increasingly a requirement of some of the oil and gas Majors’ key shareholders, and some – including Shell – already have emissions reduction targets in place. 2019 should see further efforts by oil and gas companies to reduce their own emissions, with solar PV well-placed to capitalise.
The 10 trends in brief
The full list of trends in the new report include:
- The market will (finally) crack 100 GW for the first time
- More sub-$30/MWh bids—and maybe even another record low
- Revised policy targets will determine the market’s long-term growth
- Another entrant to the subsidy-free club in Europe
- Big business goes big on corporate solar procurement in the US
- More projects trading hands, particularly in the U.S.
- Large-scale solar-plus-storage comes into the spotlight, but remains a niche solution in emerging markets
- Mono PERC and Bi-facial modules keep CAPEX costs marching down
- A make or break year for mega project plans
- Oil and Gas majors embrace solar in upstream and power
To see the details behind all 10 trends, download the free report by completing the form at the top of this page.