Burgess COMMENTARY

Peter Burgess

Solar Energy Market Growth

Solarbuzz is now bringing you more research and analysis of the solar industry through our expanded product portfolio and analyst commentary on industry and market developments. To streamline our site, we have discontinued updating some sections, including Industry News, Retail Pricing and information for those new to the solar industry. You can still sign up to receive free email summaries of the latest commentary, blogs and articles from Solarbuzz analysts.

Global Market Size

Solar electric energy demand has grown by an average 30% per annum over the past 20 years against a backdrop of rapidly declining costs and prices. This decline in cost has been driven by economies of manufacturing scale, manufacturing technology improvements, and the increasing efficiency of solar cells.

In 2009, the photovoltaic solar industry generated $38.5 billion in revenues globally, which includes the sale of solar modules and associated equipment, and the installation of solar systems. Solarbuzz produces various forecast scenarios which, depending on the factors, see growth in the world PV market from $46.3 billion to $96.8 billion in 2014.

PV installations grew to 7.3 GW in 2009, up 20% from the prior year. Expected to reach 8.4‑13.1 GW in 2010, the various forecast scenarios predict demand rising to 15.4‑37 GW in 2014, more than five times the size of the 2009 market. The worldwide on-grid segment grew by 20% in 2009, and the off-grid market grew 23% in 2009, faster than on-grid for the first time in 15 years but on a much smaller base.

IMAGE missing
Source: Solarbuzz 2010 Marketbuzz

Regional Market Growth

The largest on-grid market by far has been Germany, where demand has been stimulated by very attractive feed-in tariffs. This is followed by Japan, where grid-connected applications are also stimulated by market incentive programs.

Source: Solarbuzz 2010 Marketbuzz

Driving Forces of Growth in Country Markets

Among industrialized countries, the German and Japanese governments have led the way in legislating high incentives to stimulate development of their domestic solar markets. The German feed-in tariff model has been increasingly used in countries around Europe, including Italy and France. As a result, the industry structure has evolved, leading to strong distributor and dealer networks with well-trained installers and good customer support capabilities. Government policy is designed to reduce CO2 emissions via solar deployment and to create high-tech jobs through the development of a strong national solar industry. In the United States, utilities have played a stronger role in market development.

Overall, regional solar energy demand where the solar energy is connected to the electricity grid is driven by the following:

• Incentive programs led by national or state governments: Subsidies allow customers/investors to gain a financial return on the PV system by selling solar electricity at preferential rates.
• Enthusiasm of customers for green energy, especially solar
• Local electricity tariffs: High electricity rates encourage alternative sources of energy.
• Sunlight conditions: Solar electricity prices fall as sunlight levels increase.
• Marketing strategies by solar companies
• Delivery infrastructure, which is the number of local suppliers and qualified installers

There is an increasing focus on micro-finance to improve the affordability of solar PV systems, which may be economical over their lifetime but have high initial costs. Such credit schemes have been effective at a small scale, but a culture of credit does not exist yet in many developing countries. Kenya is notable for its strong commercial (un-subsidized) market, where customers opt for low power (10-20W) entry-level modules.