2016 is in on track to be another big year for the global solar market, with Mercom Capital Group forecasting annual worldwide solar installations to total 76 GW – a 48% year-over-year (YOY) increase from 2015.
Perhaps even more heartening, though, is that the previously dismal outlook for 2017 has improved. Although the global market remains slated to see a small drop in solar installations next year, Mercom expects the decline to be 8% YOY from 2016 and the market to still install a whopping 70 GW in 2017.
In its new report, Mercom suggests both promising forecasts are thanks, in large part, to activity in China.
“Global solar demand will overshoot most forecasts made earlier this year due to an unprecedented level of activity in China,” explains Raj Prabhu, CEO and co-founder of Mercom Capital Group, a clean energy communications and consulting firm. “Record installations in China, followed by a slowdown, resulted in an oversupply situation – which led to a module price crash. Low module prices are helping demand recovery going into 2017.”
Rather than a slowdown as previously expected, the report says the global solar demand forecast has improved for 2017, as steep module price declines have triggered a rebound in China in anticipation of the next round of tariff cuts. In fact, the report continues, this latest rebound has stabilized module price declines somewhat, and similar demand recovery due to improved project economics is expected in other markets.
After installing 15.1 GW in 2015, China overshot its 2016 installation goal of 18.1 GW in the first half of 2016 alone, with approximately 22 GW installed as developers rushed to complete projects before the country’s June 30 tariff deadline. As the report explains, demand fell after the tariff cuts, which triggered a drop in solar module prices and resulted in an oversupply situation. The report says spot module prices have fallen approximately 30% year-to-date and about 21% since June. Due to unprecedented installation levels, China’s National Energy Administration is looking at a 27% reduction in the country’s solar installation target from 150 GW to 110 GW by 2020.
Mercom’s annual installation forecast for the U.S. solar market in 2016 is approximately 13 GW. The report says this forecast is mostly unchanged from the company’s earlier estimates, as channel checks have consistently indicated slower-than-expected activity after the investment tax credit (ITC) extension was announced in December 2015. The report notes a substantial number of large-scale projects have been postponed to 2017 due to the absence of an impending ITC deadline.
Overall, the U.S. market is projected to grow about 78% YOY in 2016. The report says utility-scale solar projects continue to drive the U.S. solar market, with an estimated pipeline of more than 30 GW. Power purchase agreements are being signed at ever-lower prices, and rapid module price declines due to the oversupply situation in China are expected to stimulate activity in the U.S. even more as project internal rates of return improve. The report says all of this could lead to a strong 2017 for the U.S.
Japan and India will follow China and the U.S. as the third and fourth largest solar markets in 2016, respectively. According to the report, India is expected to install about 4 GW this year and double that in 2017, giving the country a chance to move up to the third spot next year.
The report says Japan is expected to install 10.5 GW this year, but the country’s tariff revisions coming up in April 2017 could be steep. Reverse auctions and regulations are also expected in April as Japan moves toward auctions in an effort to reduce subsidy bills, and the Japanese market is forecast to install about 8 GW next year.
The report says the European market continues to decline, with only the U.K., Germany and France expected to install more than 1 GW in 2016. In 2017, France and Germany are the only European markets forecast to install more than 1 GW.
Australia is expected to install approximately 1 GW in both 2016 and 2017. The report says other solar markets to watch include Latin America, an important growth market led by Mexico, Chile and Brazil, and the Middle East and North Africa (MENA) region, which is also a significant up and coming market, especially after the collapse of oil prices. South Africa and Saudi Arabia are forecast to show significant growth, the report adds.
Mercom’s full report is available here.