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Energética India | September / October 2015

SUMMARIZED BY ENERGETICA INDIA Solar Industry Trends and Outlook Solar Power Europe analyses the past trends and forecasts for solar installations globally. Energetica India highlights the major points for its readers. Global Industry Trends The global solar photovoltaic (PV) sector experienced a new year of growth in 2014 reaching a cumulative capacity of 178 GW, multiplying the installed capacity by a factor of 100 in only 14 years of development. In parallel with this development, the annual PV market volume has multiplied by 40 times in less than a decade, and the global value of the PV sector will probably reach the landmark of 100 billion EUR in 2015. Despite the low risk of financing inherent to the technology, access to capital is a major challenge for a continuously growing sector. The industry has continued to recover after the significant pressure of overcapacities in 2012 and 2013. Many manufacturers of solar components have been able to significantly improve their business results. The cost of PV systems continued to decline in 2014. System prices below 1 EUR/ Wp (for utility scale PV above 1 mw) are now common in several European countries, while prices around 1 USD/Wp have been reported in the most competitive tenders. this has been achieved thanks to the declining prices of modules – except in Europe where the minimum import price on modules from China has maintained prices at a higher than market level–and inverters, combined with economies of scale that brought installation costs down much faster than many expected. This resulted in highly competitive levelised costs of electricity (LCOE) for PV generation. In 2014, super-competitive calls for tenders in emerging countries, in the US and even in Europe, demonstrated how cheap solar electricity has become in just a few years. PV power prices below 60 USD/ MWh have been granted in one project in Dubai, which remains to be proven to be profitable. Other calls revealed prices between 67 and 80 USD/MWh. These examples show how the cost-competitiveness of solar electricity progresses quickly and how PV is producing at similar price ranges as new conventional generation plants. While large-scale PV generation costs already compare with conventional electricity production today, at the distributed level solar power production is now competitive with retail prices in many countries. Whether these factors are sufficient to guarantee the flourishing of PV in the market, however, depends on the regulatory context and power system design. The achievement of grid parity (or socket parity), has started to drive developments in the prosumer-market and thus applies mainly to the distributed solar segment. The competitiveness in this sector depends heavily on how retail electricity tariffs are defined and how charges and taxes are applied to prosumers. For utility scale PV the main reference point is the wholesale power market prices. In liberalised power systems, the marginal power prices achieved in the power exchanges are currently not high enough to cover the cost of new generators, including solar power. Approaches like power purchase agreements, tenders and premiums are driving the market forward. Competitiveness on the wholesale market generally depends on an inclusive and forward-looking market design, as well as a flexible power mix that leads to sustainable wholesale price formations. Based on its predictable output and its technical reliability, solar PV can and should be considered a low risk investment for the financial community. However, the perceived risk associated with solar PV is influenced by several external factors that increase the cost of capital for solar PV in all market segments • The regulatory risk, especially the possibility of retroactive measures: this risk is by nature unpredictable, since it is linked to political decisions and cannot easily be hedged with existing financial products. It therefore drives the cost of capital higher. • The operational risk: this can be reduced with the right combination of components certification and quality installation processes. Meanwhile, the current track record of solar PV installations has not yet convinced the financial community of the stability of solar PV revenues. Bankability has become a central concept in PV risk management but it cannot replace the use of adequate standardisation and certification processes to guarantee both components and installation quality in the long term. SOLAR POWER 34 energética INDIA · SEP | OCT15


Energética India | September / October 2015
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