German market research company EuPD Research has forecast a challenging year ahead for the global solar PV market with a possible decline in new installations to 69 GW.
The global PV industry achieved a new record in 2016, according to EuPD Research, with the total installations up to 76.4 GW. China dominated the market with about 34 GW of installations with the US, Japan and India following on behind. However, the company finds that significant reduction of newly installed systems of around 10 to 12 GW is likely in 2017.
REM talked to Dr Martin Ammon, head of energy industries center at EuPD Research to find out more.
Can you tell me about EuPD Research and what it does?
EuPD Research is an international active market and economic research company, specialized in analysing renewable energy markets. Founded in 2000, EuPD Research conducted around 2,000 successful research projects for customers around the world.
How would you describe the state of the global PV industry at the moment?
The global PV industry is in a difficult situation. There is always a risk when half of the global PV installations are concentrated on one nation. Changes in energy policy within this single country market could lead to massive over capacities on a global level.
On the one side, we observe high pressure on costs for PV manufacturing companies; on the other side it’s necessary to invest in new and larger production sites to use the economy of scale effects.
How do you expect China’s influence to grow in the wake of the potential exit from clean energy by the US?
The US sales market for PV systems was the second biggest market after China in 2016. Nearly two thirds of the global PV installations in 2016 were made in China and the USA. A potential exit from clean energy by the US will increase the pressure on the prices of photovoltaic products. Due to the fact that most PV manufacturing companies are located in China, an exit of the US market will have dramatic consequences on PV prices as well as the survival of the industry.
Beside the consequences for the Chinese economy, an US exit regarding clean energy sources will be a bad example for other nations as well as clean energy investors.
How great a problem is China’s current dominance of the market?
For 2017 as well as for the next 3 to 5 years, there’s no country market or region worldwide, which has the opportunity to compensate for the downturn of the Chinese PV market.
A strong decrease in PV installations in China will lead to increasing pressure on PV prices on a global level. Newly installed PV systems become cheaper and electricity generation costs of these new PV systems will decrease short-term. Midterm, the price level for PV products has to be reached, which allows PV manufacturing companies to realize gains from their business.
The authors of a new report released recently in Europe are hoping for stronger growth in 2017 due to the cost reductions in solar and wind. What is your view on that?
All in all, investment costs are an important indicator for the development of the deployment of renewable energies.
For example, the number of newly installed PV systems in the second half of 2016 in Germany showed an upward trend, which can be attributed to the cost reduction for PV modules on a global level. Larger ground mounted PV projects are more cost-sensitive than smaller residential PV systems. With more than 350 MW of new large-scale PV system installations in Germany, we were able to observe this cost effect on installations only recently in December 2016.
Also in 2017, based on low PV system costs, a lot of large scale PV installations from tender processes will be realised in Europe.
As China seeks increasing decarbonisation, what are the main problems it will face and how do you expect the Chinese to try and overcome them?
Decarbonisation means that a change from extremely cheap electricity from coal power plants to renewable energies has to happen. Unlike for conventional energy sources, this requires high investments, because for renewable energies the main focus is on the investment costs.
Besides that, this transition to renewable energies also needs high investments in electricity grids, as well as grid balancing structures, such as possibly storage. As we have recently observed in China, this demand for investment is slowing the investments in renewable energies.
To get the whole picture of decarbonisation, it is also necessary to change the heating sector and the mobility sector to renewable energies. Just focusing on electricity generation is not necessary for a real decarbonisation.
Where do you think the global clean energy market will be in, say, five years’ time?
Clean energy markets will show a strong growth path for the coming years, because renewable energies are already more cost effective today than conventional power sources. However, instead of single technologies such as photovoltaics, heat pumps or e-mobility, the whole concept of connecting clean energy sources to new solutions will be crucial. Based on that, we will see a long term growing market for clean energy technologies. Clean technologies will become more and more standard.
Martin Ammon has been involved in the renewable energy and clean tech sector since 2007. His field of work includes the creation of economic models in the context of industry and national market surveys in the range of renewable energies.