The 2016 Global PV Outlook: US, Asian Markets Strengthened by Policies to Reduce CO2

Global solar installations will reach 64.7 GW in 2016 according to Mercom Capital Group, a clean energy communications and research firm based in Texas. “The top 3 countries will be China, U.S., and Japan and they will account for about two thirds of the global market,” said Raj Prabhu, CEO and co-founder of Mercom.


Although China is expected to continue leading the global PV market, the U.S. will show the most robust growth in 2016, due to the anticipation of the federal Investment Tax Credit (ITC) expiration, which developers and EPC had already factored into their business plans for 2016, prior to the five-year extension received at the end of 2015.

In 2016, the U.S. is set to overtake Japan as the second largest solar market, exceeding the much-anticipated 10-GW mark. Another notable shift will see India move up to the No. 4 position, pushing down the former European leaders, U.K. and Germany.

China: Remains No. 1 Market with Some Trouble Ahead

China is expected to install approximately 19.5 GW in 2016, a rise of 14.7 percent over 2015, Mercom predicts. “The country is strongly committed [to solar] because of the pollution problems. Air pollution continues to drive China’s environmental policies, of which clean power generation is a big part,” said Prabhu.

Officials from China’s National Energy Administration (NEA) are considering raising the 2020 target from 100 GW to 150 GW, which will bring about 21 GW of annual installation between 2016 through 2020. China also has pledged to reach an ‘emissions peak’ around 2030 with non-fossil fuels making up 20 percent of the nation’s energy generation mix. “All of these factors have made renewable forms of energy a vital component of the Chinese economy for years to come,” stated Prabhu.

solarThe rapid PV deployment, however, has caused growing grid congestion problems. In addition, the nation’s economic conditions also deteriorated in 2015. “Production curtailment and subsidies continue to be the biggest challenges facing the Chinese solar industry.  Subsidy payment delays up to 18 months have been reported by solar project developers causing cash flow problems.  Some companies have reported selling out projects and stopping further project development activities as they are unable to sustain without timely subsidy payments,” said Prabhu.

Overall though, the Chinese government recognizes pollution as a much bigger and broader problem. “The government has shown no signs to indicate that its support for renewable energy will waive. There are pending proposals to increase the renewable surcharge and cut coal tariff payments to help improve the renewable subsidy payment situation,” he added.

Robust Growth Brings U.S. to No. 2 Global Market

“PV deployment in the US is currently trending on an accelerated track and the extension of the ITC for five years indicates that this will continue through 2020,” said Paula Mints, founder and chief analyst of SPV Market Research.  For 2016, Mints forecasts that the US PV market to be 10.8 GW under the accelerated scenario, compared to 8.5 GW under the low scenario and 9.6 GW under the conservative scenario.

“Given the Clean Power Plan (CPP) and planning for it, extension of net metering in California, the extension of the ITC and business models that allow electricity consumers to continue renting electricity, the accelerated scenario is expected through at least 2019.” Mints said.

Low, conservative and accelerated U.S. solar demand forecast 2015-2020. With the extension of the ITC in late 2015, the accelerated forecast is more likely. Credit: SPV Market Research.

While the ITC has been a major market driver at the national level, Renewable Portfolio Standards (RPS) continue playing a significant role at the state level. Last year, Hawaii became the first state to enact a 100 percent renewable energy policy to reduce its dependency on imported fossil fuels. California, the biggest solar market in the U.S, also increased its renewable goal to 50 percent by 2030 and the state of New York followed the suit. These will continue boosting the industry in the long-term.

At the local level, Community Choice Aggregation (CCA) is expected to deploy more widely in 2016. “There is a lot of CCA growth planned for 2016 in California, and also some growth expected in New York,” said Dawn Weisz, CEO of Marine Clean Energy (MCE), a not-for-profit electricity provider, which launched California’s first CCA program. “In California, San Francisco will be launching a CCA program in April, 2016.  San Mateo county, and many of the cities in their region will be launching a CCA program called, “Peninsula Clean Energy” in August of 2016.  There are also CCA efforts in the Los Angeles regions, the Monterey Bay regions, the North Coast, and in Alameda County where Oakland and Berkeley are located.”

Like China, the U.S agreed to reduce or limit emissions at COP21 in Paris. “The biggest driver (for CCAs) is climate change,” explained Weisz.  “Local governments want a tool that redirects an existing funding stream that exists in each community, and use it to get more renewable energy onto the grid to reduce GHG emissions,” he added.

Japan Slows Down after 2015 Peak with Uncertainty Ahead

RTS Corporation, a leading Japanese PV consultancy, projected that Japanese PV market in 2016 to be 8 GW, down from 10.6 GW, the company’s 2015 market projection. “We foresee the year 2015 to be the market peak. However, when upcoming changes for the nation’s Feed-in tariff (FIT) program start to become clear, it may trigger an installation rush to be grandfathered in the current FIT terms.  For that, there is a possibility for the 2016 market size to be the same as that of 2015,” said Izumi Kaizuka, the manager of research at RTS.

Approved but uninstalled solar PV capacity by system size in Japan at of Sept 1, 2015. In sum, about 60 GW of solar capacity has been approved but has not been installed and is at risk of being canceled. Credit: Japanese Ministry of Economy, Trade and Industry (METI).

Kaizuka pointed out that the Japanese Ministry of Economy, Trade and Industry (METI) is discussing a revision of the current FIT policy and the introduction of an auction process to promote lower cost operation. The FIT program resulted in more than 22 GW of PV capacity being installed in just over 3 years. However, the program failed to diversify into other renewables and was criticized for being heavily skewed toward PV. The program also currently holds about 60 GW of approved, but not yet developed PV projects.

“METI has intensions to cancel the pipeline projects, which have a lower probability to be materialized. The details of the new changes are unknown at this point, but we expect to know them in 2016,” said Kaizuka.

In addition, Japan will face another major policy change in 2016. The government will end the Green Investment Tax Credit, which has contributed to the growth of the non-residential PV projects.

PV Rising in India but Industry Could Prove To Be Unsustainable

Mercom is forecasting that India will install approximately 3.6 GW of new solar capacity in 2016, up by about 70 percent from 2015. “We are seeing increased activity in the Indian solar sector over the last quarter (third quarter in 2015) with tenders and auctions beginning to occur more frequently along with some important policy announcement,” said Prabhu.

In fact last August the Indian government raised the national solar installation target from 22 GW to 100 GW by 2022. India, despite having the fourth largest coal reserves in the world, has suffered from shortage issues, and its coal power plants have been increasingly dependent on imports. “These coal supply shortages have pushed the current government, even more aggressively toward solar and wind as a solution to overcome power shortage problems and to reduce dependence on imported coal.”

In spite of the expected high growth, sustainability of the solar market is in question. “Bids are falling much faster than component prices and interest rates,” said Prabhu.  “Developers are competing aggressively for market share and tend to sacrifice higher profit margins for market share. It remains to be seen as to how many will survive this trend.”

Chile: The Star of Latin America?

During 2015, Chile became the largest PV market in Latin America and reached the 1 GW milestone.  The country’s market, specifically very large (50 MW plus) solar projects, has been driven by a Renewable Energy Law (Ley 20.257), which set a target of 20 percent renewables by 2025 and by very high spot market electricity prices driven by the mining industry.

Robert Muhn, Managing Director of Yingli Chile shared his market insights: “2016 will start out strong as the last of these (large) projects get completed, then the market will drop. Some smaller utility-scale projects, ~3 MW to 9 MW in size, will still get built under slightly less constrained conditions as the large plants that will mainly serve the Santiago Metro demand. 2016 will also have a large public tender (currently scheduled for April) for projects to be interconnected in 2021, so there will be lots of development activity around this.”

“But project financing and permitting remain as obstacles.” Muhn explained that “the biggest issue has become the capability of the grid (primarily in the north) to interconnect and accept the output of these large PV (and wind and CSP) projects, so much so that the spot market prices have collapsed in some areas to zero or very low. Also the access to project financing has been challenging, particularly without a PPA.”

In Summary

Moving forward in 2016, Mints is concerned that the solar industry needs to maintain high standards. “The solar industry will need to focus on quality now [in 2016] as well as the incremental improvements over time that are hallmark of technology development.” Further, she said the solar industry should “avoid mythologizing the technologies of the future (that are not here now).” Solar PV is ready to realize its role on the world’s stage and needs to begin to think about how it fits in with other energy technologies. Mints would like to see the industry “take the practice steps necessary to compete with other renewables, nuclear and natural gas as the world moves to change its energy infrastructure.”

Lead image: Topaz solar farm. Credit: First Solar.

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Junko Movellan is a Solar Industry expert who writes and analyzes the US and Japan PV downstream markets. She has more than 15 years of experience in the PV industry, analyzing industry trends and developing business strategies for global companies. She previously worked as a Senior Analyst at Solarbuzz and as a Market Development Analyst at Kyocera. She is based in California, USA.

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