COP26: Four reasons why solar is vital for the energy transition
Head of Global Solar
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Solar is undeniably one of the most important technologies in the energy transition. It has already taken centre stage in numerous studies examining how to address the climate crisis. And it’s likely to be a major focus at the UN Climate Change Conference of the Parties (COP26) in November. While solar is on a strong growth path globally, COP26 negotiations will need to focus on removing barriers to solar deployment to achieve climate targets.
But what makes solar such a vital part of the energy transition? It can be boiled down to four different reasons.
1. Solar is flexible
Photovoltaic solar is one of the most unique power generation resources in terms of its flexibility. Panels can be deployed to power single buildings in remote locations, massive power plant-sized systems, and everything in between. Solar panels can be installed on rooftops, farms, landfills, deserts, and even water bodies. They can even be integrated directly into building components like outer facades and windows as building-integrated solar.
This flexibility will undoubtedly help the world deliver power to developing countries and off-grid sites. Nearly $3 billion has already been invested in the off-grid renewables market, which has enormous growth potential since its unencumbered by grid limitations. In underdeveloped parts of the world, solar and solar-plus-storage can provide clean electricity for daily needs, oftentimes displacing diesel power and improving air quality.
Finally, the ability for solar to be paired with storage further increases its flexibility. Solar-plus-storage projects are expected to make up an increasing share of solar installations in the coming years. By allowing solar power to be discharged when it’s needed, batteries will enable more solar to be deployed in more locations around the world.
Solar’s flexibility means that developing countries can broaden their access to power and alleviate poverty without compromising on the COP26 goal of reaching net zero by midcentury.
2. Solar is cost-competitive
The declining cost of solar over the past decade is truly a renewable energy success story. The cost of solar modules has gone down by 85% since 2010 while the power output per panel has doubled. Along with declining hardware costs, the sophistication of technologies like solar trackers and performance-optimising software have enhanced the output of solar plants. As a result, solar has the most competitive Levelised Cost of Energy (LCOE) in many markets, even before considering any financial incentives. This cost competitiveness means solar will play a vital role in our transition to a clean energy future.
3. Solar is a job creator
Solar is not only a critical piece of the energy transition, but it’s also an important economic and job growth driver. These gains, in terms of GDP growth and job creation, can oftentimes offset the necessary upfront investments in new clean energy deployments. The solar industry employs skilled and unskilled labor across the value chain from manufacturing and construction jobs to engineering and project design jobs. China – the largest solar market in the world – employs over 2 million people across the solar value chain. As of 2020, the US – the second largest solar market in the world – employed 230,000 workers in all 50 states.
4. Solar has momentum
Solar is no longer a niche technology. Strong policy and market momentum is set to make solar a key player in the power sector.
Governments around the world have committed to bringing more clean energy to the grid. China aims to have 1,200 GW of wind and solar by 2030, India has a goal of 100 GW of solar by 2022, the EU increased its 2030 renewable energy target to 40%, and nine Latin American countries formed a block to pledge 70% renewable energy by 2030. More than half of all US states, two territories and Washington DC have state-level clean energy targets. Even the oil-rich Saudi Arabia is committed to 50% renewable energy by 2030, and solar will be the primary technology of choice.
Private sector players have also committed significant investments. Solar projects are attractive investment opportunities since they lower the cost of power. In the Asia Pacific region, corporate renewable energy buyers have already procured over 7.5 GW of solar, compared to 3 GW of wind. These buyers include the world’s largest technology companies and industrial players.
Oil and gas majors are also leveraging solar investments to make their businesses more sustainable and to satisfy demands from shareholders. They have spent approximately $23 billion to build and acquire solar projects. TotalEnergies and BP are the world’s second- and third-largest solar asset owners.
The COP26 negotiations will focus on mobilising more investment from developed countries, and solar already has the market momentum to be a major target of those investment dollars.
Policy action should focus on the removal of barriers to solar deployment
Despite all these advantages, solar is not being deployed at the levels necessary to achieve decarbonisation targets and ward off the worst impacts of climate change. In the US, for example, several studies put necessary solar deployments at roughly 80-100 GW through 2030. Wood Mackenzie’s current forecasts have US solar deployments averaging 30 GW over the next five years.
Some of the most substantial challenges to expanding solar deployments will require policy solutions. For starters, there are multiple trade actions by various countries that place import duties on solar equipment or limit foreign investment in domestic solar projects. This ultimately limits options for developers and slows down growth. Global cooperation will be necessary to encourage healthy and fair competition while simultaneously expanding the solar supply chain. Nations should keep this cooperation top of mind as they finalise the Paris Rulebook.
Another major challenge will be bolstering the electric grid’s ability to accommodate this massive growth in solar. Grids all around the world will need upgrades, expansions, and streamlined permitting processes for interconnecting projects. Pairing solar with storage will certainly help, but grid upgrades will remain vital. Admittedly, this is much more of a local issue that individual nations will need to resolve. But as the COP26 negotiations focus on mobilising investments, grid upgrades will be a critical lynchpin for unlocking solar deployments.
Finally, more investment will be needed to build off-grid solar in underdeveloped nations. This will provide access to electric power for vulnerable communities while alleviating poverty and accomplishing climate targets.
As the COP26 negotiations commence, nations need to consider how they can expand and expedite solar energy. The world can’t hit climate targets without it.
Read more about COP26.