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Global Solar: Pathway to 500GW
- As investment in solar power increases amid falling prices…
- ...we think it could meet or exceed many government targets...
- ...with new installations potentially reaching 500GW per year in 2026
Solar is the star of global energy investment
Solar’s stellar rise continues apace. Alongside technologies such as onshore and offshore wind and nuclear power, solar is an increasingly critical component of national long-term decarbonisation plans around the world.
The International Energy Agency predicts investments in solar energy in 2023 (an estimated USD382bn) will surpass spending on oil production (USD371bn) for the first time, and comfortably exceed investments in wind power (USD225bn). Unlike other low-carbon technologies, we expect solar will meet and even exceed many government rollout targets.
USD382bn
IEA forecast for solar investment, 2023
USD371bn
IEA oil production investment forecast, 2023
In light of the remarkable scale of investments, we have increased our forecasts on how much new solar power is set to be built around the world, and now think that 2023 could see 344GW of new solar installations, up around 44% year-on-year. We expect more modest growth in 2024 followed by another spurt in 2025, with new installations potentially reaching 500GW in 2026.
To give you an idea of scale, that would be around a billion new solar panel installations a year. Not bad, considering that in 2010 new solar demand totalled 20GW.
Two key factors underpin the latest increase in our forecasts. One is that prices for solar equipment fell in the first six months of 2023. A new wave of Chinese polysilicon has become available, removing a key supply bottleneck. Solar module prices are down by around 25% so far this year, which is driving strong demand. And capacity keeps rising: the top five panel suppliers globally are spending around USD7.5bn in 2023 on further capacity expansion.
Supportive government policies are another factor. Efforts to incentivise solar manufacturing in the US and Europe, driven by energy security concerns, should further increase capacity. The US Inflation Reduction Act, for example, provides generous incentives for low-carbon energy generation.
Yet, while we anticipate growth in all segments – including industrial-scale solar farms, and smaller rooftop installations – and across all regions, one market continues to outstrip others in terms of solar installations and manufacturing capacity: China.
China currently dominates solar manufacturing. It accounts for about 90% of the world’s polysilicon, around 97% of global wafer, and nearly 75% of total module capacity. So, while the US and Europe are trying to incentivise a wave of new solar manufacturing, for the time being both rely on Chinese imports. Indeed, we think Chinese companies could play a part in Europe’s push to expand its solar capabilities: in June 2023, Germany and China signed a Memorandum of Understanding to collaborate on climate technologies.
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