I have been looking at the solar market for ten years now and ever year I try to estimate how big the market will be. To be honest I have never gotten it right, and in fact it always comes in above what I have predicted, and there is always something that happens that I never foresee. Back in 2008 it was the size of the Spanish solar market. Then in 2011 it was the massive boom in Italy. And consistently we have had boom and bust as installations boom in one country or the other and then collapse as governments and or regulators intervene to stem installations.
The good news is that the solar market is now becoming more global and somewhat easier to predict as the technology becomes increasingly cost competitive. That said there are still regulatory risks in countries like Japan, and then of course we have the lower oil price which will most likely dampen the enthusiasm of countries like Saudi Arabia to invest in solar. Despite that we will see growth in global solar installations this year as we have done for the last decade and as we will in 2016.
We do not have the numbers in for 2014 but we believe the global market was circa 42.2GW, increasing by 18% to 50.0GW this year. We anticipate growth coming from Emerging Markets (40% to 5.3GW), North America (23% to 9.oGW), Asia (16% to 26.2GW), and Europe which is likely to come back into growth mode with 10% growth to 9.5GW.
In terms of major markets we expect China to be the No.1 market in 2015 with installations reaching 13GW (up 23%) driven by a major revamp of the regulatory environment at the end of last year in which the government has put a feed in tariff in place for ground and rooftop installations.
The second biggest market is likely to be the U.S with 8.3GW (up 26%) driven by an investment tax credit (ITC) which provides a 30% upfront payment as well as renewable portfolio standards (RPS) across 44 states.
The third biggest market should be Japan which we believe could be 7GW (down from 8GW in 2014) but there is big caveat over this number and this is the most serious “wildcard” amongst the top 5 solar markets. Concerns are mounting over the state of the grid in Japan and its ability to take any more solar. New rules came into being last week which allow utilities to curtail solar generation without compensating project owners which may impact investor returns and thus slow down new installations.
The fourth biggest solar market in the world is likely to be the U.K. which is largely being driven by a legislative change later this year and a rush to get installations finished before the new rules come into being. The market in the U.K. this year could be as high 2.7GW.
The fifth biggest market is likely to be India with 2.5GW up from 1GW in 2014. This growth is supported by the central government driven National Solar Mission which plans to have 22GW installed by 2022 and seems finally to be gaining some momentum.
With regards other markets we will see Europe finally coming back into growth mode after three years of declining installations. We will also see strong growth in emerging markets driven by grid parity markets such as Chile as well as Mexico, Brazil, and South Africa.
And what will continue to drive this growth in solar installations against a background of low oil and fossil fuels prices? First and foremost, solar is becoming increasingly cost competitive with other forms of generation. In countries like Chile there is no subsidy needed for solar to compete with wholesale power prices and in countries such as Italy and Spain putting solar on ones roof is cheaper than buying from the local utility. And in developing countries (think Bangladesh with 2m solar powered homes) it is cheaper to use solar than to build a grid and then supply that power through standard power generators. The second reason is increasing geopolitical and consumer desire to use renewables be it for environmental or energy security reasons. Finally, it is important to note that solar only makes up for 1.2% of electricity generation across the world and even if that level only goes to that of Italy (7.5% of all power generated in 2014) there is a lot of growth to come in the solar market…