While we are yet to have the final PV installation numbers for 2020, at IHS Markit we estimate 118 GW – a 5% decline from 2019. Most of that drop was not directly related to Covid-19, which we at first thought would be the main culprit in causing a slowdown. Instead, as many PV markets started coming back mid-year after local lockdowns, module price hikes startled developers.
Throughout 2020, an increase in raw material prices resulted in an unprecedented increase in module costs. Polysilicon was the first material to suffer drastic surges in prices (up 60% from June to September), but other materials, such as glass, soon followed, forcing module manufacturers to raise prices and renegotiate contracts. Developers and EPCs without hard deadlines in the fourth quarter that had not secured modules and/or were unwilling to pay a premium, had to delay procurement and push project completions into 2021.
These delayed projects, together with a generally increased appetite for renewables around the world, lead us to project 34% year-on-year growth in annual PV installations in 2021. We forecast 158 GW of new additions, in a year when module prices will remain high for at least the first two quarters. Once prices start coming down, buyers that have been able to wait will rush to get modules. Will that rush create speed bumps or sharp turns? All we can say is that this year will be quite a ride.
Owing to the high price environment, many projects that were originally planned to be installed at the end of 2020 but were postponed, such as grid-parity projects in China, are now under pressure to be completed in the first half of 2021. Many developers have had to accept renegotiated supply contracts to meet deadlines. As few counted on this unexpected surge in pricing, there is a risk that projects in the most price-sensitive markets, such as India, could face serious challenges to meet deadlines in the first half of 2021. In less price-sensitive markets, like Japan, installations are likely to go ahead in the first quarter as required.
As for Spain and other price-sensitive markets without government-imposed deadlines, developers will try to delay installations further if contracts allow. Our forecast for 2021 hinges on a projection of an easing on the supply chain that will lead to module price declines in mid-2021. If that does not happen, our 158 GW forecast may turn out to be too optimistic. The question is which projects, or which markets, will suffer in that case.
Distributed growth
Not only will 2021 be a peculiar year in terms of module price dynamics, it could also be the first year in modern PV history when growth of PV demand in China would be at the same level as the global average. In previous years, the growth of the global PV market has evolved based on the dynamics between China and other markets. When China has grown strongly, other markets have grown less and vice versa – a pattern closely linked to the supply chain.
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In 2021, we anticipate growth across the majority of markets. This distributed growth, however, does not eliminate mainland China and the United States from dominating global demand by adding more than half of the PV generation capacity globally. The other eight markets among the 10 largest will add up to just 25% of global demand, in comparison to 40% in 2019, and another 10% will come from 10 other markets. This means that we are seeing a parallel consolidation and fragmentation. China and the United States consolidate their positions, while more smaller markets make up the remaining demand. Another way to illustrate this is that in 2021, we anticipate 55 markets with between 100 MW and 999 MW of annual additions, from 37 in 2019.
We do not expect any major shifts among the biggest PV markets. In 2020, India was the solar market worst impacted by the Covid-19 pandemic, with installations falling by more than half from 2019. Developers must now do what they can to complete delayed solar PV projects in 2021, which could bring India back to being the third-largest market, unless hampered by continued high module prices. Among the other leading PV markets, we project Australia to overtake Japan, and Spain to surpass Germany once again. We also believe that France will replace South Korea in the 10th position.
In 2021 we will keep an extra eye on upcoming solar markets such as Colombia, Peru, Portugal, Greece, Ireland, Oman, Saudi Arabia, Zambia, Thailand, the Philippines, and Malaysia. Tenders continue to be the main driver for new solar markets, but we also see growing power purchase agreement activity, as well as an uptick in commercial and industrial solar PV installations.
Our analysis points at 158 GW of PV additions in 2021. Elevated module prices as we begin the year create dilemmas for developers with upcoming deadlines, and half-finished projects are continuing to wait for modules since the end of 2020. Anticipated price declines in the second half will create a procurement rush, but the exact supply and demand dynamics of the year are yet to be experienced. All we know is that the PV industry can still surprise us all. Fasten your seatbelts, this is 2021!
Source: pv magazine
