How the exponential growth of solar will help shape global power markets

Global investment in clean energy technologies is forecast to reach $2 trillion by the end of 2024. At over $500 billion, spending on solar photovoltaics is set to surpass all other generation technologies combined for the second consecutive year, according to the International Energy Agency's World Energy Investment 2024 report.

In 2023, renewable capacity additions increased by almost 50% to surpass 500 GW -- marking 22 years of growth, according to data from the IEA. The lion's share of this increase -- over three-quarters -- was attributed to solar.

This cleaner energy mix allowed greater access to cheaper electricity as an estimated 96% of the new utility-scale solar PV capacity enjoyed lower generation costs than their new coal and natural gas counterparts in 2023. Moreover, IEA data showed that, at present, the levelized cost of electricity -- the cost of a generating asset over its lifetime -- of solar PV plants in China, the European Union and India are below that of existing coal and natural-gas fired plants.

Spot prices for solar PV continue to fall, having declined by almost 50% year-on-year in 2023. Data from Platts Renewable Energy Price Explorer showed that solar capture prices in Spain in May remained 58% below that month's spot price averageat Eur17.67/MWh, while solar capture prices in Germany in May dipped below Eur40/MWh -- the lowest levels since summer 2020, capturing 59% of average spot prices.

In the US, a June report from the Lawrence Berkeley National Laboratory found that, as a zero-fuel-cost generation resource, solar is able to provide hedging opportunities against wholesale cost increases.

Solar power costs in the US are expected to continue to decline upon the introduction of new tax credit incentives through the Inflation Reduction Act.

Growing investment

The low generation cost of solar PV is an effective investment incentive. According to analysts at S&P Global Commodity Insights, solar is expected to enjoy some 55% of clean energy technology investment forecast for 2024.

The most notable recent legislative investment incentive came from the US IRA, signed into law by President Joe Biden in August 2022, which offers subsidies to both private and public entities through financial incentives such as investment allowances and tax credits. It is expected to help the US achieve its goal of cutting emissions by 50%-52% below 2005 levels by 2030. John Podesta, senior advisor to Biden for international climate policy, said it is "the largest investment in clean energy and climate action in history."

"[The IRA] is unleashing a clean energy movement in America that's boosting innovation and lowering the cost of clean energy technology by as much as 25% according to the Boston Consulting Group," Podesta said at the Climate Innovation Forum 2024.

In Europe, the Net-Zero Industry Act came into force on June 29, targeting that the manufacturing capacity of clean technologies, such as solar PV, meet 40% of the European Union's annual deployment needs by 2030.

The solar solution

As investments grow, so does solar output. Across the EU-27, solar generation in May rose to a monthly high of just under 30 TWh, data from Fraunhofer showed, whilst daily peaks averaged above 100 GW. In the US, CASIOdata showed a 31% year-on-year spike in solar output for May, rising to average of 179.46 GWh/day and topping the electricity mix in May for the first time.

China is the world's largest PV market, with 42% of global cumulative solar PV as of 2023 and provided over half of global solar module demand that same year. Platts PV Installations Tracker forecasts 240 GW of new solar installations in China this year, the most installations in all major regions, followed by other countries in Asia-Pacific.

Global demand for solar is only expected to rise with manufacturers expected to add 309 GW of solar module production capacity in the next two years, according to Platts' Top Ten Cleantech Trends in 2024.

Increasing solar demand saw Commodity Insights analysts increase their 2024 solar forecast between the close of 2023 and the second quarter by almost 50 GW to 520 GW, which would equate to a year-on-year growth of 23%.

Between 2024 and 2030, Commodity Insights analysts indicate a total of 4.3 TW PV additions globally, bringing total installed capacity to 5.9 TW, according to the latest Platts PV Installation tracker.

"Solar PV will be the most installed energy source for the next decades, with Commodity Insights forecasting more than 4 TW-dc of new installations before 2030," said Edurne Zoco, research and analysis executive director at Commodity Insights. Solar modules have become one of the most sought-after commodities in the increasingly competitive energy markets."

Tracking the solar revolution

The bulk of the solar growth to 2030 will be seen in Asia, which is projected to almost triple its solar fleet to surpass 3 TW-direct current. Both the EU-27 and North America are forecast to more than double their installed solar PV capacity by 2030.

According to IEA forecasts, solar and wind are set to generate more electricity than hydropower in 2024, before surpassing nuclear electricity generation in 2025 and 2026.

By 2028, renewable energy sources are expected to provide 42% of global electricity -- over half of which will come from solar PV and wind.

Power price drivers will shift alongside decarbonization. Therefore, solar's increasing presence in the global electricity mix means the technology is set to be a major influencer on power prices in decarbonized electricity systems.

Like most commodities, solar module prices are not insulated from external influences. Oversupply in Asia has led to plummeting solar module prices in the past 18 months while evolving import taxes in the US have created significant module price disparity on the continent compared to Asia and Europe.

Platts solar module assessment, launched on July 1, will help track the solar revolution and provide transparency in the market, with six daily prices across Europe, China and the US. The price assessments will reflect Topcon specification and wafer sizes of 182-210 mm, output 570-720W, for volumes 5-50MW and 50-100MW.

A Global Solar Marker will also be published by Platts containing an average of the six assessments.

"The new daily global solar module price assessments are a major step forward, addressing the growing need for price transparency and mitigating transaction risks in the highly volatile solar markets," said Zoco.