The Distributed Solar Power Generation market is expected to reach 128.78 billion by the end of the year and is projected to register a CAGR of over 2% during the forecast period.
The market was negatively impacted by COVID-19 in 2020. Presently the market has now reached pre-pandemic levels.
- Over the medium term, rising environmental concerns and government policies for incentives and tax benefits for solar panel installation, high cost of grid expansion are also expected to drive the growth of the market studied.
- On the other hand in ability of distributed solarto serve as aprime power source may negatively impact the market's growth and is one of the major restraints for the market.
- Nevertheless, Technological advancements such as perovskite-based PV cells which offers high ease of manufacture, high efficiency, and excellent semiconductor behaviour, are expected to provide growth opportunities in the forecast period.
- The Asia-Pacific region dominates the market and is also likely to witness the highest CAGR during the forecast period. The growth is mainly driven by the majority of the demand coming from the countries such as the China and India, over rising environmental concerns.
Key Market Trends
Declining Price and Installations Cost of Solar PV Systems Expected to Drive the Market
- Since the last decade, the average cost of a solar PV panel has dropped by nearly 90% across the world. Prices of other components have also fallen significantly since 2011, reducing the levelized cost of electricity (LCOE) for both distributed and utility-scale solar PV generation.
- Due to a combination of techno-economic and geopolitical factors, it is estimated that the rate of decline of solar PV panel prices is going to reduce slightly, but solar PV panel prices will continue to decline during the forecast period.
- According to the United States National Renewable Energy Laboratory (NREL), since 2010, there has been a 64%, 69%, and 82% reduction in the cost of residential, commercial-rooftop, and utility-scale PV systems in the United States, respectively. The decline in the prices of solar panels in Europe and the United States is primarily due to the drop in solar panel prices. This scenario is expected to positively impact the market and drive the demand for solar panels in these regions.
- Due to the decline in prices, many residential and commercial consumers are opting for rooftop solar PV systems to reduce energy costs and recovery time. Further, till 2020, the prices of solar PV modules witnessed a decline of approx. 90%. However, this changed in 2021, when for the first time in the last decade, the prices went significantly up by 18%. This rise in 2021 was majorly due to the supply chain constraints of the solar industry caused by COVID-19. The effect of the pandemic on the prices has already been declining since the start of 2022 and is likely to achieve its initial declining rate soon.
- The industrialization of these highly modular technologies has yielded impressive benefits from economies of scale and greater competition to improved manufacturing processes and competitive supply chains. The overall decline in the solar PV system costs can also be attributed to the effective feed-in tariff programs in countries like Germany.
- The decline in cost of solar PV combined with the declining cost of batteries have been major drivers of the distributed solar energy market in recent years. This trend is expected to continue during the forecast period.
- Prices of lithium-ion batteries have declined by over 86%, from 1,000 USD/kWh in 2010 to 132 USD/kWh in 2021.
- Thus, the improved cost-effectiveness of batteries and solar PV modules are expected to benefit the distributed solar energy market during the forecast period.
Asia Pacific Expected to Dominate the Market
- Asia-Pacific has dominated the distributed solar power generation market in 2021 and is expected to continue its dominance in the coming years as well. The region holds vast potential for the expansion of distributed energy systems (DES), notably in the form of off-grid and residential solar. Inefficiencies in the power grid infrastructure, power supply shortages, and the scalability of decentralized technology pave way for the deployment in the region, particularly in China and India.
- The electricity demand in China has been increasing due to economic growth and urbanization. Since 2015, the country's power demand has risen by 7% per year. The power demand rose by 11% in 2021, reaching 8,312.80 TWh.
- China had a total installed solar PV capacity of about 306.4 GW in 2021, witnessing an increase of 21% compared to 2020. According to China's National Energy Administration (NEA), China's newly installed solar PV capacity reached 53 GW in 2021. Of this capacity, 29 GW came from distributed solar power generation projects, and the remaining share came from the large-scale solar plants accounting for the remaining share.
- The National Energy Administration (NEA) of China revealed that residential solar arrays represent 21.5 GW of the total capacity. Of the country's 306 GW of cumulative solar capacity in 2021, 107.5 GW of installed power was from solar.
- China has been focusing on increasing the distributed solar power generation by encouraging the residential and commercial end-users to install rooftop solar panels for quite some time. For instance, in August 2021, the NEA approved a pilot program to encourage the deployment of distributed solar PV installations in the country.
- The solar power capacity in Singapore has risen over the past several years. According to the Energy Market Authority, Singapore's total installed solar PV capacity reached 632.4 MW in 2021, recording a 46% growth compared to 2020. Furthermore, the country aims to generate at least 2 GWp of solar energy by 2030.
- The majority of solar PV capacity in 2021 came from the non-residential private sector (61.16% of the total installed capacity or 386.8 MWp), town councils, and grassroots (29% or 185.5 MWp), while the installations from public service agencies (6% or 41 MWp) and residential installations (3% or 19.1 MWp) added to the remaining PV capacity. Singapore's residential solar PV capacity recorded a decent development from 0.6 MW in 2012 to about 19 MW in 2021. This indicates a growing trend in distributed solar power.
- India is another country in Asia-Pacific where distributed solar power generation has a noticeable development. India's cumulative installed solar power capacity reached about 49 GW in 2021, adding around 10 GW in 2021.
- The Ministry of New and Renewable Energy is implementing the Rooftop Solar Programme Phase-II for the country's accelerated deployment of solar rooftop systems. The scheme provides for financial assistance of up to 4 GW of solar rooftop capacity to the residential sector. There is a provision to incentivize the companies for incremental achievement over the previous year.
- Therefore, owing to the above points, Asia-Pacific is expected to dominate the distributed solar power generation market durinf the forecast period.
The distributed solar power generation market is fragmented with a lot of players. Some of the major players in the market (in no particular order) include Suntech Power Holdings Co. Ltd, First Solar Inc., Tesla Inc., and Canadian Solar Inc., Sharp Energy Solutions Corporation, among others.
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