2020s to be the Decade of Emerging Solar Power Markets: WoodMac

The 2020s are set to deliver more of the same for solar PV, as costs continue to fall, and the global market gets more diverse with emerging markets coming of age

The next decade is set to deliver more of the same for solar PV, according to Wood Mackenzie. Costs will continue to fall, though slower than before, and the diversification of the global market will continue at pace with emerging markets coming of age.

In the next five years, countries from Saudi Arabia to Pakistan to Malaysia will join the gigawatt club. Outside of the OECD, there are auctions planned in 44 countries, and a project pipeline of 180 GWdc in almost 120 countries. Managing the risks associated with doing business in emerging power markets will be a key challenge for investors to negotiate.

The analysis further added that the Emerging markets also offer opportunities beyond traditional grid-connected plants. Off-grid solar PV-based installations for those currently without power supply, or where the service from existing suppliers is inadequate will offer a different opportunity set, particularly in Sub-Saharan Africa. ESG concerns and the high cost of oil-based power are also leading to companies in extractive industries such as mining to look to PV-based systems as a cleaner and in many cases cheaper, alternative.

Tom Heggarty, Wood Mackenzie Principal Analyst, sees six key themes that will b the biggest trends to watch in the global solar market in 2020 and beyond:

• Increased power price risk
• Investments in grid infrastructure
• Short-term policy incentives
• COP26
• Overly-aggressive auction bidding activity
• PV waste risk

Heggarty said: “We’ll see increased power price risk as more solar PV markets go, merchant, that’ll also mean a change in the competitive landscape. Power trading and power purchase agreement (PPA) origination capabilities – typically the preserve of the larger utilities – will become more important.

“Smaller independent power producers (IPPs) could be forced to focus purely on early-stage development and the sale of shovel-ready or operational projects as a result. The market will become more consolidated as larger players buy-up riskier portfolios. New entrants, such as the oil and gas Majors, will be keeping a close eye on market developments – their trading expertise and risk appetite should leave them well-placed to succeed.”

While the coming decade undoubtedly looks healthy for solar PV, actions by policymakers could pave the way for even stronger growth. When the fundamentals of investing in solar PV make sense without subsidy, markets can and should grow quickly. But decades of under-investment in grids and burdensome connection processes are putting the brakes on markets around the world. Policymakers are not short of ambition when it comes to the decarbonisation of power markets. However, the translation of long-term targets into specific and consistent policy incentives is severely lacking, says Wood Mackenzie.

To read the full paper click here.