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Global solar PV installations to grow 20% in 2022, despite rising costs: IHS Markit

16 November 2021 Amena Saiyid IHS Markit Energy Expert

Global solar PV installations will see double-digit growth in 2021 and 20% growth or more in 2022 and surpass the 200 GWdc barrier for the first time, according to a new report by the Clean Energy Technology service at IHS Markit.

Total investment in 2022 will be least $170 billion.

Until recently, declining PV system costs—which decreased by more than 50% on global average from 2013 to 2020—have been a crucial factor in the exponential growth of the industry, with global installed capacity increasing 275% during that time. However, IHS Markit found that PV systems costs have increased by 4% from 2020 to 2021, bringing new challenges to the burgeoning market.

IHS Markit calculates the range of current pricing for utility-scale PV systems at $0.55/Wdc to $0.97/Wdc, "though that is dependent on a variety of factors, including location and type of companies involved," said Josefin Berg, research manager, clean energy technology at IHS Markit. "But as IHS Markit data shows, this range is higher than it was a year ago."

Using data from the US National Renewable Energy Laboratory, utility-scale solar PV costs were about $4.75/Wdc in 2010, and NREL credited the declines in the last decade primarily to PV module efficiencies and lower hardware and inverter costs.

Expansion

Installations in key markets such as China, India, US, and Europe are driving expansion in 2021 and in 2022, with the highest growth coming from the distributed generation segment, led by China.

IHS Markit expects solar PV installations to experience double-digit growth tis year, but with a new sector leading the way.

"The utility segment has been the most affected in 2021, with multiple projects delayed or canceled. By contrast, the strong growth of the distributed generation i.e., residential, commercial, and industrial, sector has been one of the success stories of solar PV in 2021," said Berg. "[It has been] boosted by the fuel crisis and surging electricity prices, particularly in markets across Europe."

High prices through 2022

Global logistics and supply chain disruptions in many industries over the past year have pushed the cost of solar PV materials to new highs. In addition, power restrictions imposed in mainland China in the latter half of 2021 have severely restricted the output of PV-related manufacturing in certain provinces, cutting supplies of key materials such as metal silicon, polysilicon, and solar glass.

From October 2020 to October 2021, IHS Markit has found that the price of polysilicon has grown over 200% alongside major price increases in other module materials such as solar glass and copper—forcing module manufacturers to increase their prices. IHS Markit estimates that, since August 2021, average module production costs have increased above 15%, and module prices are now back to 2019 levels.

Other solar PV components such as inverters and trackers are also being affected by the shortage of some materials (including semiconductor components) and the high cost of raw materials such as steel. IHS Markit expects that the current high costs of freight and subsequent shipping delays will continue well into 2022.

"There is significant appetite across global markets to invest in and develop solar installations, but the supply chain is just not ready to meet this level of demand; it needs time to adjust. We have seen this most clearly in the polysilicon market, which will continue to be a bottleneck for solar PV growth into 2022, until planned new capacity is ramped up from 2023 onwards," said Edurne Zoco, executive director, clean energy technology at IHS Markit.

In addition to production capacity catching up in 2023, IHS Markit anticipates increased efficiency from emerging technology, such as passivated contact cells and heterojunction, will also contribute to lower production costs from 2023 onwards on a dollars-per-Watt basis.

Policy uncertainty

However, the wild card for the 2022 forecast is the policy uncertainty in major solar PV markets.

Resolution of those issues will have major consequences for manufacturing capacity decisions and market installation pace, Zoco said. In China, the length and intensity of current power restrictions will determine solar PV production rates and its export potential. In the US, as much as 20% of new installations could be lost if current high costs continue and if the investment tax credit is not extended.

"Despite the two-year impasse in solar PV cost decline, solar continues to be one of the energy technologies with the lowest capex and is the fastest energy source to install," Zoco said. "Over 1,000 GWdc of new solar installations are expected to be installed [globally] through 2025, driven by solar technology competitiveness, versatility, and installation speed, that will be instrumental to contribute to the decarbonization of the power system this decade."

Posted 16 November 2021 by Amena Saiyid, Senior Climate and Energy Research Analyst

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