Global demand for solar photovoltaic (PV) installations is projected to experience a significant surge of up to 40% in 2023. This growth is attributed to favorable economics within the solar sector, combined with the implementation of broad policies such as the Inflation Reduction Act (IRA) and REPowerEU schemes.
According to Bloomberg Intelligence's ‘Global Solar Energy Midyear Outlook' report, solar PV will continue to be the fastest-growing sub-segment within the energy sector. This growth is primarily driven by solar PV's position as the most cost-effective method for electricity generation in many parts of the world. Bloomberg's report indicates that solar PV has achieved a levelized cost of electricity (LCOE) of approximately US$50 per megawatt-hour (MWh).
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While solar installations are poised for growth, manufacturers may experience a slight slowdown in sales due to falling prices. The cost of solar modules is expected to continue its downward trend throughout the year, having already declined by 10% since December. Consequently, capacity additions are forecasted to increase by 36% this year, as projected in BloombergNEF's mid-level scenario, compared to a projected 26% increase in manufacturers' sales.
The report anticipates that both LCOE and module costs will continue to decrease in 2023 and beyond. This reduction can be attributed to ongoing improvements in efficiency and the expansion of manufacturing capacity. As a result, project developers and installers are expected to benefit from increased revenues.
Furthermore, the declining cost of polysilicon, which has dropped by nearly 60% since December, along with a projected 50% increase in production capacity, is anticipated to further boost manufacturers' revenues. However, there is a growing concern of oversupply in the market.
Rob Barnett, a senior clean energy analyst at Bloomberg Intelligence, commented, “Global solar demand may rise about 30-40% in 2023, with industry revenues increasing about 35%. Despite such fast top-line growth, solar share prices have trailed this year relative to the overall market, though we note that solar shares are performing broadly in line with the energy sector. We believe the rapid pace of growth can be sustained in 2023-25, which may boost sentiment and help lift consensus sales expectations in the years ahead.”
The report specifically highlighted the success of manufacturers First Solar and Maxeon in 2023. These companies have benefitted from incentives and tax credits offered by the IRA, alongside the aforementioned price declines and increased demand. First Solar has secured capacity orders at favorable prices from companies like Intersect Power and Lightsource bp for the coming years, with a backlog of over 70GW as of April.
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Bloomberg Intelligence's report aligns with similar forecasts and analyses from energy analysts in recent weeks. Wood Mackenzie reported that Q1 2023 marked the best first quarter for the US solar industry, with supply chain issues gradually resolving and delayed projects from 2022 coming online. The report predicts sustained growth throughout the rest of the year, with the potential for the national solar market to triple by 2028.
Europe also appears poised for growth, as indicated by the BI report, following the European Commission's REPowerEU plan. The plan sets ambitious targets of 320GW of deployed capacity and 30GW of manufacturing by 2025. A recent report from the European Solar Industries Association confirmed that the 30GW manufacturing target is attainable with the right legislative environment.
