{"id":95022,"date":"2021-12-14T06:37:22","date_gmt":"2021-12-14T06:37:22","guid":{"rendered":"https:\/\/alj.com\/?post_type=perspective&p=95022"},"modified":"2022-05-05T06:26:09","modified_gmt":"2022-05-05T06:26:09","slug":"setting-a-shining-example","status":"publish","type":"perspective","link":"https:\/\/alj.com\/en\/perspective\/setting-a-shining-example\/","title":{"rendered":"Setting a shining example"},"content":{"rendered":"

In amongst the uncertainty, disruption and economic contraction caused by the recent pandemic, it is encouraging, and heartening, to see there are still some positive indicators of a brighter future not too far around the corner.<\/p>\n

Take the global energy sector.\u00a0 Although global consumption of most fuels fell during this \u2018outlier\u2019 of a year, renewables bucked the trend, experiencing unprecedented demand. \u00a0Spearheading this growth was solar power<\/a>.\u00a0 In 2020, solar recorded a 23% expansion of new PV installations to almost 135GW worldwide.[1]<\/a>\u00a0 A burst of new activity that pushed global solar power capacity over the 700GW threshold[2]<\/a> for the first time.<\/p>\n

\"IEALittle wonder the International Energy Agency (IEA<\/a>) has crowned solar \u2018the new king\u2019 of global electricity markets.\u00a0 Moreover, the IEA notes that this solar shift shows no sign of abating. \u00a0<\/p>\n

Indeed, it is tipping solar expansion to hit 145GW in 2021 and 162GW by 2022 (almost 50% higher than pre-pandemic levels of 2019), together representing more than half<\/em> of all green energy expansion over that two-year period.[3]<\/a>\u00a0 Hardly surprising, given that solar power is now the lowest-cost method of power generation in many countries boasting the right mix of plentiful sunshine and ready financing.<\/p>\n

Solar dazzles around the world<\/h2>\n

Breaking down the figures, 2020\u2019s 135GW of new solar energy spanned the market, comprising 75.9GW utility-scale installations, 30.1GW commercial\/industrial installations, 27.5GW residential installations, and 0.5GW off-grid installations.<\/p>\n

Not only has solar power proved versatile in 2020, but this growth has also been truly global.<\/p>\n

China led the solar surge with 48.2GW of additional capacity, prompted partly by the imminent conclusion of its solar subsidy schemes.<\/p>\n

Elsewhere, Europe recorded 20.4GW of solar growth, the USA 19.3GW, ASEAN (Association of Southeast Asian Nations) 12GW, Japan 9GW, Latin America 6GW, Australia 5GW and India 3.9GW[4]<\/a>.<\/p>\n

The USA\u2019s 19.3GW growth, overshadowing 2019\u2019s 13.2GW, affirmed its status as the world\u2019s largest power purchase agreement (PPA) market for utility-scale projects.\u00a0 So active was the second half of the year that it more than offset the Covid-induced lethargy of the first six months, carrying the USA past the 100GW total installed solar capacity mark.<\/p>\n

Europe\u2019s expansion represented the second-best year ever for solar growth in the EU, according to Solar Power Europe.\u00a0 The top three performing markets were Germany, The Netherlands and Spain[5]<\/a>.\u00a0 Germany consolidated its position as Europe\u2019s solar leader, with investors capitalizing on preferential feed-in premiums for medium and large-scale systems from 40kW to 750kW, supported by a raft of auctions for systems up to 10MW.\u00a0 Solar power grew in Germany by 4.8GW in 2020, 25% higher than the previous year.<\/p>\n

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The Netherlands became Europe\u2019s second largest solar market with 2.8GW of new installations in 2020, a 23% rise year-on-year, with commercial rooftop installations accounting for almost half of its solar total.\u00a0 The Netherlands\u2019 largest solar plant to date commenced operations this year, a 110MW facility in Groningen province.<\/p>\n

Spain expanded its solar capacity by 2.6GW, down sharply from the previous year\u2019s 4.8GW (when figures were skewed by two power plant tenders coming online), but enough to maintain its position as one of Europe\u2019s key solar sites.\u00a0 Some 1.5GW of Spain\u2019s 2020 installations came via PPAs stemming from an in-progress 100GW pipeline.<\/p>\n

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Such enthusiasm for solar power should come as little surprise given that the industry has the potential to meet one-fifth of Europe\u2019s electricity demand by 2030, providing up to 4 million jobs in the process.[6]<\/a>\u00a0<\/p>\n

Bright future despite supply chain setback<\/h2>\n

The data is proof, if any were needed, that solar is here to stay \u2013 despite sporadic logistical bumps in the road.\u00a0 Fires at two silicon manufacturing plants in China (a key exporter of solar PV modules) halved the country\u2019s silicon output in 2020, for example.\u00a0 The incidents reversed the 25% price drop in solar modules achieved during the first half of 2020, and by September had sent silicon prices soaring 60%.[7]<\/a><\/p>\n

Other materials critical for solar panels also escalated in cost in the second half of the year.\u00a0 PV glass prices, for instance, rose by half due to delays in modernizing production lines, while steel and copper prices increased 40% from September 2020 to March 2021 as industries bounced back from Covid slowdowns and demand increased.\u00a0 High oil prices trebled freight costs, affecting profitability at a crucial period.<\/p>\n

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Fortunately, these supply chain issues and resultant higher costs are not expected to be long term.\u00a0 A new wave of silicon plants are scheduled to be operational in China by mid-2022, while glass manufacturers are likewise predicted to increase their output, bringing module prices back down from their US$ 0.205\/watt high of 2020.<\/p>\n

Around the world, buoyed by supportive policy environments, investors are waiting to pounce on the potential of solar power in the near future, as illustrated by developments in some key markets[8]<\/a>.<\/p>\n

The United States is expecting to see 44.3GW of new solar capacity over 2021\/2022, fueled by a year-long extension to the country\u2019s Investment Tax Credit (ITC).\u00a0 The number of utility-scale projects will rise due to higher corporate demand via PPAs, largely driven by falling costs.<\/p>\n

Europe is forecast to host 49.1GW of new solar capacity in 2021\/2022, thanks to auctions in Germany, France, Poland and Turkey, as well as Spain\u2019s corporate PPAs.<\/p>\n

In China, 110.5GW of new solar capacity is predicted for 2021\/2022.\u00a0 Some 40GW of subsidy-free schemes will be greenlit under 20-year contracts, despite the recent axing of subsidies for utility-scale and commercial\/industrial PV projects.\u00a0 Residential solar subsidies are expected to remain, maintaining the upward trend in smaller PV installations.<\/p>\n

In Latin America, meanwhile, 21GW of new solar capacity forecast for 2021\/2022, with brisk solar growth expected in Brazil and Chile<\/a>.\u00a0 Brazil\u2019s beneficial net-metering scheme will trigger a rapid expansion of distributed PV projects, while Chile\u2019s utility-scale market is anticipating high levels of activity spurred by earlier auctions.\u00a0 The cancellation of clean energy certificate auctions is expected to hinder new developments in Mexico.\u00a0 However, many utility-scale projects already in the pipeline will become operational in 2021\/2022 before any new rules take effect.<\/p>\n

Australia weathered an oversupply of clean energy certificates in 2020 which hampered profitability at utility scale-level.\u00a0 Corporate PPAs are likely to restore commercial confidence and 9GW of additional solar capacity is forecast for 2021\/2022.\u00a0 Lower down the policy chain, some states are encouraging distributed PV growth by supporting the expansion of battery storage facilities.<\/p>\n

India\u2019s solar capacity additions trebled in 2021 compared to 2020 as several utility-scale projects belatedly came online.\u00a0 The government granted 27GW of solar contracts during 2020 via auctions, ensuring continued PV growth this year and next. \u00a0However, regulatory disharmony between states continues to constrain distributed PV expansion. \u00a0Overall, India is anticipating 26.1GW of new solar capacity in 2021\/2022.<\/p>\n

Policy, as we can see, is pivotal to a thriving solar energy market.\u00a0 And 2021 could be a landmark year for renewable energy policies globally.<\/p>\n

Policymakers take a shine to solar<\/h2>\n

Solar power\u2019s limitless potential has seared itself indelibly into the public consciousness during 2021\u2019s COP26<\/a> gathering of world leaders.\u00a0 The watershed UN Climate Change conference<\/a> took place in Glasgow, UK, during November, billed as a last-ditch chance to avert environmental breakdown over the coming decades.<\/p>\n

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The timing is critical, with pre-COP26 plans to cut global carbon emissions falling 60% short of targets necessary for net zero, according to the IEA.[9]<\/a>\u00a0 The IEA estimates an extra US$ 4 trillion of investment is essential for transforming the concept of net zero from pipe dream to reality.\u00a0 This will require a substantial shift in public sector investment policies: pre-COP26, for every US$ 1\/capita earmarked for clean energy in COVID-recovery packages among G20 countries, US$ 1.05\/capita was being spent supporting fossil fuel industries.[10]<\/a><\/p>\n

As state leaders departed the conference and left further dealmaking to negotiators, it was clear solar will play a major part in the global transition to clean energy. \u00a0Trade body SolarPower Europe is already pushing for a 45% EU renewable energy target by 2030, which it says offer the most cost-effective path to keeping the 1.5\u00b0C Paris limit alive and would put the continent on the trajectory towards achieving climate neutrality by 2050[11]<\/a>.<\/p>\n

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Walburga Hemetsberger
\nCEO, SolarPower Europe<\/figcaption><\/figure>\n

\u201cIncreasing the EU\u2019s renewable energy ambition is possible and will shield consumers from high energy prices while stimulating the growth of a domestic solar manufacturing industry\u2026 \u00a0<\/em><\/p>\n

Solar will continue to be crucial tool in the fight against climate change as it prevents over 90% of carbon emissions compared to gas or coal, while creating the most jobs of any energy generation technology<\/em>,\u201d\u00a0said Walburga Hemetsberger, CEO of SolarPower Europe.<\/p>\n

India and the UK also launched a project to create a solar grid connecting countries around the world.[12]<\/a>\u00a0 The so-called Green Grids Initiative has the potential to transfer solar power from one country to another as the sun rises and sets, allowing round-the-clock green energy<\/a>, even at nighttime.\u00a0 Around US$ 10 billion funding is being sought to get the project under way, though operations are unlikely to commence for at least a year.<\/p>\n

India was absent though from another major deal, in which more than 40 countries pledged to phase-out use of coal-fired power entirely and refocus on renewables instead.[13]<\/a>\u00a0 Canada, Poland, South Korea, Ukraine, Indonesia and Vietnam will cease using coal for electricity generation during the 2030s and 2040s.\u00a0 Apart from India, several other coal-dependent economies likewise refused to sign up to the deal including China, Australia and the USA \u2013 but green campaigners vowed to keep applying pressure to these holdouts.<\/p>\n

Also unveiled during the conference was a US$ 8.5 billion international grant to assist South Africa \u2013 currently one of the world\u2019s largest coal polluters \u2013 to boost renewables and stop burning fossil fuels.[14]<\/a>\u00a0 Six 75 MW solar parks are due to be built in Tokologo, in the Lejweleputswa District of the Free State region.<\/p>\n

More initiatives are set to follow as the commercial case for solar becomes increasingly watertight.\u00a0 With the cost of renewable energy continuing to decline, solar power is joining wind as the cheapest source of electricity in many markets.<\/p>\n

Solar power prices fell to an average of US$ 0.057\/kWh in 2020, down from US$ 0.381\/kWh a decade earlier.[15]<\/a>\u00a0 Only hydropower (US$ 0.044\/kWh) and onshore wind (US$ 0.039\/kWh) hit a lower price point among renewables in 2020.<\/p>\n

The International Renewable Energy Agency (IRENA<\/a>) estimates that in order to hit 2050 climate goals, solar power must by that date achieve 15,000GW global capacity.\u00a0 That\u2019s big business, and a mission which will entail harnessing the vision, skills and spending power of the private sector.<\/p>\n

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At the forefront of the green energy transition<\/h2>\n

At Abdul Latif Jameel<\/a> we are committed to playing our part in the energy transformation through our flagship renewables business Fotowatio Renewable Ventures (FRV<\/a>), part of Abdul Latif Jameel Energy.<\/a><\/p>\n