Solar demand will shift away from its concentration in Germany and other European markets to a broader range of countries over the next five years, concludes a report by Lux Research.
Demand is expected to shift to Asia and North America, with Japan, China, and India and the US driving significant volumes. US growth will be driven by the federal tax credit, which remains in force through 2016, and a myriad of state-level programs.
Sales are expected to grow at about 15% a year, growing the industry significantly in terms of megawatts installed, but revenues will stay flat as price declines outpace volume growth, says Lux.
The conclusions are based on an analysis of levelized cost of electricity (LCOE) and internal rate of return (IRR) across 156 countries, states, and regions.
“The global solar market for grid-connected systems will grow from 15.8 gigawatts (GW) in 2010 to 37.5 GW in 2016, a compound annual growth rate of 15.5%,” says analyst Matt Feinstein. “However, price declines will outpace volume increases, at least at first – the industry will actually shrink on a revenue basis from $64.4 billion in 2010 to $56.9 billion in 2012 before recovering to $65.4 billion in 2016.”
Among the report’s key findings:
Leading 2011 markets include New Jersey, Australia, and Greece, but they will be widespread by 2016.
Because of subsidies, the most attractive markets for residential solar are Australia (52% subsidized IRR), Greece (32%) and Ontario (27%) while the most attractive commercial markets are New Jersey (42%), Portugal (37%) and Hawaii (34%).
On the utility ground-mount side, Portugal (81%) tops the list, followed distantly by New Jersey (58%) and Cyprus (44%).
By 2016, the number of viable markets will increase dramatically, to 45 residential markets, a whopping 88 commercial markets, and 85 utility markets.
Rising Electricity Prices will generate demand.
Today, subsidies and grid parity are necessary to generate demand, but in the future, the cost of retail and wholesale electricity will be the key factor.
Brazil, for example, is projected to reach a 12% unlevered, unsubsidized IRR for commercial microcrystaline silicon (mc-Si) systems at the end of 2016 – even though solar will not yet have reached grid parity.
In fact, of 55 geographies demonstrating unsubsidized IRRs above 10% at the end of 2016, only 10 will have reached grid parity, Lux says.
Commercial systems reach grid parity fastest, with 10 geographies there by 2016.
The number of commercial rooftop markets reaching parity will grow from one in 2010 to 10 in 2016, including the Dominican Republic and Nicaragua.
Hawaii will be the first to reach residential grid parity in 2011. By 2016, seven other residential markets will follow, including Italy, Denmark, and Ukraine. For utility ground mount, the number remains small.