Bloomberg New Energy Finance’s head of solar analysis has revealed that new solar installations in 2018 are likely to have hit as high as 109 gigawatts (GW) and that growth in 2019 could see annual capacity additions increase to as much as 141 GW.
With the coming of a new year, solar analysts all over the world will be busy sorting through as much project data as they can so as to determine how much solar energy was brought online. One of the most respected and authoritative sources of such analysis is Bloomberg New Energy Finance (BNEF), and its head of solar Jenny Chase posted a small note last week as part of the company’s larger ‘Transition in Energy, Transport — 10 Predictions for 2019‘.
Specifically, according to Chase, solar installations in 2018 are expected to end up around the 109 GW mark “once the final numbers come in during the next few weeks.”
Further, Chase expects solar growth in 2019 to skyrocket, with annual capacity additions predicted to be in the range of 125 GW to 141 GW.
“Europe is building more PV once again, and India, the Middle East, North Africa, and Turkey are continuing to expand their deployments,” Chase wrote. Meanwhile, “The world’s largest PV market, China, is in disarray as the government tries to reconcile future solar support with a deficit in the renewable energy fund of 150 billion yuan ($23.4 billion) at the end of 2017.”
A Gigawatt Here, a Gigawatt There
What’s most interesting about Bloomberg’s 2018 figures, however, is that one of its analytical peers, Wood Mackenzie, in a recent post entitled ‘Trends Shaping the Global Solar Market in 2019‘ (you can read more about it here) posits that “the global solar market will finally breach 100 gigawatts in 2019, with Wood Mackenzie’s latest forecast topping 103 gigawatts for the year.” Further, Wood Mackenzie expects installations to settle at around 115 to 120 GW through 2023 — though they do expect quarterly installations to break the 30 GW barrier for the first time in the fourth quarter of 2019.
This makes for a significant discrepancy between Bloomberg’s figures and those underlying Wood Mackenzie’s analysis.
I reached out to both Bloomberg New Energy Finance and Wood Mackenzie in an effort to understand the discrepancy in figures. Wood Mackenzie’s Research Marketing Manager Mike Munsell explained the company’s methodology as a means to explaining why its figures are different to BNEF’s: “We use a bottom-up forecasting methodology based on historical PV installations, project-level pipeline data, forthcoming RFPs, cost and power price data and forecasts, policy analysis, and interviews with key players in downstream PV markets.”
Further, “According to Wood Mackenzie’s latest Global Solar PV Market Outlook Update (Q4 2018), 2018 installs are 94.8 GW. This number was released prior to the NEA’s announcement of official PV installation figures in China this week” (which I covered here).
“We expected subsidy-free solar to make economic sense in H2/2019,” explained Rishab Shrestha, Research Analyst covering Solar PV in the Asia-Pacific Region for Wood Mackenzie, who also spoke to me via email. “But, due to a boost from local subsidies (not federal ones), more projects than expected came online from the end of Q3 2018 and into Q4 2018. Depressed prices also spurred faster-than-expected installation. These local subsidies also supplemented DG projects as well – despite quotas – led to higher than expected installs.”
While Wood Mackenzie will likely solidify its final figure in the coming weeks in its forthcoming Q1 2019 Global Solar PV Market Outlook Update, as it stands, there is a 14.2 GW discrepancy between Wood Mackenzie and Bloomberg — a discrepancy which, according to Bloomberg’s head of solar Jenny Chase, means that Wood Mackenzie is just plain “wrong.”
I also reached out to another generally reliable source of global solar data, SolarPower Europe, the region’s solar power trade association, which regularly publishes its own forecasts and updates on global solar capacity additions. Michael Schmela, Executive Advisor and Head of Market Intelligence, explained that they have “not announced any downward changes from its 102.6 GW 2018 Medium Scenario forecast in our Global Market Outlook 2018-2022.”
According to Solarpower Europe’s Global Market Outlook report, “Our Medium Scenario expects about 3.5% market growth to 102.6 GW of new PV capacity additions in 2018, despite the recent subsidy cut announcement from China to restructure its solar incentive programmes.”
Interestingly, SolarPower Europe was one of the few analysts to avoid making any sweeping changes to its overall 2018 solar forecast in the wake of China’s policy shift announced in May which sent other analysts scurrying for dramatically downward revised 2018 forecasts. “Despite the news from China we are not panicking and dropping the expected level of grid-connected solar in 2018 by much – our current estimates suggest we are on track for about 102 GW grid connected in the world,” said James Watson, then CEO of SolarPower Europe, explaining that they saw “only a small decrease” by China’s decision to essentially put a cap on new solar installations.
Which is what makes SolarPower Europe’s decisionmaking in its Global Market Outlook 2018-2022 so interesting. Specifically, as Michael Schmela explains:
We already estimated in the Global Market Outlook published in June 2018 that China’s 531 restructuring program would result in an annual installation decrease from 52.8 GW in 2019 to around 39 GW in 2018 in our Medium Scenario and 46 GW in our High Scenario (which was probably the most optimistic view at that time; finally, 44 GW was installed in China, according to official data from NEA). Moreover, it was obvious that many other markets would bet on solar as it has become increasingly cost-competitive with other power generation sources. We wrote: “On a positive note – we will now see more diversification of solar demand. While in 2016, only seven countries installed over 1 GW, in 2017, the number increased to nine, and this should be 14 in 2018.”
The Sleeping Giant
Despite marked differences in capacity addition forecasts, both BNEF and Wood Mackenzie see many of the same trends defining the solar industry in 2019. The global solar market will continue to diversify, with new countries bidding for a share of the market as costs continue to fall and energy storage makes solar an even more viable alternative. New countries are holding auctions and tenders and will serve to make up for the expected decline in China’s share. Wood Mackenzie, specifically, sees China’s share of the global share falling from 55% in 2017 to 19% by 2023, due in large part to the emergence of markets in Latin America, the Middle East, and Africa.
“There are lots of new markets which are driving growth, with India probably the second largest,” added Bloomberg’s Jenny Chase. “We expect 14 countries to be over 1GW in 2019, including Israel, Spain, the United Arab Emirates, Egypt, and Vietnam, so the global solar market is diversifying.”
Despite this diversification, however, a lion’s share of the attention will remain on China and how its recent drive to encourage subsidy-free solar (and wind) projects will impact its solar industry in 2019.
“Basically, for several years China’s government has been discussing options to encourage solar installation without increasing the Renewable Energy Subsidy Fund deficit, which is now estimated at about 180 billion yuan,” explained Bloomberg’s Jenny Chase. “This can be achieved by offering PPAs below the state-mandated coal-fired power price. The latest government policy, released by the NDRC and NEA on January 7, clarifies the terms of the PPAs and specifies that solar will get priority dispatch. However, there is still massive uncertainty even for 2019 build, and we had already sketched in some kind of continuation of China’s solar market although a complete bust is still possible.”
China’s plans, as laid out by the NDRC and NEA, provide numerous incentives to regions and utilities across the country to develop their own solar (and wind) projects which, even though they won’t benefit from Central Government subsidies, will nevertheless benefit from tangential policies. For example, projects laid out under this new direction will not be subject to annual construction scale restrictions, but can only be built in regions where local authorities can ensure that the power will actually be used. No new solar PV will be permitted in the autonomous region of Xinjiang or in the province of Gansu — both of which already suffer from significant curtailment issues, and more solar will only exacerbate this situation. The Central Government will also impose some measure of controls on new solar capacity across a further 12 provinces and parts of 7 others.
“This signals a permanent policy shift towards zero-subsidy renewables,” explained Jonathan Luan, an analyst with Bloomberg New Energy Finance who spoke to me via email at the time. “Though the industry suspected it coming after the May 2018 announcement applying breaks to the subsidy flow, the new policy clearly steered the market to a new direction. The two-year policy window should stimulate new build. We are more inclined towards the optimistic scenario of our 34-44GW solar forecast for 2019.”
How this will affect 2019’s solar industry is, therefore, unclear.
“The subsidy-free renewable notice and the positive discussion among the policymakers, however, affects our outlook,” added Wood Mackenzie’s Rishab Shrestha. “The subsidy deficit still remains an issue, but the emphasis on reducing subsidy intensity in a proper manner is a positive development for the entire industry.
“The notice essentially lays out priorities, plans, and guidance for local governmental bodies, grid enterprise, and financial institutions for the promotion of subsidy-free solar PV projects through 2020.
“Priority has been given to reducing non-technical costs using state-owned land, reduced grid network charges, and curtailment compensation for subsidy-free projects,” Shrestha concluded. “Locally subsidized projects without support from central government will also be having the subsidy-free status. Such favorable support will help China deploy more projects.”
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