A New Era Of Sustained Growth

A New Era Of Sustained Growth

After several years of weak solar demand growth in Europe, compared to the historical highs of 2011, installations are expected to surge by 88% to reach a new installation record of 23 GW in 2019, writes Cormac Gilligan, research manager at IHS Markit. A range of favorable macro conditions have coalesced this year to reignite the market.

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While the European region is forecast to grow over the next five years, headwinds do exist, such as grid connection and planning permission issues due to the large installed base of PV in some local areas, and shortening PPA terms as financial market drivers move toward merchant deals. However, the European solar market is moving toward a new level of maturity and growth beyond rich subsidies. Increasingly, it will be driven by market fundamentals such as growing interest from corporates, utilities, and offtakers that see solar as a cost-competitive energy generation source.

China’s loss, Europe’s gain

The global solar market is highly interconnected in 2019 and sensitive to big changes in demand, such as the decline of a large market like China. The solar supply chain has now reached a scale where suppliers will seek new growth opportunities instantly if key markets fail to install expected demand. The past year has been a prime example, as the failure of China to reach the same heights as 2018 meant that module and inverter suppliers swiftly expanded internationally and rapidly lowered prices in order to fill their order books.

Among the beneficiaries are European EPCs and developers who were actively installing during the lull in Chinese demand throughout the first nine months of 2019. European installations are forecast to have surged to account for 18% of total global additions – an increase of six percentage points over 2018. Several Chinese module manufacturers are expected to increase capacity in the next few years, with the mantra of scale being their strategy to maintain profitability. As a result, PV system prices are expected to fall in 2020, mainly due to PV module price decreases arising from excess module capacity, which will help drive Europe to install more cost competitive solar.

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