Distributed solar to lead global renewables surge, as costs fall another third

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Distributed solar to be largest source of capacity additions in next five years, utility-scale PV, onshore wind and hydropower.

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Australia is expected to take a lead role in the global surge in the uptake of distributed solar, according to a new report from the International Energy Agency, as costs fall by another one-third over the next five years and offer significant savings to conventional grid-sourced power supplies.

The Renewables 2019 report from the IEA, however, says solar will drive a 50 per cent leap in overall renewable energy investment over the next five years –  to some 1,200GW, or the equivalent of the entire US power grid. It could add much more, around 1,500GW, but only if policy-makers and rule makers catch up with the potential.

For the first time, however, most of the rise in renewable energy investment (60 per cent) will come from solar, which will account for more than one-third of all power capacity additions (including coal, gas and nuclear) over the next five years.

And the amount of distributed PV – located mostly on the rooftops of homes, business and industry – is expected double to 600GW by 2024. (It is currently around 9GW in Australia, which continues to lead the world in installations per capita, if not in overall size). The expected addition of distributed solar PV over the next five years is equivalent to all onshore wind additions over the same time period, but reflects just six per cent of distributed PV’s potential.

“Distributed solar PV systems in homes, commercial buildings and industry are set to take off, bringing significant changes in power systems,” the report says, while noting that it presents both new opportunities and challenges for electricity providers and policy makers around the world.

“Distributed PV’s potential is breathtaking, but its development needs to be well managed to balance the different interests of PV system owners, other consumers and energy and distribution companies,” IEA executive director Fatih Birol added.

“Renewables are already the world’s second largest source of electricity, but their deployment still needs to accelerate if we are to achieve long-term climate, air quality and energy access goals.”

The main factors holding back renewables are well known in Australia – policy and regulatory uncertainty, high investment risks and system integration of wind and solar PV.

The IEA report says that three-quarters of the global growth in distributed PV will happen in commercial and industrial applications rather than residential uses, because of economies of scale combined with better alignment of PV supply and electricity demand enable more self-consumption and bigger savings on electricity bills.

The jump in capacity additions are being driven by anticipated cost falls. Solar has fallen by 90 per cent over the past decade, and the IEA predicts a fall of another 35 per cent in coming years. Wind, which has also fallen sharply, is expected to also fall by around 30 per cent.

The IEA notes that distributed used PV is becoming increasingly cheaper than retail electricity prices. The difference is most marked in Germany and Australia, but is now happening in Japan and increasingly in the three biggest electricity markets – the US, China and India.

China is expected to dominate the market for distributed solar installations, because of its sheer size, but the top five markets for residential solar PV installations per capita in 2024 will be Australia, Belgium, California (United States), the Netherlands, and Austria.

If regulators and policy makers can address grid integration, and deliver policy certainty, governments can accelerate renewables growth by one-quarter, or more than 1,500GW over the next five years, putting renewable electricity on track with sustainable energy goals.

This would also put renewables at a total capacity of 4,000GW,  twice the size of today’s global coal capacity. And annual deployment would rise to 280 GW – 50 per cent higher than the current rate.

“Governments can put renewables on track with climate, air quality and energy access goals through stable policies addressing system integration & investment risk and focusing more on transport and heat,” the report says.
The integration issues are also addressed. Part of the problem comes from the tensions of what’s good for consumers, and the impact on existing utilities and their business models.  This is the prime case for reform, and the IEA suggests that policy makers and rule makers need to be careful in how they address this.
The growth of solar in Australia, the IEA noted, had helped in the last two years to offset falls in capacity additions in key countries such as China, but overall growth was now expected to resume.

“Of all renewable technologies, additional growth potential is highest for distributed PV because consumer adoption can be very rapid once the economics become attractive,” the report notes.

Distributed PV growth could therefore be almost 30% higher in the accelerated case, assuming:

1)faster investment cost reductions, especially in countries where BoS costs remain high;

2)clarification of regulatory and incentive schemes in multiple markets, especially concerning remuneration and the length of self-consumption accounting periods;

3) the reduction of non-economic barriers such as protracted application processing, high connection fees and unjustified deployment caps;

4) access to affordable financing, especially in emerging economies;

5) speedy implementation of retail market reforms, enabling more cost-reflective electricity pricing for residential and commercial users.

It’s not just China that is going to grow quickly. European countries like Spain, France and Germany are also looking for significant increases in solar and wind capacity. Spain has plans for 50GW by 2030, France plans 33GW of capacity auctions by 2028 (and no new nuclear), while Germany is also looking to increase its renewables share from 47 per cent to 65 per cent by 2030.

In absolute terms, the IEA forecasts that global renewable electricity generation will increase 37 per cent during 2019-24, led by solar PV, wind, hydropower and bioenergy, with contributions from other renewable technologies as well.

“This increase (2450TWh) covers two-thirds of global electricity generation growth, and is more than that from coal, gas, and nuclear combined. For the first time, solar PV registers the largest absolute growth of all electricity generation technologies over the forecast period,” it says.

Coal remains the largest source of electricity in 2024, even though its contribution falls from nearly 40 per cent to 34 per cent, but will be challenged by renewables, particularly if the “accelerated” case emerges.

See also: Rooftop solar pushes South Australia grid demand to new record low

 

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