Installations to fall 18% in 2020
The coronavirus pandemic will have a significant impact on the global solar PV market. Construction and development is slowing as countries around the world enforce unprecedented lockdowns. As the world economy faces severe economic disruption, Wood Mackenzie has downgraded its forecast for 2020 installations from 129.5 gigawatts (GW) to 106.4 GW, a reduction of 18%.
Tom Heggarty, principal analyst, solar, said: “Next year will be a challenging one for solar, too. We assume that the economic damage caused by the pandemic and concurrent crash in oil prices will tip the world into recession in 2020.
“Although we expect a strong economic recovery next year, projects that should be delivered in 2021 are being developed and financed today. When the recession hits, not all activity will go ahead as planned.
“Demand destruction will be offset to some degree by the spill-over of delayed projects from 2020 to 2021. Nonetheless we have reduced our 2021 forecast from 127.2 GW to 123.6 GW, down 3%.”
Heggarty said the impact of the disruption caused by the pandemic will vary by country. In China – the initial epicentre of the outbreak – economic indicators suggest a recovery is underway.
“Wafer, cell and module production is ramping back up towards full capacity and construction at many project sites has resumed,” Heggarty said.
“We don’t expect that the impact on the Chinese PV market (either upstream or downstream) will continue beyond the end of the second quarter this year. In contrast, in Europe and North America, lockdowns in some form or another are likely to last well into the second quarter and possibly into the third.
“Other regions such as Latin America and Africa have – as yet – been less affected by the coronavirus outbreak. Nonetheless we anticipate severe disruptions in these regions too as we move towards the middle of the year.”
Different sectors of the market will be impacted differently as well. In-construction utility-scale projects will be the first to feel the pain as lockdown measures delay or halt progress. For projects at such a late stage of development, however, we should be mostly talking about interconnection delays rather than cancellations, Heggarty said.
However, the picture looks more challenging for earlier stage development.
“Auctions are being delayed, PPA negotiations halted and permitting is slowing down. Weak power prices and collapsing FX rates are severely damaging the economics of new investments across a wide range of countries. Projects that were slated for 2021 will be tougher to bring to market on time, if they make it at all,” he said.
The distributed generation (DG) sector faces a different set of challenges. Installers are often working on small rooftops, in close proximity with customers. This presents an obvious challenge around observing social distancing regulations, and residential installations in many countries have (voluntarily or involuntarily) slowed or stopped altogether.
The prospect of a global recession on the horizon is also troubling – Wood Mackenzie assumes global GDP will contract by 2% in 2020. In a downturn, and against a backdrop of rising unemployment, many potential residential and commercial consumers will cut back on discretionary spend. All else being equal, distributed solar PV installations will be lower than in a more positive economic environment.
Heggarty added: “One risk to the upside, however, will be the reaction of policy makers. The stimulus taps have already been turned on, and no doubt there’ll be more to come as the immediate challenges posed by coronavirus fade and attention turns to the recovery.
“If – and it’s a big ‘if’ – post-coronavirus spending is directed towards decarbonisation efforts, solar PV could stand to benefit. That’s something we’ll be watching closely as we move through 2020.”