Wood Mackenzie: Global PV Installations To Reach 417GW By 2023

According to a study recently released by research organization Wood Mackenzie, the global installed capacity of PV systems installed in 2023 reaches 417GW, an increase of more than 80% compared to 2022. The current ultra-low prices of PV modules have accelerated the installation of PV systems in Europe and China. China remains the world's largest PV market, accounting for more than 60 percent of the world's installed PV system capacity last year.

Decarbonization commitments at both government and corporate levels remain a key driver of global installed PV capacity growth. Tight grid connection deadlines for contract auction projects and growing electricity demand have led to double-digit growth in Wood Mackenzie's near-term forecasts for PV markets such as Malaysia, Saudi Arabia, and Iran. The need for energy-intensive industries to hedge against electricity price volatility continues to drive a boom in the development of industrial and commercial (C&I) PV systems, as well as the signing of more off-site and on-site power purchase agreements in Europe.

Wood Mackenzie's outlook for the global PV market over the next 10 years is flat due to slowing economic growth

Wood Mackenzie's outlook for global installed PV systems is expected to reach more than 430GW of installed capacity in 2024, a 3 percent increase compared to 2023.

Despite strong growth in the global PV market over the past few years, Wood Mackenzie expects average annual growth rates to be flat over the next 10 years. This is driven by Wood Mackenzie's outlook for the Chinese PV market. The company expects moderate growth in the installed capacity of PV systems in 2024 and 2025, as China's construction of "renewable energy" bases (government-supported areas dedicated to the development of renewable energy) is expected to be connected to the grid on schedule.

However, Wood Mackenzie expects China's installed capacity of installed PV systems to decline by 9% in 2026, due to a slowdown in PV system development and deployment as PV systems from the last round of the national program have been installed, before the next round of planned procurement in 2028.

The initial years of implementation of national infrastructure development programs are likely to face policy adjustments and a more cautious approach by PV developers and investors to invest in PV projects. In the long term, growth in installed PV system capacity will be limited by transmission infrastructure and grid capacity.

Wood Mackenzie's outlook for the Chinese PV market may have an upside. In the ideal case set by the company, China will add 600GW of new PV systems over the next 10 years, a 24 percent increase from the base case. Its ideal case assumes a more optimistic outlook for China's PV module manufacturing industry. If PV module capacity grows beyond current expectations and PV module prices remain at their current ultra-low levels, it could drive additional growth in the installed capacity of PV systems installed in China.

In looking at the outlook for the global PV market outside of China, Wood Mackenzie expects an average growth rate of 4 percent over the next 10 years. While PV markets such as the Middle East and Africa are growing at an average annual rate of between 12 and 14 percent, growth in Europe and Latin America is relatively flat.

Inadequate Grid Infrastructure, Low Demand, and Protectionism Limit PV Market Growth Potential

Slow expansion and upgrading of transmission and distribution grids remain the biggest limiting factors for growth in installed PV system capacity. The installed capacity of PV systems in Europe last year grew by more than 40 percent compared to 2022, but the size of the grid has not been able to keep up with the rapid expansion of the installed capacity of PV systems. wood Mackenzie estimates that the EU grid will require an investment of EUR 600 billion per year to meet decarbonization targets and to allow for large-scale renewable energy generating facilities and installed capacity of PV systems to keep growing over the next decade. to keep growing over the next decade.

However, the development of grid infrastructure is lagging. Similar bottlenecks are worsening in most countries and regions of the world, with some countries waiting up to 10 years or more for grid connection. The inability to expand and upgrade the grid is particularly acute in South America, where the lack of transmission infrastructure is limiting the prospects for the PV market in the near and medium term.

Slower growth in electricity demand is also affecting Wood Mackenzie's long-term outlook for the global PV market. Lower-than-expected progress in trading and heating electrification trends and limited growth in electricity demand will dampen growth in installed PV system capacity in Europe over the next decade.

The PV module purchasing boom seen over the past two years has relied on another record low in PV module prices, but rising protectionist sentiments and impending trade defense measures could jeopardize the competitiveness of the PV economy in certain markets. The European Commission has introduced the Net Zero Industry Bill, which seeks to increase the production of key renewable energy components. In addition, Canada recently passed a bill requiring proof that PV product supply chains are traceable and free of forced labor. These policies could lead to restrictions on imported PV modules, thus inhibiting the growth of its PV market in the coming years.