The big question is whether we will see growth in global solar installations this year against the backdrop of low oil, natural gas and coal prices? The answer is a resounding yes! Not only will we have double digit installations growth but we will also see over 64GW of new installations, which will not only make 2016 a record year for solar but will also make it the biggest generation technology in the world. Why are we seeing this growth? There are five reasons for this:
First and foremost, solar is becoming increasingly cost competitive with other forms of generation. In countries like Chile there is no subsidy needed for solar to compete with wholesale power prices. And in large part of the world (India for instance) solar is now becoming so cheap that it makes sense for power users and utilities to sign power purchase agreements (PPAs) with solar power generators. This in turn is pushing down the cost of capital making solar even more economical.
Secondly, solar is much more flexible than any other source of electricity generation. It can be used to power a calculator or a town and it can be installed more quickly than any other generation technology. It can also be done on site thus enabling the user to avoid expensive distribution costs, taxes and other surcharges.
The third reason that the global solar market will continue to grow is increasing environmental motivations from governments particularly concerning climate change and air pollution. The loser will be coal and solar should be one of the major beneficiaries of this transition away from coal.
Fourthly, thanks to falling battery and solar prices, hybrid power solutions are becoming the cheapest way to bring power to those who don’t have power. We are seeing this already in places like Tanzania and Kenya and going forward we will see increasing numbers of people in places diverse as Germany and Australia (who already have grid connected electricity) putting solar on their roofs with batteries attached.
Finally, solar is only at the start of the growth curve. It only makes up 1.5% of electricity generation across the world and even if that level only goes to that of Italy (7.5% of all power generated in 2014) there is a lot of growth to come in the solar market…