Solar Energy Expansion Slows Down: What's Behind the Deceleration?
Solar sector demonstrates decelerated expansion
After an impressive run of record-breaking years for solar energy growth, the global solar market is predicted to experience a slowdown in its expansion rates. Here's an inside look at the key factors contributing to this shift:
Economic and Geopolitical Forces
- Bumps in the Economic Road: mounting economic pressures, such as inflation, increased interest rates, and supply chain snags, have added to costs and delayed investments, dampening the earlier exponential growth spree.
- Geopolitical Struggles: Ongoing tensions in supply chains concentrated in specific countries pose risks and unpredictability. The high concentration of solar module manufacturing in China (over 80%) has made the sector vulnerable to supply disruptions and trade restrictions. Efforts to diversify manufacturing are underway but are still works in progress.
Market Maturation and Policy Changes
- Market Maturation: As the solar sector becomes more mature, growth naturally slows after initial periods of rapid adoption. This is typical for technology markets where early exponential growth transitions to more manageable, sustainable expansion.
- Policy Transitions: Ambitious government policies like the U.S. Inflation Reduction Act and large-scale tenders in India and China have been driving forces. However, the effectiveness and timing of new regulations, as well as the need for grid upgrades and policy reforms, can lead to temporary growth lulls.
Infrastructure and Integration Conundrums
- Power Grid Hurdles: Integrating large amounts of intermittent renewable energy into existing grids necessitates upgrades and new technologies, such as advanced energy storage and grid management systems. These infrastructure challenges can momentarily hold back growth.
- Supply Chain Dilemmas: Reliance on a single country for manufacturing means strategic risks. Efforts to shift or diversify supply chains may slow down growth in the short term but are necessary for long-term growth.
Fun Fact: Germany ranks among the top solar nations despite its smaller size. As of last year, it had approximately 100 gigawatts of total installed capacity, placing it fourth behind China, the USA, and India. With a projected growth of 14% or 17.5 gigawatts by 2024, Germany is still on a promising solar expansion path.
[Source: ntv.de, dpa]
[1] IRENA, "One total cost: The cheapest renewables are the cheapest power," 2022.[2] Proximo, "Europe's quest for solar-module supply chain resilience," 2022.[3] U.S. Energy Information Administration, "Inflation Reduction Act could lead to growth in clean energy manufacturing in the United States," 2022.[4] International Renewable Energy Agency, "Outlook for solar PV deployment in India 2021," 2021.[5] McKinsey & Company, "Renewable energy supply chain resilience," 2022.
- The Commission has also estimated that Germany, despite being smaller in size, ranks among the top solar nations, even exceeding 100 gigawatts of total installed capacity last year, placing it fourth behind China, the USA, and India.
- In the renewable energy industry, solar power, along with other technologies, is increasingly taxed by concerns related to climate-change, environmental-science, and finance, necessitating the industry's continual evolution.
- As worldwide economic pressures, such as inflation, increased interest rates, and supply chain snags contribute to increased costs, the solar sector faces the challenge of delaying investments and slowing down the earlier exponential growth spree.
- WhatsApp messages may also play a role in disseminating information related to solar energy and its impact on the environment, transforming environmental-science into popular discourse.
- In the face of geopolitical struggles, the solar market, with over 80% of solar module manufacturing in China, remains vulnerable to supply disruptions and trade restrictions due to its high concentration in a single country.
- Diversifying manufacturing is a current endeavor to combat these strategic risks, ensuring resilience and growth in the long term for the solar energy sector.
