Solar will become the dominant electricity source around the world as it displaces fossil fuels and generates $5 trillion in revenue over the next 15 years, a new report has predicted.
The 175-page Deutsche Bank report, published last Friday, describes the market potential for solar as “massive,” despite the fact that it currently accounts for just 1 per cent of the 6,000GW, or $2 trillion electricity market (that is an annual figure).
The report predicts that by 2030, the global solar market will increase ten-fold, as more than 100 million customers are added, and its share of the electricity market jumps to 10 per cent.
By 2050, it suggests, solar’s share will be 30 per cent of the market, with developing markets set to see the greatest growth.
“Over the next 5-10 years, we expect new business models to generate a significant amount of economic and shareholder value,” the analysts write in the report. Within three years, the economics of solar will take over from policy drivers (subsidies),
The Deutsche analyst predictions are underpinned by the fact that solar is already at grid parity in more than half of all the world’s countries, and within two years will be at parity in around 80 per cent of them.
And at a cost of just 8c/kWh to 13c/kWh, it is up to 40 per cent below the retail price of electricity in many markets. In some countries, such as Australia, it is less than half the retail price.
“As we look out over the next 5 years, we believe the industry is set to experience the final piece of cost reduction – customer acquisition costs for distributed generation are set to decline by more than half as customer awareness increases, soft costs come down and more supportive policies are announced,” the report says.
“While the outlook for small-scale distributed solar generation looks promising, we remain equally optimistic over the prospects of commercial and utility-scale solar markets.”
At utility scale, parity is also drawing near. Just four years ago, the ratio of coal-based wholesale electricity to solar electricity cost was 7:1. Now, says Deutsche Bank, this ratio is less than 2:1 and will likely approach 1:1 over the next 12-18 months.
In some markets, it already is cheaper. And in India, that ratio could fall to 1:1 this year, with major ramifications for coal projects such as those in the Galilee Basin.
“We believe utility-scale solar demand is set to accelerate in both the US and emerging markets due to a combination of supportive policies and ongoing solar electricity cost reduction. We remain particularly optimistic over growth prospects in China, India, Middle East, South Africa and South America.”
Still, Deutsche Bank reported that while it is becoming increasingly clear that solar is now competitive with conventional electricity generation in many global markets, there is still some policy uncertainty that could impact investor sentiment and overall supply/demand fundamentals.
“That said, we believe the dependence on subsidies has decreased significantly compared to a few years ago and demand drivers are also increasingly more diverse as well as sustainable,” the report said.
“We expect solar sector’s dependence on subsidies to gradually decrease over time, policy outlook to become more supportive and economics to take over politics over the next 3 years.”
© 2015 Solar Choice Pty Ltd