PV will become mainstream energy source under right policy conditions


In its latest "Global Market Outlook for photovoltaics until 2016", the European Photovoltaic Industry Association (EPIA) states that photovoltaics now plays a significant role in Europe’s energy mix, currently contributing two percent of the energy demand and approximately four percent of peak demand. Italy is said to be particularly progressive, with photovoltaics covering five percent of electricity demand, and over 10 percent of peak demand.

Globally, meanwhile, photovoltaics is said to represent around 0.5 percent of electricity demand and one percent of the peak power demand. "Given the speed at which markets outside Europe can develop, PV could in the coming years score the same percentage as in the best European countries," write the report's authors.

Watershed moment

In 2011, photovoltaics reportedly became the third most important renewable energy source in terms of globally installed capacity, after hydro and wind power, which signals a watershed moment for the technology. Furthermore, EPIA says that for the first time, photovoltaics was the number one electricity source in Europe, in terms of added installed capacity.

It writes, "The evolution of the electricity mix in Europe will depend on a series of parameters … The Spanish PV market has shown in recent years that PV can quickly become a direct competitor to incumbent players, and notably gas. PV is especially entering in direct competition with other technologies during mid-day peak hours, one of the moments when flexible power plants run."

Over the next five years, EPIA believes photovoltaics is on track to stay in the top three technologies in Europe.

Measured responses

To maintain its growth trajectory, a more measured response to market developments must be implemented, as the marketplace matures from the feed-in tariff (FIT) phase into one in which the technology is competitive against all electricity sources, and in which governments continue to support market development in other ways – for example by removing bureaucratic barriers, encouraging innovation, and ensuring grid access.

Indeed, it is understood that FITs cannot last forever. But the sector needs them for the time being, to finish closing the competitiveness gap. "If any general lesson can be drawn from the various market analyses, it is this: Sudden, stop-and-start policies (making harsh and/or frequent changes in the FITs, for example) can threaten PV’s growth momentum by destroying investor confidence," write the authors. They add that a corridor concept is good, if it can adapt the FIT with regular, measured updates; otherwise it could trigger boom-and-bust cycles.

Market collapse

Overall, the report envisages the potential for around 20 to 25 gigawatts (GW) of photovoltaics to be installed per year in Europe up to 2016, if the right policies are in place. Although this is less than 2011, it still represents a significant amount. Without favorable conditions, EPIA foresees the possibility of a market collapse to possibly less than 10 GW a year, however.

The potential outside Europe could play the role of propping up the market. This non-European sector could top between 38 and 77 GW in 2016, with the right policies in place everywhere. But this is a best-case scenario.

A slower market in the short-term should trigger new price decreases, favoring development in markets without regulatory restraints. In a Policy-Driven scenario, the European market would stabilize at around 20 to 25 GW in the coming years, accompanying the development of markets outside Europe. In that respect, the market could top more than 75 GW in 2016, with two-thirds of this coming from new markets outside Europe.

Depending on the conditions of the Moderate scenario, the 100 GW mark could be reached in 2012 or 2013, while in the Policy-Driven scenario, more than 350 GW of photovoltaic systems could be connected to the grid over the next five years.

Critical paradigm shift

As has been widely reported, Europe’s dominance in the photovoltaic industry will decrease as other, emerging markets pick up the pace. Despite this, of the 29.7 GW of photovoltaic systems installed in 2011, 21.9 GW were connected in Europe, meaning the traditional home of photovoltaics still accounted for 75 percent of new capacity in 2011.

China was identified as the top non-European photovoltaic market in 2011, with 2.2 GW installed, followed by USA with 1.9 GW. The number of markets achieving more than one GW of additional photovoltaic capacity during 2011 doubled from three to six: Italy, Germany, France, China, Japan, USA.

The report identifies the burgeoning Chinese, U.S., Japanese and Indian markets as potentially filling the void left by a slowing Europe. More importantly, this shift will come about due to more competitive photovoltaic technologies rather than economic stimulus, as the case has been until now. This signals a critical paradigm shift for the technology, but the report warns that this will not happen overnight.

The photovoltaic potential of the sunbelt countries – where the technology can already compete with diesel generators for peak power generation without financial support – could range from 60 to 250 GW by 2020, and from 260 to 1,100 GW in 2030.

And with the faster than expected price decrease that the industry experienced in 2011, even more countries will see photovoltaics becoming competitive before the end of this decade. "Outside Europe, the market is well-balanced; three countries with a huge potential lead the pace, followed by an emerging secondary market," the report says.

Country breakdown

EPIA goes on to look at the individual photovoltaic markets in Europe, and abroad, and outlines their potential for installed capacity until 2020, versus the actual market in 2011.

It believes that by 2020, Europe could have a cumulative installed photovoltaic capacity of 240.15 GW. Of this, Germany could have installed 80 GW, Italy 55 GW, France 30 GW, Spain 17 GW and the U.K. 11 GW.

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