The European solar power market has grown by leaps and bounds over the past few years owing to steep cost reduction, easy maintenance, versatile applications, and strong policy and regulatory support. This trend has continued in 2020 as well in contrast to earlier predictions of a slowdown in capacity additions owing to the coronavirus pandemic. SolarPower Europe’s EU Market Outlook for Solar Power 2020–2024 analyses the growth trends witnessed in the European solar space with a special focus on the top five solar markets in the continent. It provides a forecast for the expected capacity additions till 2024 and gives detailed policy recommendations for enabling economic recovery through promotion of solar power. REGlobal presents the key findings of the report.
Solar power in the European Union has continued to grow despite the negative impacts of Coronavirus. Solar power costs have reduced even further, and developers and operators are now dealing with intense competition in this space. Moreover, even the industrial and wholesale electricity prices have dropped dramatically across the Continent owing to a decline in economic activities as a result of coronavirus pandemic. While large-scale solar plants were more cost competitive when compared to both industrial and wholesale electricity prices in southern and northern Europe in 2019, the scenario is quite different now. Much better financing conditions are required to beat wholesale power prices. However, this hasn’t deterred the growth of solar power as anticipated earlier.
In fact, the demand for solar power in the European Union has increased notably in 2020. EU members states installed 18.2 GW of new solar power capacity in 2020. This is an 11% improvement over the 16.2 GW deployed in the previous year. This makes 2020 the second-best year ever for solar in the EU, only topped by 2011, when 21.4 GW was installed.
Top 5 EU solar markets 2020
In total, the top five solar markets in the European Union were responsible for 74% of the total installed capacity in the region in 2020 compared to a 5% points higher share (79%) in 2019.
Germany: Germany emerged as the largest solar market in Europe again, a position it has held for most of the time over the last 20 years, interrupted only six times. Following the first full feed-in tariff based European solar boom there was a temporary consolidation phase. However, this gave way to a second boost as of 2018 owing to a growth in self-consumption with attractive feed-in premiums for medium- to large-scale commercial systems ranging from 40 kW to 750 kW. Moreover, growth was enhanced through a combination of factors including auctions for systems up to 10 MW, a tried and tested regulatory scheme and solar’s improving cost competitiveness.
The Netherlands: The Netherlands moved up to rank 2 after installing an estimated 2.8 GW, a 23% rise compared to 2.3 GW installed in 2019. Commercial rooftop was the biggest market segment in 2020 with a share of nearly 50% followed by the residential market with 30% and ground-mounted systems with 20%. The largest PV plant so far, a 110 MW in Groningen province, became operational this year.
Spain: Spain dropped to rank 3 with an estimated newly installed capacity of around 2.6 GW, down 45% from around 4.8 GW last year. Nearly 4 GW of the capacity installed in 2019 came from two tenders in 2017. However, there were no new capacity additions in 2020 from additional tenders and nearly 1.5 GW of the installations came from PPA based projects. The country has a 100 GW+ PPA-based project pipeline under development, probably making it the world’s largest market for subsidy-free solar.
Poland: In a surprising turn of events, Poland has emerged as a leader in the solar power space ranking fourth in Europe’s top solar markets. This is a country where hard and lignite coal represented nearly 75% of power demand in 2019. Poland exceeded the annually installed solar GW-scale for the first time in 2020. This positive solar development follows previous year’s trends, when Poland’s PV market grew almost four-fold to 972 MW. The key driver for this growth in Poland is self-consumption founded on a favourable policy of net-metering or feed-in framework for prosumers.
France: France ranks fifth among the EU’s top solar markets, falling back one place. It installed an estimated 945 MW in 2020 witnessing a decline of 7% from 1,021 MW in 2019. By Q3/2020, France reached 10 GW total solar capacity, about 2 years later when compared to the original plan. This plan requires nearly 10 GW more to meet its 20 GW targets by end of 2023 and needs over three times more to reach its goal of 44 GW by 2028. France’s solar power market has long suffered due to long administrative procedures and challenging grid connection processes.
EU solar market prospects 2021-2024
The surprisingly positive growth trends witnessed in 2020 in Europe’s solar space will continue and are expected to be followed by four years of even stronger demands according to the report’s Medium Scenario. After an 11% improvement in demand in 2020, a 23% boost is predicted for 2021 with annual installations reaching 22.4 GW. This growth will continue into the later years with new annual additions reaching 27.4 GW in 2022. Despite a slight decrease in growth rates in 2023 and 2024, deployments of over 30 GW are expected in both years, with 30.8 GW in 2023 and 35.1 GW in 2024.
The key drivers for this growth are:
- Continued reduction in solar costs
- Solar increasingly wins in cost-based technology neutral energy tenders
- Its low cost has also created a business case for subsidy-free solar systems, with the number of corporates opting for solar to source their power quickly augmenting
- Solar’s versatility is unmatched, enabling various multi-purpose applications that meet quickly increasing interest now that solar is cost competitive
- Various EU policy initiatives in the context of the EU Green Deal striving for carbon neutrality and the Recovery Packages will directly or indirectly boost solar
The report divides the next 4 years of the Medium Scenario into 2 phases. First is the catch-up phase which will see the construction of those solar projects that were delayed or even cancelled due to covid-19 but were restarted following new incentives. This will be a period of 20% plus growth and will be followed by a more moderate phase in 2023 and 2024 with a 13-14% growth period. These two years will mostly witness demand from customers like energy companies, investors and corporates as well as residential prosumers that want to reduce their energy expenses and improve sustainability.
In addition to the Medium Scenario, the report also presents the Low Scenario and the High Scenario. The Low Scenario, modelled on major EU markets slashing solar support and implementing policies that would disable key business models, anticipates dwindling demand in 2021 to a volume of 14.9 GW, growing only to 19.8 GW in 2023. Meanwhile, the High Scenario projects 28.8 GW of capacity additions in 2021 going up to 45 GW of new installations in 2024.
In terms of leading solar markets, the report anticipates Germany to be the leader for the coming years in all the three scenarios, as the momentum for solar in Germany is expected to stay strong backed by the fast ascent of PPA-based systems. Spain which has a huge PPA project development pipeline, will add the second most solar capacity although grid constraints remain a major obstacle. The Netherlands will continue to rank third owing to its thriving market supported by a broad incentive scheme landscape. However, two other major markets with major growth plans, France and Italy, may overtake the Netherlands provided they overcome their bureaucratic hurdles. Further, there is a lot of opportunity for growth in Poland as well, which is already part of the top five markets for the next 4 years. According to the report, the top 10 EU solar markets are anticipated to install 98.5 GW from 2021 until 2024 in the most probably Medium Scenario, 55.1 GW in the Low Scenario and 130.7 GW in the High Scenario.
Next Generation EU – Solar Powering the European Economic Recovery
The EU’s recovery plan, Next Generation EU, is an unprecedented and ambitious investment plan which aims to mitigate the impact of the COVID-19 pandemic by accelerating Europe’s green and digital transition, creating new opportunities for industrial growth and job creation at the service of Europe’s climate-neutrality ambition. The solar industry is an ideal solution that can contribute to this challenging energy transition.
The central theme of this plan is the EUR 672.5 billion Recovery and Resilience Facility (RRF) which will provide financial support to Member States that can be directly injected in their economies, in the form of grants, loans or state guarantees. Interestingly, all investments under RRF must be aligned with the objectives of the European Green Deal. Moreover, up to 37% of the total funding is exclusively earmarked for climate-related expenditures. Further, in order to access RRF funds, Member States have to submit their “national recovery and resilience plans” to the European Commission that elaborate the measures and sectors targeted along with their contribution to Europe’s energy and climate objectives.
These national recovery and resilience plans may incentivise Member States to invest into solar power, enable sustainable growth and create green jobs. Utility-scale solar investments combine job creation with very low costs for greenhouse gas emission abatement, whereas investments into rooftop solar can be implemented within a short timeframe.
SolarPower Europe together with its members developed 6 key recommendations for EU Member States:
- Boost utility-scale solar and storage: Member States should allocate funds to finance renewable energy tenders including tenders for hybrid renewable energy projects that combine solar with utility-scale Battery Energy Storage Systems (BESS). In combination with these tenders, recovery funds should be used to accelerate permitting procedures, a key bottleneck to deploy utility-scale solar.
- Roll out solar rooftop and storage programmes: Up to 90% of Europe’s roof surfaces remains unused, while the potential contribution to Europe’s energy transition could be significant. In fact, the Moderate Scenario of SolarPower Europe’s 100% Renewable Europe report models 570 GW of rooftop PV capacity deployed already by 2030, a massive leap from the 90 GW installed today. To make the most of Europe’s solar rooftop potential and provide a short-term boost to jobs, Member States should design solar mandates for all new and existing buildings with suitable rooftops.
- Promote electrification, deploy BESS, and invest in smart grids: Electrification has great potential to boost the European Green recovery. Only for electrical contractors, more than 270,000 jobs could be created in the building sector, and 112,000 jobs in e-mobility. Member States should use RRF to promote renewable-based electrification of energy end uses, such as buildings, heat, transport, and industry. Furthermore, investments should be prioritised in the integration of BESS and smart grid projects that bring in the flexibility of distributed energy resources.
- Support the European solar manufacturing sector: Support should be provided for domestic research and innovation in emerging solar PV technologies. Further, the development of new manufacturing projects in Europe should be facilitated to strengthen Europe’s long-term energy security and ensuring European innovations lead to job creation and economic growth in Europe.
- Reconvert former coal and industrial sites with solar: Member States should support the reconversion of former coal and industrial sites into hubs for innovative solar applications. Supporting the development of utility-scale solar, floating solar, biodiverse solar and agricultural photovoltaics coupled with BESS creates new growth ecosystems in areas affected by the clean energy transition.
- Finance training and re-skilling programs: Member States will drive job creation for workers across a very wide range of experiences and backgrounds by boosting the deployment of solar power. Further, recovery plans should be used to launch large-scale training programmes to provide the necessary skills to workers for deploying solar power as well as for the re-skilling of fossil fuel workers.
The vast majority of EU member states are now jumping on the solar train directed by a few pioneers. In 2020, 22 of the 27 EU member states installed more solar than the year before despite the coronavirus pandemic owing to growing awareness and increasing solar activities in most of the countries.
In summary, solar in the European Union has proved much more resilient to the coronavirus than anticipated in the late spring. In 2020, the demand for solar power has grown by 11% to 18.2 GW when compared to last year, and the cumulative installed capacity increased by 15% to 137.2 GW. This positive trend is likely to continue in the coming years as well with roughly 115 GW of capacity expected to be added in the next four years taking the total solar power installations in Europe to over 250 GW.
The full report can be accessed here