Europe’s extended solar winter has come to an end.
Following a multiyear period of gloomy installations, Europe’s annual solar market is set to double over the next few decades, and do so in a sustained fashion, based on new research from Wood Mackenzie Power & Renewables.
Solar projects now frequently conquer onshore wind in competitive auctions in Germany, among the world’s most mature wind niches. France has rebounded and is currently regarded as the most attractive place to construct solar in Europe.
Meanwhile, long-dormant Spain has quickly transformed into a globally significant solar market, as well as a new hot spot for corporate renewables deals.
Since the growth of modern solar and wind technology, few markets have seen a striking and sustained a recession as European solar. The abrupt elimination of feed-in tariff plans for large projects nearly a decade back in Germany and Italy precipitated a collapse in installations.
At the peak boom year of 2011, Europe installed 22.7 gigawatts of new solar capacity — together with Italy alone putting a remarkable 9 gigawatts. That same year the U.S. installed 1.8 gigawatts. But the European economy then crashed hard, slumping into a low of 7 gigawatts in 2016, WoodMac statistics reveal. WoodMac predictions 18.8 gigawatts of installations in 2019, up from 10.7 gigawatts last year. By 2022 the market is expected to hit nearly 25 gigawatts, and remain above 20 gigawatts for the near future.
And unlike the days when installations were driven by dangerously vulnerable subsidies, the market is increasingly focused around competitive auctions and subsidy-free jobs.
Among the marketplace’s tailwinds:
A backdrop of quick power-sector decarbonization and plant retirements. Europe will shed around 174 gigawatts of gas, coal and nuclear capacity between 2015 and 2040, WoodMac predictions.
A diversified solar marketplace and lively roster of renewable-energy programmers. Even though utility-scale jobs remain the largest section, distributed solar is larger in several key markets such as Germany and the Netherlands, offering a varied set of opportunities for developers and tech providers.
The recent takeoff of subsidy-free projects, driven in part by rising wholesale power rates. Carbon prices have increased sharply in Europe recently, and WoodMac expects them to keep on trending up to 2040, when they will exchange about $40 ($45) per megawatt-hour.
The finalization by the end of the year of European countries’ strategies for reaching their ambitious renewables targets for 2030, providing more visibility to the marketplace.
Lots of Europe’s domestic PV manufacturers went bankrupt during the years, with international cell and module production mostly shifting to Asia. At the same time, many European solar developers survived, Heggarty said, by diversifying into other worldwide markets or placing low at home, building up pipelines of early-stage jobs to get a day when requirement came back.
That day is here, and as a result of their perseverance Europe has an enormous pipeline of solar projects prepared to proceed.
“The marketplace is still mostly dominated by locally focused developers,” like EnerParc in Germany, Heggarty said. “The exclusion we’re beginning to see is the Spanish market, where some of the very big developers and utilities are starting to play,” he said, from homegrown renewables giant Iberdrola into Italy’s Enel Green Power.
Intense competition within the European renewables economy means that even amid rising installations, it won’t be an easy place to create a profit, Heggarty noted.
And”cost cannabilization” will turn into a bigger and bigger issue since the growing penetration of wind and solar on Europe’s grid pushes down electricity prices. It is expected to be the biggest market in Europe this season, topping Germany for the first time.
The aggressive auctions Spain started in 2017 are currently inventing completed projects. And while there are no additional auctions around the calendar, the country’s rich solar source is anticipated to sustain market growth long into the 2020s, even in the unlikely event that more auctions aren’t forthcoming.
Spain’s promise-rich marketplace has less than 6 gigawatts of solar installed now, with fairly lofty power prices during the middle of the day. That’s a huge opportunity for solar developers, helping to drive a surge of unsubsidized solar projects and corporate deals.
Beyond electricity market dynamics,”Spain is a really clear place to build these resources, with a great solar resource, a relatively low cost of work, and a great deal of land available, particularly down south where the resource is greatest,” Heggarty explained.
“You’re seeing a bit of a gold rush there for solar at the moment.”
The goals are mandated by the EU. Draft plans were submitted earlier this season, but the devil will be in the final details.
“We will find out more auction pipelines confirmed, we will see measures to encourage DG, and steps to support the corporate procurement of renewable energy,” Heggarty said.
