Market Trends of Distributed Solar Power Generation Industry
Declining Price of Solar PV Systems and Installations Cost Expected to Drive the Market
- Since the last decade, the average cost of a solar PV panel has dropped by nearly 90% worldwide. Prices of other components have also fallen significantly since 2011, reducing the levelized cost of electricity (LCOE) for distributed and utility-scale solar PV generation.
- Due to a combination of techno-economic and geopolitical factors, it is estimated that the cost of solar PV panels prices will reduce slightly. Still, solar PV panel prices will continue to decline during the forecast period.
- According to the United States National Renewable Energy Laboratory (NREL), since 2010, there has been a 64%, 69%, and 82% reduction in the cost of residential, commercial-rooftop, and utility-scale PV systems in the United States, respectively. The decline in the prices of solar panels in Europe and the United States is primarily due to the drop in solar panel prices. This scenario will positively impact the market and drive the demand for solar panels in these regions.
- Due to the price decline, many residential and commercial consumers opted for rooftop solar PV systems to reduce energy costs and recovery time. Further, till 2020, the prices of solar PV modules declined by approximately 90%. However, this changed in 2021, when for the first time in the last decade, the prices went significantly up by 18%.
- According to National Renewable Energy Laboratory (NREL), the average selling price of the Mono C-Si solar PV module was 0.25 USD/watt in Q2 2022, lower than 0.26 USD/watt in Q1 2022. The declining module price has increased the demand for distributed solar power generation.
- The industrialization of these highly modular technologies has yielded impressive benefits from economies of scale and greater competition to improved manufacturing processes and competitive supply chains. The overall decline in solar PV system costs can also be attributed to the effective feed-in tariff programs in countries like Germany.
- The decline in the cost of solar PV and the declining cost of batteries have been significant drivers of the distributed solar energy market in recent years. This trend is expected to continue during the forecast period.
- Prices of lithium-ion batteries have declined by over 86%, from 1,000 USD/kWh in 2010 to 132 USD/kWh in 2021.
- Thus, the improved cost-effectiveness of batteries and solar PV modules will benefit the distributed solar energy market during the forecast period.
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Asia Pacific Expected to Dominate the Market
- Asia-Pacific dominated the distributed solar power generation market in 2022 and is expected to continue its dominance in the coming years. The region holds vast potential for expanding distributed energy systems (DES), notably off-grid and residential solar. Inefficiencies in the power grid infrastructure, power supply shortages, and the scalability of decentralized technology pave the way for the deployment in the region, particularly in China and India.
- The electricity demand in China has been increasing due to economic growth and urbanization. Since 2015, the country's power demand has risen by 7% per year. The power demand rose by 3.6% in 2022, reaching 8,637 TWh.
- According to International Renewable Energy Agency, China had a total installed solar PV capacity of about 3924.4 GW in 2022, witnessing an increase of 28% compared to 2021. According to China's National Energy Administration (NEA), China's 20.37 GW new solar PV capacity to have been installed in January 2023 and February 2023, taking the country's total solar fleet to exceed 413 GW, out of which the majority came from distributed solar power generation projects, and the remaining share came from large-scale solar plants accounting for the remaining share.
- China has been focusing on increasing distributed solar power generation by encouraging residential and commercial end-users to install rooftop solar panels for quite some time.
- The solar power capacity in Singapore has risen over the past several years. According to the International Renewable Energy Agency, Singapore's total installed solar PV capacity reached 572 MW in 2022, recording a 15% growth compared to 2021. Furthermore, the country aims to generate at least 2 GWp of solar energy by 2030.
- India is another country in Asia-Pacific where distributed solar power generation has a noticeable development. India's cumulative installed solar power capacity reached about 62.8 GW in 2022, adding around 13 GW in 2022.
- The Ministry of New and Renewable Energy is implementing the Rooftop Solar Programme Phase-II for the country's accelerated deployment of solar rooftop systems. The scheme provides financial assistance of up to 4 GW of solar rooftop capacity to the residential sector. There is a provision to incentivize the companies for incremental achievement over the previous year.
- Therefore, owing to the above points, Asia-Pacific is expected to dominate the distributed solar power generation market during the forecast period.
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