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Clean Power UBS-solar-growth

Published on May 17th, 2014 | by Giles Parkinson

19

UBS: 10% Of Global Electricity Capacity By 2020 Could Come From Solar

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May 17th, 2014 by  

Originally published on RenewEconomy.

Global investment bank UBS says solar is likely to account for 10 per cent of global electricity capacity by 2020, as production costs continue to fall, and demand soars in the world’s major economies and in other markets.

In the latest bullish solar analysis released by a major investment bank – see Alliance Bernstein says solar’s dramatic cost fall may herald energy price deflation  and Citigroup says age of renewables has begun – UBS says that solar’s dramatic growth is assured because it is no longer dependent on a single, subsidised market.

“China, the USA & Japan presently take the largest share of solar capacity growth,” it writes in a report. (See table below for how the solar industry is supported in those markets – in the US with a tax credit and in Japan and China with feed-in-tariffs).

ubs global solar policy

“For each of these countries it’s important to understand the regulatory and other drivers of growth in order to have some reasonable perspective on how much future growth exists. “

“However, the most fundamental point is that solar growth is now coming from different regions in the world. As such its future is more assured than when all of the growth was driven by feed-in tariffs in Europe in general and Germany in particular.”

UBS notes that US solar group SunEdison predicts that solar can maintain a 16 per cent compound annual growth rate over the next five years. That will take annual installations to around 100GW by 2019. That’s as much as had been installed cumulatively across the world up to the end of 2012, and as much new generation (all fuels included) that is installed each year in China.

UBS solar growth

UBS notes that solar has several key advantages over other technologies:

-        It has few economies of scale. Which means it can be produced for around the same cost whether it is powering a torch or being used to construct a 100MW utility scale plant.

-        That means that it doesn’t need a market any bigger than the individual household to be cost competitive (It cites Australia as a key example of this, where the market for homes accounts for 95 per cent of the market, as opposed to around 60 per cent globally).

-        In turn this means that the economy of scale is driven more by the number of installations than the size of the individual installation. This means that solar can be built at the point of consumption and can arbitrage the grid system by avoiding the grid cost, which represents about 50% of the cost of buying electricity from the grid.

-        It also means that this is a market that traditional utilities cannot control, which is possibly why it is viewed as such a threat.

-        UBS says that the experience in Europe shows that solar production is reasonably predictable and reliable.

UBS solar installs size

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About the Author

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.



  • Jouni Valkonen

    with solar power capacity in gigawatts is irrelevant. Only thing what matters is the daily winter and summer production in megawatthours.

  • Doug

    I do expect the cost of solar to continue to fall to the point that a home, business, government or industrial site can make a financial case to install a solar power generating system (unsubsidized) for the sole purpose of reducing or eliminating daytime electricity consumption from the utility provider, even without net metering or FITs. Eventually, costs for energy storage will continue to fall to the point that utilities will be relegated to a mere backup system for cloudy, rainy days.

  • JamesWimberley

    How do they get a growth rate as low as 16%? An exponential trend line fitted to the global installation data since 2000 gives 44%. There may be reasons to think that isn’t sustainable for quite a while yet, but I haven’t seen them. It will be different once you get to very high penetrations: about 75 GW in Germany – twice the current total – would meet all demand at noon in midsummer, so after that an increasing amount of solar output would have to be given or thrown away, and the return to investors must fall sharply. I suggest that some analysts are picking low growth rates with a pin to seem Serious.

    Solarbuzz are predicting 49GW for this year, a 30% growth rate. I’ll go with that – noting that it assumes problems in China with the switch from utility to distributed, which are transitional, while Latin America is just starting to ramp up.

    • LookingForward

      I predict 50GW+ :P
      Mainly because some report I read said we need, when it comes to solar, 50GW anually to curb climate change.
      Well Zachary it seems we’re done here, you can close the site, we’ve done our job :D

      • http://zacharyshahan.com/ Zachary Shahan

        :D

    • LookingForward

      Also, Germany won’t build 75GW of solar, atleast not with incentives/without storage.
      Last sunday it allready got 75% of total production from renewables during peak daytime production, if they double without storage the’re gonna blow some transistors and/or the’re net export will probably be more then half there consumption on peak production days.

      • Bob_Wallace

        We need to look at how often Germany would hit those sorts of levels. Remember, that was on a weekend.

        With solar getting cheap it works (financially) to toss away some peak output in order to enjoy the extra capacity when demand is high.

        Tossing some 9c electricity is better than using 15c peaking power at other times.

        • LookingForward

          Since when does weather adjust on weekends? And renewables are dependend on weather, not man power, right? Or do you mean something else?

          Germany has, relatively, a lot of wind capacity and solar capacity. On windy days Germany can reach 50% wind production and on hot summer days it reach 50% of solar production. On windy sunny days, it can now reach 75% renewable production (last sunday was the first time, I believe).
          But all in all, I think Germany’s renewable production goes over the 50% production atleast a couple of weeks to a month total anually now. And considering they still have some coal plants (relatively a lot) that’s saying something for the future of there coal industry. :)

          • http://zacharyshahan.com/ Zachary Shahan

            75% of demand… low demand on weekends. (every time Germany breaks one of these records it’s a weekend or holiday.)

          • LookingForward

            Are you shure? Cause they export a lot too, to Holland (my country) among other countries.
            We have only a few hot and windy days combined (it’s mostly sun with low wind or cloudy with high wind), it might just be a coinsodience that they were on weekends/holidays?

      • Jouni Valkonen

        Germany will build by 2020 probably some 100 GW solar power. And indeed, with active and passive storage.

        • LookingForward

          They will have 100GW renewables by 2020, not 100GW solar, they are at 35GW now and will probably at only 2/3GW a year for the next few years as long as the FIT keeps going down, which is done on purpose and is good for the grid, till storage takes off.

          • Jouni Valkonen

            This 100 GW is for unsubsidized solar. The government of Germany does not have means to stop private people and companies to install unsubsidized solar electric systems on their roof-tops.

            Or are you suggesting that Germany will start taxing solar electricity in order prevent people from installing solar panels?

          • LookingForward

            No, I’m not suggesting that, all I’m suggesting is that, right now (untill solar is not just affordable, but actually cheap), FIT controls rather solar is affordable for everybody in Germany, especially for private people and compagnies. Nobody in Germany buys solar unsubsidized, well maybe now that the FIT for more then 1MWh+ is gone in that area, but below 1MWh everybody uses FIT.
            FIT, right now, is going down anually to “control” how much solar/renewables in general get build. When FIT hits 0 cents, renewable sales will start going up again, because the price of renewables will still go down after FIT hits 0 cents. The hope is that, by that time, the EV and storage boom will have started.
            Germany allready taxes electricity, don’t know about the production part, but I believe they will only tax solar if fossil fuels is/will be taxed too.
            Fossil fuels have been subsidized for decades….
            The problem for utillities is not the subsidies, it’s there ballance of production by source. Utilities won’t have losses at net total if cheap renewables ballance out the more expensive fossil fuels.

          • Jouni Valkonen

            Roof-top solar power is already cheapest electricity for household (household grid parity achieved in 2010) and companies (commercial unsubsidized and untaxed solar grid parity achieved in early 2014). And in 2015 also unsubsidized solar panels + battery storage will be cheapest form of electricity for households. If battery subsidies are included, then unsubsidized solar panels + subsidized batteries are already cheapest form of electricity that German households can get. And probably around 2016–2018 unsubsidized solar power + battery storage will be the cheapest electricity also for German companies.

            Apparently you do not realize that the cost of solar panels have gone down 90 % during the last five years and there are no signs that the cost reduction is slowing down significantly whitin the next six years. More over, the cost evolution of batteries is now in the same aggressive phase as solar panels were four years ago — their price is getting down some 20 % annually!

          • LookingForward

            cheapest yes, but not affordable for everyone, the cheapest plane can’t be bought by someone with minimum wage…
            I know costs have dropped a lot and I know they will be dropping for years to come. But not everyone can put down 10k for solar and storage let alone 20k or 30k.
            To get back to the point, I think solar will be between 50GW and 75GW by 2020 depending on when national new anual solar capacity goes up again and when the storage and EV boom starts.

  • UKGary

    The next phase of growth is likely to see substantial growth in unsubsidised solar – in countries like Chile where there is a pipeline for merchant solar – (No PPA just sold directly into the market with no subsidy or tax breaks), and Italy where a substantial amount of solar is starting to be constructed for on site use at factories and other commercial buildings again in the absence of government incentives.

    Such markets will grow as costs further reduce and solar becomes competitive in more unsubsidised countries and regions.

  • Michael Berndtson

    Great stuff. Then there is this going on in Ohio:

    Debunking the Myths of Ohio’s Proposed Clean Energy “Freeze”
    http://switchboard.nrdc.org/blogs/swilliams/debunking_the_myths_of_ohios_p.html

    A clear example of the confederacy of fossil fuelers and free marketeers (ALEC et al) kneecapping energy efficiency and renewables legislatively. My guess is that Ohio is counting their chickens before they’ve hatched. Ohio is hoping for an oil boom in the eastern portion of the state from the Utica shale. It may have been oversold. So we’ll have to see.

    BP selling off Ohio land and leaving Utica shale play
    http://www.bizjournals.com/columbus/blog/ohio-energy-inc/2014/04/bp-selling-off-ohio-land-and-leaving-utica-shale.html

    And an interesting analysis on natural gas and natural gas liquids:

    Gulfport Energy Jolts Analysts; Downshifts in the Utica
    http://www.naturalgasintel.com/articles/98317-gulfport-energy-jolts-analysts-downshifts-in-the-utica

    Here’s my take. Natural gas promoters assume a well is drilled and clean burning natural gas comes out. That gas get’s fed to cogen gas turbines and low carbon electricity is generated.

    In reality, gas carries along with it natural gas liquids and other things that need to get separated. If oil comes out mostly, like from the Bakken, that’s OK. But in that case the natural gas gets flared as a waste. Natural gas liquids have little marketability right now.

    So fossil fuel has to spend billions on processing and transportation (multiple pipelines since multiphase flow is dangerous to pump through one pipe).

    Renewables and energy efficiency directly cut into return on investment for that huge capital outlay. Which is why fossil fuelers need to go to Ohio’s legislation to submarine renewables. I wonder how banks and investors are hedging these legislative wars going on in many US states.

  • heinbloed

    Thanks for the report!

    Interesting to see that the small scale private sector is expected to make about 50%.

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