Global status of solar photovoltaics

By Dr. Winfried Hoffmann and Sven Teske

The solar electricity market is booming. In 2005 the cumulative installed capacity of solar photovoltaic (PV) systems around the world passed the landmark figure of 5000MWp. Global shipments of PV cells and modules have been growing at an average annual rate of more than 35 percent for the past few years. What happens next?

Such has been the growth in the solar electricity industry that the European PV industry alone was worth more than €5 billion in 2005. Competition among the major manufacturers has become increasingly intense, with new players entering the market as the potential for PV opens up. The worldwide photovoltaic industry, particularly in Europe and Japan, is investing heavily in new production facilities and technologies. At the same time, political support for the development of solar electricity has led to far-reaching promotion frameworks being put in place in a number of countries, notably Germany and Japan.

Since the first issue of our global solar PV market forecast ‘Solar Generation’ was produced in 2001, the global market has continued to expand at the rate then predicted. While some countries, such as the United States, have lagged behind in their expected development, others such as Germany have exceeded expectations. There is also evidence of new enthusiasm for solar power in some of its most promising potential world markets, such as China.

The 2006 issue of ‘Solar Generation’ shows that our estimates have been proved to be realistic, even a little conservative, as the market grew faster. Compared to the first market forecast, the market volume in 2005 was three years ahead of schedule, and the market volume in 2010 is now expected to be over 5500MW – twice our expectation in 2001.

This clear commercial commitment to the expansion of the PV industry means that the current surge of activity in the solar electricity sector represents only a foretaste of the massive transformation and expansion expected to occur over the coming decades. The target: realisation of a common goal of substantially increasing the penetration of solar electricity into the global energy mix while also cutting greenhouse gas emissions.

Much work still needs to be done to turn potential into reality. One crucial step is to bring a far broader range of actors into the sector, particularly in the investment finance, marketing and retailing areas. At the same time, there is a need to transmit to as wide an audience as possible the message that solar electricity will bring socio-economic, industrial and environmental benefits to regions that proactively encourage its uptake.

A projection to 2025
Numerous qualitative analyses about the potential market development of solar photovoltaics have been published in the past. The aim here has been to compile a detailed quantitative knowledge base, coupled with clearly defined and realistic assumptions from which extrapolations can be made on the likely development of the solar electricity market up to 2025 and beyond.

The results emerging from this extensive analysis point to a technology that is going to have a significant future impact on the everyday lives of the population born today. Clearly, this transformation will not happen by itself. It will require the far-reaching commitment of consumers and industry, as well as significant political will. The level of commitment needed, however, has already been demonstrated in those countries that show the greatest growth in their solar electricity industries. We must learn from them and adapt and deploy the corresponding catalysts at a global level if solar electricity is to fulfil the potential that we need it to.

Methodology and assumptions
Taking its lead from Japanese and German success stories, this EPIA/Greenpeace report looks forward to what solar power could achieve, given the right market conditions and an anticipated fall in costs, over the first two decades of the twenty-first century. As well as projections for installed capacity and energy output it makes assessments of the level of investment required, the number of jobs that could be created, and the crucial effect increased input from solar electricity will have on greenhouse gas emissions.

This scenario for 2025, together with an extended projection forwards to 2040, is based on the following core inputs:

• PV market development over recent years both globally and in specific regions
• National and regional market support programmes
• National targets for PV installations and manufacturing capacity
• The potential for PV in terms of solar irradiation, the availability of suitable roof space and the demand for electricity in areas not connected to the grid

The following assumptions have been used:

Market growth rates
The average annual growth rate of the worldwide PV market up to 2009 is projected to be 35 percent and 26 percent between 2010 and 2015. Between 2016 and 2025, the market will slowly consolidate at a high level, growth rates going down to 19 percent until 2020 and 11 percent between 2021 and 2025. Although initial growth is expected to be fastest in the grid-connected sector, by 2010 the off-grid sector will play an increasing role.

Electricity generation
Figures for the growth in global electricity demand up to 2020 (on which comparisons with expected PV development are based) have been taken from projections by the International Energy Agency. These show total world power demand increasing to 23,000 Terawatt hours (TWh) by 2025. DLR has been asked by Greenpeace International and EREC to conduct a study on global sustainable energy pathways up to 2050. The scenarios are based on the reference scenario from IEA World Energy Outlook (2004). The energy demand is split up in electricity and fuels. A low energy demand scenario has been developed based on the IEA reference scenario: For the year 2025, the energy efficiency scenario estimates a global electricity demand of 16.845 TWh in 2025.

Carbon dioxide savings
Over the whole scenario period it is estimated that an average of 0.6 kg of CO2 would be saved per kilowatt-hour of output from a solar generator.

Projection to 2040
For the period 2025-2040 a moderate annual growth rate of 15 percent has been assumed, as well as a very conservative lifetime of 20 years for PV modules.

The scenario is also divided in two ways – into the four main global market divisions (consumer applications, grid-connected, remote industrial and off-grid rural), and into the regions of the world as defined in projections of future electricity demand made by the International Energy Agency. These regions are OECD Europe, OECD Pacific, OECD North America, Latin America, East Asia, South Asia, China, the Middle East, Africa and the Rest of the World.

Key results of the EPIA/Greenpeace analysis
The key results of the EPIA/Greenpeace scenario clearly show that, even from a relatively low baseline, solar electricity has the potential to make a major contribution to both future global electricity supply and the mitigation of climate change. These key results are shown in Table 1.

PV’s contribution to global electricity supply
The EPIA/Greenpeace scenario shows that by 2025 PV systems could be generating approximately 589 TWh of electricity around the world. This means that enough solar power would be produced globally in twenty years’ time to satisfy the electricity needs of 20 percent of the entire EU25. Put another way, this would represent the annual output from 150 coal-fired power plants.

Global installed capacity of solar power systems would reach 433 GWp by 2025. About two thirds of this would be in the grid-connected market, mainly in industrialised countries. Assuming that 80 percent of these systems are installed on residential buildings, and their average size is 3 kWp, the total number of people by then generating their own electricity from a grid-connected solar system would reach 290 million. In Europe alone there would be roughly 41 million people receiving their supply from solar electricity generation.

Although the key markets are now located mainly in the industrialised world, a global shift will result in a significant share – approximately 40 GWp – being taken by the developing world in 2025. Since system sizes are much smaller than grid connected systems and the population density greater, this means that up to a billion people in developing countries would by then be using solar electricity. This would represent a considerable breakthrough for the technology from its present emerging status.

By 2040, the penetration of solar generation would be even greater. Assuming that overall global power consumption had by then increased from 16,000 to 36,500 TWh, the solar contribution would equal 16 percent of the world’s electricity output. This would define solar power as an established world energy source.

PV’s contribution to industry, employment and the environment
For the solar production industry, global annual shipments of PV modules will rise from 1.4 GWp in 2005 to more than 55 GWp in 2025. This represents an increase by a factor of 40.

For job seekers in 2025, this will contribute considerably towards their employment prospects. On the assumption that more jobs will be created in the installation and servicing of PV systems than in their manufacture, the result is that by 2025 it is likely that more than 3.2 million full-time jobs will have been created by the development of solar power around the world.

Most of those would be in installation and marketing. By 2025 solar PV would also have had one other important effect. In environmental terms, it would have reduced annual CO2 emissions by 353 million tonnes. This reduction is equivalent to the emissions from Australia AND New Zealand, or 150 coal-fired power plants. Cumulative CO2 savings from solar electricity generation between 2005 and 2025 will have reached a level of 2.2 billion tonnes.

Policy recommendations
In order to supply up to a billion people with solar electricity by 2025, and go on to achieve a global electricity share of 20 percent or more by 2040, a major shift in energy policy will be needed. Experience over the past few years has demonstrated the effectiveness of joint industrial and political commitment to achieving greater penetration of solar electricity into the energy mix at local, national, regional and global levels. A number of key political actions are required:

• Firstly, an annual world PV market growth of 5GWp+ by 2010 will only be achieved through the extension of best practice support schemes, appropriately adapted to local circumstances, to encourage the uptake of solar electricity amongst consumers. The German and Japanese experiences highlight the impact, which such actions can have on the global photovoltaics industry.
• Secondly, the inherent barriers to the take-up of solar power, and the subsidies available to fossil and nuclear fuels, which currently penalise renewable sources, must be removed.
• Thirdly, legally enforceable mechanisms must be implemented to secure and accelerate the new market for solar photovoltaics.

Particularly in industrialised and emerging economies, the introduction or expansion of premium feed-in tariffs with guaranteed lifetimes must be a cornerstone of all future promotion mechanisms for solar electricity.

Our goal now must be to mobilise the necessary industrial, political and end-user commitment to this technology and, more importantly, the service it provides. We must redouble our efforts to ensure that the generation born today benefits from all the socio-economic and environmental benefits that solar electricity offers.

Dr. Winfried Hoffmann is President of the European Photovoltaic Industry Association (EPIA). Sven Teske is Renewables Director for Greenpeace International.