Next generation opportunities in utility-scale solar

Perspective 
Utility-scale solar is expanding fast and its cost-competitiveness is improving accordingly. The pressure on costs, margins and speed is intense, and pure-play solar companies have dominated the industry so far. Will this trend continue, or does utility-scale solar hold viable opportunities for energy incumbents going forward? In this knowledge perspective, QVARTZ takes stock of utility-scale solar and outlines some opportunities and challenges for energy incumbents.

From fringe to mainstream: Utility-scale solar is winning the cost race

The solar industry is steaming ahead, and 2016 was another record year with a global market of around 74 GW installed, up 30% from 2015. The current projection is that the total installed capacity will more than double from today’s 320 GW to some 680 GW by 2020 (21% annual growth), and reach 1,300 GW by 2025. At this rate, solar will overtake wind by 2020 in terms of annual capacity added, and by 2022 have more total capacity installed. Solar will then be placed right at the top across all energy sources in terms of new capacity added, representing a third of all new capacity in 2020. Remarkably, 80% of all new capacity in California in 2016 was solar energy (39% for the US as a whole), 28% in China and 15% in Germany. Still, solar’s share of global power production is only around 1%. In leading markets like Germany, it is around 7%, while in California – a major solar market – the share is now 13%.

Utility-scale solar is a segment dominated by the standard multicrystalline technology, typically deployed in 20-100 MW ground-mount projects, followed by monocrystalline and thin film. The other solar technologies deployed in utility projects are concentrated high-efficiency PV (CPV) and concentrated solar power that converts heat into steam (CSP). These technologies require high levels of direct solar irradiation (ideally desert conditions), which limits their market adoption, and these technologies have also struggled to bring down costs as fast as standard  PV due to the smaller volumes deployed (~2%).

The utility-scale segment has been a key driver of the fast growth of solar during the last years, reaching almost 60% of all solar capacity installed in 2016 (Figure 3). A major trend for this segment has been a shift from mature European markets like Germany and Italy, which have relatively less utility-scale projects and more rooftop installations, to emerging markets like China and India, where utility-scale solar dominates. In addition, the US has been a very strong market for large projects, supported by a 30% tax credit system. Going forward, the three largest utility markets, China, India and the US, will account for 2/3 of the expected utility capacity added by 2020. Moreover, other emerging ‘gigawatt utility markets’ to watch are Mexico, Chile and Brazil, with Middle Eastern and African countries also getting into the game.
FIGUR 1: Investeringer i kraftnettet frem til 2025 (mrd. NOK)

Up for a chat about Utility-scale solar?

Thomas Nyheim
thomas.nyheim@qvartz.com
+47 901 80 355

Anders Roed Bruhn
anders.roed.bruhn@qvartz.com
+45 29 69 69 33

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