Global solar energy trends to 2023

According to S&P Global, falling component costs, local manufacturing and distributed energy are the three main trends in the renewable energy industry this year.

Continued supply chain disruptions, evolving renewable energy procurement targets, and the global energy crisis continue throughout 2022. some of these trends are evolving into a new phase of the energy transition this year, says S&P Global.

Raw material and transport costs are set to fall in 2023 after two years of being affected by tightening supply chains, with global transport costs having fallen to pre-New Crown epidemic levels. However, this cost reduction will not immediately translate into lower overall capital expenditure on renewable energy projects, S&P Global said.

S&P Global said that land access and grid connectivity are proving to be the industry's biggest bottlenecks, with the unintended consequence of driving up development costs as investors rush to deploy capital in markets with insufficient interconnection availability and are willing to pay a premium for projects that are ready for construction sooner.

Another change driving up prices is the shortage of skilled labour, leading to higher construction labour costs, which S&P Global said, together with higher capital costs, could prevent a significant reduction in project capex prices in the near term.

PV module prices are falling faster than expected in early 2023 as polysilicon supplies become more plentiful. This relief may filter through to module prices, but is expected to be offset by manufacturers looking to restore margins.

Downstream in the value chain, margins are expected to improve for installers and distributors. this is likely to reduce cost reduction gains for end users of rooftop solar, S&P says. it is developers of utility-scale projects that will benefit more from reduced costs. s&P expects global demand for utility-scale projects to intensify, particularly in cost-sensitive emerging markets.

In 2022, distributed solar consolidates its position as the dominant power supply option in many mature markets, and S&P Global expects the technology to expand into new consumer segments and gain a foothold in new markets by 2023. PV systems are expected to be increasingly integrated with energy storage as shared solar options emerge and new types of home and small business projects will be able to connect to the grid.

Upfront payments remain the most common investment option in home projects, although electricity distributors continue to push for a more diverse environment, including long term, short term and power purchase agreements. These financing models have been widely deployed in the US over the past decade and are expected to expand to more countries.

Third party financing is also expected to be increasingly adopted by commercial and industrial customers as liquidity becomes a major concern for many companies. the challenge for providers of third party financed PV systems is to contract with reputable offtakers, says S&P Global.

The overall policy environment is expected to favour increased distributed generation, whether through cash grants, VAT relief, rebate subsidies or long-term protective tariffs.

Supply chain challenges and national security concerns have led to a growing focus on localising the manufacture of solar and storage, particularly in the US and Europe, where the emphasis on reducing reliance on imported natural gas has put renewables at the centre of energy supply strategies.

New policies such as the US Inflation Reduction Act and Europe's REPowerEU are attracting significant investment in new manufacturing capacity, which will also cause a boost to deployment. s&P Global expects global wind, solar and battery storage projects to reach nearly 500 GW in 2023, an increase of more than 20% over 2022 installations.

"Yet concerns persist about China's dominance in equipment manufacturing - particularly in solar and batteries - and the various risks involved in over-reliance on a single region to supply the required commodities," S&P Global said.