The International Energy Agency released their solar energy trends forecast for late 2021 and early 2022 this year. The Agency predicts a 43% increase in capacity for solar energy by 2022, even with the hike in prices of rare earth materials and silicon. Though Bloomberg reduced its forecasted projections for the next year, the trend of solar adoption around the globe remains positive. The IEA predicts a growth of 920 GW in 2022.
Furthermore, the number of new energy start-ups has been dramatically increasing. This continues the trend of solar power production and deployment in significant numbers for the past decades. Though this trend was fuelled in large part by the continuously reducing prices of solar products, the hike is not affecting the solar market as much as many would have thought. This is because the factors affecting the prices are viewed largely as short term at best and medium term at worst. The rampant power shortages and supply chain debacles that have caused the hikes are being addressed by major players and will likely be resolved, though not too soon.
So, what does the future hold? It would be amiss to state that solar energy production is not going to be affected by the rise in prices at all. Currently, the solar industry is undergoing its largest challenge in decades and there is no small amount of uncertainty. Let’s look at what the near future holds for solar energy.
As anticipated, growth is down across the board for solar energy, but the industry is still churning a net profit overall. For example, in Q1 2021, the US solar market installed a little over 5 GW of solar PV capacity. This represented a 46% increase over Q1 2020. Q4 2021 tells a different story. Collective solar power installations were down 8% in comparison to Q4 2020, but still up 11% from Q1 2021. This shows that the industry remains profitable, thought the rate of growth has undeniably slowed in comparison to last year. Even with the reduced growth, solar power will continue to set records of adoption world-over, according to Wood Mackenzie.
Government Intervention Remains Key
Government support of solar energy is going to remain key for the next few years and will go a long way to boosting solar energy well into 2026. At least for the next five years, government-backed tax rebates, credits, auctions, or other incentives will aid solar energy adoption substantially. Almost half the solar and wind projects that are still in the pipeline worldwide have some form of government support. The COVID-19 crisis has, however, put these plans into question, as nations have poured more and more resources in economic stimulation and healthcare. Many solar projects will depend on whether governments find it feasible to honour their tenders and uphold their commitments. But even if governments do uphold their commitments, it is unlikely that they will open new tenders for renewable energy at the same rate as before. In fact, we will probably see governments invest in traditional forms of energy to keep up with energy demand. An example of this is Beijing’s backtracking on its promise to completely go cold-turkey on coal energy. Other countries that have delayed solar PV auctions are Brazil (delayed indefinitely), and France (delayed by six months) among others. Delays in government support and auctions will impact the solar industry well beyond 2021.
Newer, Better and More Batteries
Battery packs will see widespread adoption and net metering will become more pervasive. We’re already seeing this happen in Australia, where net-metering has increased to such a degree that the national grid is being flooded with solar energy. This is a positive sign, but it can also have negative consequences on the grid. At some point, decisions will have to be made about how much the government will continue to support solar energy considering that the grid can only absorb so much as more and more people go solar. Contrast this with the ticking timebomb that is climate change, and decisions begin to look more and more urgent and troublesome. Nonetheless, we predict that by 2022 and 2023, the storage market will look very different than what it does today. Newer forms of batteries like flow batteries are also making an entry. Flow batteries have longer lifespans than lithium-ion batteries. The cost of batteries will likely drop by 15-20 percent from 2022 onwards. This will make them more widely available and far more affordable for customers all over the world. As we’ve seen solar panels increase in efficiency and reduce in cost, we’re going to see the battery industry follow suit.
The Resilience of the Solar Industry Will be Tested
Beyond 2021, the solar industry’s resilience will be tested, as governments reduce spending on solar PV projects in the wake of the coronavirus induced economic recession. Though not a full-blown bust like the 2008 recession, the current global energy crisis is going to strain many a government’s resolve to continue to invest in solar and other renewable energies. As a result, the solar industry will be tested more than it has been in the recent past.
If we look at the solar PV project pipeline, we will see that about one-third of the projects slated for completion by 2025 have already been financed, either through banks or governments, and the likelihood of their cancellation remains low. However, projects that were slated to come into the pipeline are more likely to face delays. Both because government support is waning – not because of a lack of faith in the solar industry, but because of short term priority changes – and because prices are increasing. Just in 2021, we have seen many solar projects face delays, as customers tried to wait out the price hikes. It has become clear that this is unwise, and prices will not decrease anytime soon.
We will probably see new technologies like solar cars and solar shingles make an entrance in the market in the 2022 – 2023 timeframe. While solar cars may be some ways off, solar charging stations for EVs are a logical next step. All in all, things look positive for solar power in the near and foreseeable future. Though challenges are aplenty, so are opportunities. The industry will have to survive, adapt, and overcome.