Costs for solar energy will halve before 2030, accelerating disruption in global energy markets while driving the energy transition, according to a new study by Climate Energy Finance (CEF), an Australia-based think tank.

In its “Solar Pivot” report, CEF forecasts record solar installation in 2023, with growth of 30 to 50 percent year over year. Total solar installation could reach 1,000 gigawatts (GW) per year by 2030, riding on the “dramatic expansion” of solar module supply chains globally and a return to solar cost deflation over the rest of this decade, the report said.

CEF said that the International Energy Agency (IEA) has “consistently underestimated the rate of solar deployments, the massive deflation of solar generation costs, and accordingly the disruption of the global fossil fuel industry”.

The “IEA World Energy Outlook 2022” report estimated 462 GW of annual solar installs to 2030 under its Net Zero by 2050 scenario. CEF projects that “there is likely to be manufacturing capacity for world installs of double this [number]”.

Investments in solar energy are “booming”, and the trend is accelerating in 2023, according to the report. For an increasing number of global markets, solar is the lowest cost source of new electricity generation, even without a price on carbon emissions, the report said.

Meanwhile, prices of polysilicon, a key raw material in solar modules, dropped two-thirds since December 2022 to just $11 per kilogram in June 2023, causing solar module prices to dip by a third from 2021 to 18 cents per watt in May 2023, the CEF report said. Global freight costs have also declined more than 80 percent since the peak at the end of 2021. CEF expects solar electricity costs to further drop 10 percent annually this decade, halving by 2030.

Solar Installation Trends

Bloomberg New Energy Finance (BNEF) estimated the world installed a record 268 GW of solar in 2022, relative to the installed world solar module manufacturing capacity of 600 GW at the end of 2022, the CEF report noted. CEF forecasts that if most of the current announcements of solar manufacturing capacity expansions proceed, the capacity will double by 2024-2025. The majority of the expansion projects will be in China, but the USA, India, and the European Union (EU) will also see a planned expansion capacity of three to five times the current figures, the report said.

Solar energy has seen record rates of annual installation every year for a decade. China leads the world with a cumulative 414.5 GW of solar installed by 2022, followed by the EU at 209.3 GW, the USA at 141.6 GW, Japan at 84.9 GW, and India at 79.1 GW, the report said.

India and China are leading the development of large utility-scale solar projects, the report said. “Phalodi, in the northern Indian state of Rajasthan, is reported to be the world’s largest district for solar with a total of 6.6 GW of capacity including the Bhadla Solar Park,  currently #1 in the world at 2.245 GW”, it noted. “Rajasthan has huge solar aspirations, with a target to reach 30 GW by FY2025.”

In China, Goghe County in Qinghai’s Hainan Prefecture is the second-biggest district with a reported 5.1 GW of capacity across 18 plants. These include the world’s second-largest solar project Huanghe Hydropower Developments at 2.2 GW and the third-largest Longyangxia Solar-Hydro at 0.85 GW, according to the report.

China is set to install 120 to 140 GW of solar in 2023, an increase of 37 to 60 percent year over year, the report noted using data from BNEF. It said BNEF expects that by 2030, China’s annual install rate will be around 260 GW, double the world record expected for 2023. The nation accounts for 40 to 60 percent of the world’s annual installation of utility solar, distributed solar, and hydro, as well as both onshore and offshore wind in recent years, and this is set to continue, the report said.

India will avoid building new coal power plants in the next five years as it targets to boost its use of renewables to generate electricity, according to the updated National Electricity Plan by the country’s Central Electricity Authority. The plan is seen as a step toward India’s target of raising the share of renewables in its energy mix by 2030, increasing its non-fossil fuel energy capacity to 500 gigawatts by 2030. As of April 2023, India had 125 GW of renewable energy installed, representing 30 percent of the country’s total installed capacity.

According to the report, India introduced a 40 percent solar module import duty and a Solar Performance Linked Scheme (PLI) to incentivize solar manufacturing, leading to 110 GW of module manufacturing commitments.

Meanwhile, the USA Inflation Reduction Act is spurring a surge of clean energy investments, “with a sixfold expansion in US solar module manufacturing capacity by 2024 and a likely doubling of annual solar installs to 40 to 50 GW annually through to the end of this decade”, the report said.

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