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Solar industry expansion slows down at a steady pace

Following successive years of significant achievements

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3 min read
Renewable energy, specifically solar, is seeing a rapid expansion at an unprecedented rate.
Renewable energy, specifically solar, is seeing a rapid expansion at an unprecedented rate.

Solar industry expansion slows down at a steady pace

Going against recent unprecedented streaks, the global solar energy sector is projected to maintain double-digit growth rates in the foreseeable future, according to industry experts [1]. However, it's time to bid farewell to annual record high installations, as consistent predictions from the German Solar Industry Association (BSW Solar) and Solar Power Europe suggest [2]. This year, theworldwide addition of new solar plants might surpass the 600-gigawatt capacity mark, nearly double the total from 2022 [2].

Germany, despite its modest size, continues to be a leading player in the international solar market. In 2022, the country boasted an installed capacity of around 100 gigawatt, ranking it fourth globally after China, the USA, and India according to BSW Solar's analysis [2]. By 2024, Germany’s installed solar power capacity is projected to increase by a robust 14 percent or 17.5 gigawatt [2].

The solar growth story might take a slight detour in 2023, with a slightly decelerated pace. Carsten Körnig, industry expert, points out that private homeowners might install fewer new solar systems this year [3]. On the flip side, demand for balcony solar systems remains robust, with numbers set to reach approximately 800,000 in 2024 [3].

Understanding the Deceleration

  1. Economic Headwinds: Higher interest rates imposed by central banks like the Federal Reserve are making borrowing more costly. This economic squeeze has a ripple effect on consumer demand and solar companies' ability to finance their operations [4].
  2. Policy Uncertainty: Changes in policy frameworks, particularly in key markets such as China and the USA, can create a sense of ambiguity and impact investment decisions. For instance, U.S. tariffs have curbed solar panel imports, reshaping global trade dynamics [4][5].
  3. Competitive Landscape: As the industry expands, the competitive landscape intensifies. Increased competition can lead to price wars and reduced profit margins, making it challenging for some companies to maintain growth [5].
  4. Infrastructure Constraints: Challenges related to grid capacity and infrastructure, such as curtailment (when excessive generated power cannot be fed into the grid), are becoming more relevant [6]. This may dampen the appeal of investing in solar projects, as observed in Brazil's centralized generation market [6].
  5. Energy Prices Fluctuations: Varying energy prices can influence the economic feasibility of solar projects. When conventional energy prices are low, solar energy becomes less competitive, leading to reduced investment [6].

Despite these hurdles, experts remain hopeful about double-digit growth in the coming years. This optimism stems from long-term favourable factors such as declining solar panel costs, sector-wide electrification, and strong energy security priorities [1].

[Sources][1] ntv.de[2] dpa[3] Carsten Körnig (Interview)[4] [5] [6] Various industry reports and expert opinions.

  1. The Commission has also highlighted economic headwinds as a significant factor affecting the solar industry's growth in 2023, with higher interest rates making borrowing more expensive and impacting consumer demand and solar companies' financial health.
  2. Despite the slowdown in growth, solar energy still holds promise for double-digit expansion in the coming years, supported by declining solar panel costs, sector-wide electrification, and strong energy security priorities.
  3. Germany's solar industry is also expected to grow robustly by 14 percent or 17.5 gigawatt by 2024, despite a slight deceleration in the pace of growth this year.
  4. Recent changes in policy frameworks, particularly in key markets such as China and the USA, have created a sense of policy uncertainty and impacted investment decisions.
  5. Challenges related to grid capacity and infrastructure, such as curtailment, may dampen the appeal of investing in solar projects and create hurdles for the industry.
  6. As the solar industry expands, the competitive landscape intensifies, leading to price wars, reduced profit margins, and challenges for some companies to maintain growth in the face of increased competition.

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