Solar energy in the European Union showed strong resilience in 2020 despite the Coronavirus having a negative impact on everyone's life.
While the solar industry has worked successfully to further reduce costs for solar power generation, commercial power plant designers and operators faced unexpected competition in 2020.
Due to the decrease in activity, industrial and wholesale electricity prices have dropped dramatically across the continent
The European photovoltaic market in 2020
By Solar Power Europe
In 2019, large-scale PV plants easily outpaced industrial and wholesale electricity prices in southern and northern Europe in virtually any interest rate environment.
Just a few months later, the business case for large-scale solar was different, requiring much better financing conditions to beat wholesale energy prices. But this and other challenges posed to the European solar sector through the Coronavirus have had less impact than expected.
Surprisingly, the demand for solar energy technology in the European Union has not decreased, but rather increased significantly in 2020. EU member states installed 18.2 GW in 2020, an improvement of 11% compared to 16.2 GW employed in the previous year (see Fig. 2.).
This makes 2020 the second best year ever for solar in the EU, only surpassed in 2011 when 21.4 GW was installed.
The number is about 12% lower than that predicted in last year's Medium Scenario of the EU Market Outlook, but higher than that of the Global Market Outlook published in June, when SPE heavily revised the number downwards after the first wave of Coronavirus.
Germany is still the largest solar market in Europe, a position it has held most of the time for the past 20 years, interrupted only six times, once by Italy, twice by Spain and three times by the UK. After a phase of consolidation following the first European solar boom based on the feed-in tariff, the solar sector of the largest economy on the continent experienced a second boost starting from 2018.
This is due to a combination of self-consumption with attractive power premiums for medium to large scale commercial plants from 40 kW to 750 kW. This is also due to auctions for systems up to 10 MW and a proven regulatory scheme on the one hand and solar constantly improving cost competitiveness on the other. After a first small, unsubsidized 8.8 MW plant was installed in 2019, many more powerful ones followed in 2020, with the country's largest solar plant, a 187 MW industrial scale system starting to put its first electricity into the grid in November while it was still under construction. These developments have allowed the dominant solar market in Europe to grow by around 1 GW per year over the past 3 years, reaching 4.8 GW in 2020, 25% more than last year and 74% more than the second. European market.
The new number 2 in Europe in 2020 is likely the Netherlands, which has risen one degree, having installed around 2.8 GW, a 23% increase from the 2.3 GW installed in 2019. market in 2020 was once again commercial roofs, which increased their share by almost 50%. The residential market, albeit stable in absolute terms, saw its share drop by about 10% to almost 30%. The ground systems market segment remained at around 20%, with the largest photovoltaic plant so far, a 110 MW in the province of Groningen, becoming operational this year. There is a growing interest in the multifunctional use of space, such as floating solar carports, with the largest 35 MW solar panel canopy recently starting construction. The two main drivers of solar in the Netherlands continue to be net metering for the residential and small business segments, while commercial and industrial-scale markets rely on the SDE + tender scheme, where solar has to compete with other sources. of 2021 with CCS and energy saving projects).
Spain's time on the European solar throne lasted only a year. The southern European country fell to third place with an estimated new installation capacity of around 2.6 GW, down 45% from around 4.8 GW last year. Nearly 4 GW of the 4.2 GW of capacity of the shore-side power plant installed in 2019 came mainly from two tenders in 2017. But in 2020 there were no new additional procurement volumes to deploy. Instead, nearly 1.5 GW of 2020 installations came from PPA-based systems on a pipeline of over 100 GW under development in Spain. This makes the country arguably the largest market in the world for subsidized solar, while demonstrating that grid constraints can dramatically slow the pace of solar installation. The rooftop self-consumption market has grown less than originally expected due to COVID-19, which hit Spain extraordinarily hard and resulted in a dire economic situation in which many SMEs have delayed or even abandoned their plans for solar project.
The residential segment was not negatively impacted, as tax incentives from some municipalities apparently impacted household investment decisions in favor of solar.
The biggest surprise on the EU solar map is once again Poland, the EU's coal bridgehead, where hard coal and lignite account for nearly 75% of energy demand in 2019. exceeded the annual installed solar GW scale for the first time, but is also expected to jump straight to the second floor in 2020, adding 2.2 GW (our number is between PV Poland's estimates of 1.85 GW figure and the 2.3 GW figure of Stowarzyszenie PV). This positive solar development follows the scoop of the previous year, when Poland's PV market grew nearly four times to 972 MW. The backbone for the continued strong growth of solar in Poland is self-consumption based on a favorable policy for the net-metering / feed-in framework for prosumers. Most Polish solar systems are less than 1 MW, with the majority installed in the micro-generation segment (less than 50 kW), adding up to approximately 350,000 systems by the end of 2020. In addition to net metering and FiTs , Poland offers additional financial incentives, including reduced VAT and income taxes and low-interest loans. The micro-generation segment is complemented by an annual RES auction program launched in 2016 and a recently developed PPA segment that has just seen the installation of the first systems.
France fell one place, now ranking fifth among the EU's leading PV markets. It installed approximately 945 MW in 2020, 7% less than 1,021 MW in 2019. In the third quarter of 2020, France reached the threshold of 10 GW of total solar capacity. This is 2 years behind schedule according to the original plan, which requires nearly 10 GW more to reach its 20 GW target by the end of 2023, and it takes more than three times to reach the 44 GW target by 2023. 2028. For years, French installations have approached the 1 GW level, with lengthy administrative procedures and demanding network connection processes that prevented developers from speeding up installations. Additionally, investors have been angered by a government bill to retroactively cut feed-in tariffs for existing solar power plants, which was passed by Parliament but later rejected by the Senate in fall 2020.
In total, the top 5 solar markets in the European Union were responsible for 74% of installed capacity in the region in 2020 compared to a 5% (79%) higher share in 2019. If you look at the top 10, the share goes up 90% based on a combined capacity of 16.4 GW, which is 1 GW more added by the group compared to 2019 (15.4 GW). For the Top 10 the trend is similar to the Top 5. Their total share of newly installed EU solar capacity has decreased, in this case by almost 4% from 94% in 2019. This means that, even if the contribution of the other 24 or 17 EU Member States remain quite small, particularly on the rise. Furthermore, when you take into account that the top 5 solar markets represent around 57% of the EU population and 61% of its GDP, its share is no longer so prevalent.
The ranking of the cumulative installed solar capacity of the EU-27 Member States in 2020 remained broadly the same (see Fig. 5). Germany maintains the largest share, managing the largest solar power plant capacity in the European Union, with 54.6 GW of total installed capacity. Germany's distance from distant second place is getting even greater, as the Italian solar fleet, which added only around 0.8 GW, now consists of 21.3 GW. One of the main differences in our ranking is due to Brexit, which means last year's number 3, the UK, is no longer listed. Instead, Spain ranks third in the EU with 13.2 GW, which is still a few hundred MW behind the UK. While one double-digit GW market was lost, another came out. France is expected to generate 10.9 GW solar electricity by the end of 2020.
The only other EU market that is about to hit double-digit GW level in 2021 is the Netherlands with a 2020 year-end cumulative solar capacity of 9.2 GW. All the top 10 EU markets handle over 1 GW of solar capacity, with Belgium above the 5 GW level, Poland, Greece and Hungary in the 2-4 GW range and the smallest , Portugal which is now estimated to own 1.4 GW. Other EU solar fleets at the GW level are generating energy in Austria, Bulgaria, the Czech Republic, Romania and Sweden, with the latter exceeding the GW threshold for the first time in 2020. While Germany has lost some of the its cumulative market share, reaching 40%, up from 42% in 2019, as well as Italy, now at 16%, down from 17%, the two largest operators in the European Union of solar power generation assets together claim a total share of 56% from 75.9 GW in 2020 compared to 59% and 70.3 GW in 2019. The share of the top 5 cumulative markets reached 80%, the top 10 accounted for 92%.
The EU country with the largest population, Germany, continues to rank first for another comparison of total installed solar capacity, although in this respect its advantage is far less prevalent. Germany has more solar installed per capita (651 W) than any other peer in the Union. But the Netherlands is catching up very quickly on this metric, approaching 539 W / capita, after each citizen installed an average of 384 W in 2019. All other top 10 EU solar markets have installed capacity per capita. between 466 W (Belgium) and 283 W (Spain).
In summary, solar in the European Union has proven much more resistant to the Coronavirus than expected in late spring. New installed capacity in 2020 is lower than expected in last year's EU Market Outlook, but demand grew 11% to 18.2 GW and cumulative installed capacity increased 15% to 137.2 GW. In terms of watts per capita, two Member States, Germany and the Netherlands, are now having the equivalent of at least one of the new 500W large solar panels installed for each citizen.
EU photovoltaic market, Outlook 2021-2024
A surprisingly positive 2020 for the EU solar sector will be followed by 4 years of even stronger demands in our Medium Scenario. After demand has improved by 11% in 2020, we expect a 23% increase for 2021. Installations are expected to reach 22.4 GW, which would mean an all-time high for the European Union, breaking the 10-year record of 21.3 GW from 2011. Market growth will not slow down in 2022, when new annual additions are expected to reach 27.4 GW. Although the growth rate will drop slightly to 13% in 2023 and 14% in 2024, both years are expected to see solar distribution above the 30 GW level, with 30.8 GW in 2023 and 35.1 GW. in 2024.
SolarPower Europe's growth assumptions are much higher than the targets formulated by EU member states in their national energy and climate plans (see Chapter 3). But with solar drivers in Europe becoming stronger, the foundation is being laid for further rapid growth in the coming years, among other reasons, because:
The cost reduction of photovoltaics continues. The latest edition of the annual report on energy costs of the US investment bank Lazard leveled 2020 showed a decrease of 7% year-over-year to an average of 0.04 USD / kWh for industrial-scale solar, which is less than any other source of energy;
-
Solar wins more and more in tenders for neutral energy versus cost-based technology, as in France, Spain, Denmark and several times in Germany;
-
Its low cost has also created a business case for subsidized solar systems, with the number of companies opting for solar for their energy rapidly increasing;
-
The versatility of solar is unmatched, enabling various multipurpose applications that are meeting rapidly growing interest now that solar is cost competitive. Examples include rooftop solar for car parks which allows direct charging of electric vehicles or floating solar and Agri-PV which promise owners of water / land areas to enter power generation while benefiting from additional benefits as the panels solar panels offer shading structures, which reduces evaporation in water tanks;
-
Various EU policy initiatives in the context of the EU Green Deal aiming at carbon neutrality and restoration packages will directly or indirectly promote solar energy;
The next 4 years of our average scenario can be divided into 2 phases. In a catch-up phase we will see the construction of solar projects after they are originally delayed or even canceled due to COVID-19, but new opportunities are being offered mainly through incentives from economic stimulus funds. This growth phase above 20% will be followed by a more moderate phase, which foresees a growth period of 13-14% in 2023/24. The demand in these 2 years will be mainly driven by customers attracted by the very flexible potential of solar to reduce their energy costs and improve sustainability. This will involve even more energy companies, investors and businesses as well as residential prosumers, while Member States will have implemented the necessary framework conditions to push and pull renewable energies in order to meet their EU climate targets for 2030. The low scenario, on the other hand, it predicts a decrease in demand in 2021 to a volume of 14.9 GW, which only grows to 19.8 GW in 2023. This scenario was modeled on the main EU markets that cut solar support and they implement policies that would disable key business models.
Such an outcome is nearly impossible when even COVID-19 has had only a limited impact on solar demand in the EU and when looking at current solar activities and political discussions, where the climate crisis is very high on the agendas of many decision makers, even whether some activities are actually counterproductive, such as retroactive cuts in France or various proposals for Germany's 2021 EEG review (see page 45). The High Scenario predicts 28.8 GW as early as 2021 and up to 45 GW new solar additions in 2024, which also seems very unlikely from today's perspective. But solar has often surprised everyone positively in the past, including in 2020. Our elevated scenario assumes solar becomes a major beneficiary of the Green Deal and restoration packages, assumes no import tax for solar products, none prohibitive tax or tax on consumption / storage, no obstacles to solar PPAs without subsidies or any other barrier that can slow down flexible and distributed solar energy. The cumulative PV market scenarios from 2021 to 2024 show constant double-digit annual growth rates, slightly higher than our previous EU Market Outlook.
The average scenario now predicts growth rates of 16-17% from last year's 13-16% levels, adding around 115.5 GW to reach 252.9 GW at the end of 2024, up from 137.2 GW today ( see Fig. 8). With annual PV distributions expected to be higher from 2021, it will take until 2022 for the market to fully reach presumed pre-COVID-19 market volumes (see Box 1, p. 14). The high scenario sees the EU reach 292.8 GW in 2024, but also our low scenario assumes that the EU will add over 60 GW to handle 200.3 GW solar capacity by the end of 2024.
In line with our generally very positive EU market outlook, we are more optimistic about solar developments in the 10 largest EU markets (see Fig. 9). For most of these markets, the 4-year installation forecasts from 2021 to 2024 (listed in the order of the average scenario assumptions) foresee higher energy additions than previous forecasts. We now expect Germany to be the largest market for the next few years in all 3 scenarios, despite uncertainties along the 2021 EEG review, which contains several provisions that will make life much more difficult for solar investors. The most severe is the implementation of tenders for rooftop systems starting from 500 kW, progressively decreasing to 100 kW. However, the momentum for solar in Germany is expected to remain strong, also supported by the rapid rise of PPA-based systems. It is very likely that Spain will add the second extra solar capacity, closely followed by the Netherlands.
Although Spain has a huge PPA project development pipeline, network constraints remain a major obstacle. Although a new auction calendar has been released, it will take some time for these power plants to be built so that self-consumption systems on the roof become a stronger pillar in the coming years. Solar in the Netherlands is expected to continue to thrive on a broad landscape of incentive schemes, which will allow the country to defend its third place.
That is, unless France or Italy, which both have major solar growth plans, finally overcome their bureaucratic hurdles to exploit the enormous potential available in these large, sunny European countries. We also see plenty of solar growth opportunities for Europe's latest shooting star, Poland, which is now in the top 5 markets for the next 4 years. Notable additions to the top 10 list are Bulgaria and Denmark. In Bulgaria, recent regulatory changes for the C&I sector have prompted many companies to look into solar self-consumption systems. Furthermore, the industrial-scale solar energy sector is finally seeing renewed interest following the brief 2011-12 FiT boom on expectations of higher wholesale prices and a phasing out of coal after 2025. With very little traction solar power in Bulgaria in recent years, our model shows a wide spread from the medium to low scenario.
After the auctions opened up the field for land-based solar in Denmark and proved its competitive cost when it outpaced wind in recent technology-neutral tenders, a strong trend towards systems based on PPA, with announcements for several 100+ MW solar power plants.
It is very likely that Denmark will be among the top 10 markets to add the largest solar volumes in the European Union over the next four years. Our analysis sees the EU's top 10 solar markets installing 98.5 GW from 2021 to 2024 in the very likely medium scenario, 55.1 in a low scenario and 130.7 GW in the high scenario. The fundamentals of our EU solar weather forecasts have not changed. In the next few years we will again see a very sunny working environment for solar energy, with only a few clouds limiting the sun shining bright everywhere in the region (see Fig. 10)
For only 3 of the top 15 solar markets, we see clouds on the horizon (Germany, Italy, Belgium), the rest should enjoy truly sunny weather. The choice may seem bizarre at first glance, but these are the EU Member States with the lowest growth expectations (Italy 7%, Belgium 10% and Germany 11% CAGR). Almost everyone else is expected to increase demand by more than 20%. Indeed, Germany will continue to dominate the European solar sector by far. We expect the country to reach 81.5 GW of its climate law goal of 98 GW for 2030 as early as 2024. But Germany, which only met its 2020 climate targets with the help of COVID-19 had an impact on its economy, it is about to pass a revised 2021 EEG law that poses several obstacles to its solar sector, which has just recovered from a market crash that lasted several years (for details, see the article on Germany, p. 45).
Italy, despite its ambitious solar goals of 51 GW by 2030, has seen little progress. A fiscal incentive as part of the economic stimulus for small solar and storage systems has helped somewhat, but the long-awaited auctions, which were technology-neutral bids, have so far proved disappointing for solar.
The different schemes in the regions of Belgium make it difficult for solar investors. The country does not have a federal auction plan for the whole country, the NECP's goals are not ambitious, among other reasons. Again, although there are a number of things that need to be improved, as outlined in our chapters on key policy files for solar (see p. 22) and NECP assessment (see p. 30), in general the The outlook for solar is very bright in the European Union, especially considering that regions have been hit hard by the Coronavirus. We expect the 15 largest solar markets in the EU to add 109.6 GW over the next 4 years based on our average most likely scenario, compared to 81.6 GW in the previous 4-year EMO forecast. In 2024, the EU solar market is projected to be almost double the current one, 35.1 GW versus 18.2 GW, with Germany still leading the region, but with a 20% lower share than in 2020. , and ahead of Holland and Spain, only in reverse order (see Fig. 11). Over the next 4 years, the demand will further diversify towards smaller countries. The market share of the top 10 will drop to 84%, from 90% today.
Source: Solar Power Europe