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9 January 2020

China solar resurgence underestimated by analysts

Solar installations will continue their rise into the start of the decade, according to analysts at IHS Markit, with an additional 142 GW forecast for 2020. We agree that this will be led by the globalization of the market, but the report suggests a dwindling market share in China, with lower installations through the 2020s than seen in the previous decade, as the country pushes to eliminate subsidies. With PV costs still on the decline, this is more likely to cause a brief moratorium than a long-term slump, and the report may be underestimating the extent to which solar will resurge in China.

The report indicates that annual installations will continue to rise, with 2020 seeing 14% more installations than the previous year. With 43 countries now having over 1 GW of solar installed, compared to just 7 a year ago, IHS pushes the idea that globalization is driving this.

China is home to the four largest solar module manufacturers (Jinko, JA, LONGi and Trina Solar) and benefiting from a low-cost supply chain, these suppliers often undercut global competitors, which has facilitated the Chinese dominance in the marketplace. The cost reduction in China has been driven by governmental pressure in the drive to make solar subsidy free. This has seen annual installations in the country fall from record levels of 50 GW in 2017 to between 20 and 24 GW in 2019.

This pressure is lesser elsewhere, which caused installations outside of China to grow by 53% in 2019, as manufacturers have turned their focus abroad. The subsidy-free mark is likely to be hit within the next 2 years, which will see a resurgence of solar as a certain investment in China, and we would anticipate that the country will regain some market share as it drives towards renewables in the early 2020s. This does somewhat depend on the country’s 14th five-year-plan which will be announced next year, which we predict will included a significant increase in renewables ambitions – something IHS may have dismissed.

The IHS report also predicts that 2020 will see a 20% growth in solar in the US, the world’s second largest market, driven by states including California, Texas, Florida, North Carolina and New York. However, large Chinese manufacturers have remained skeptical of the US market during the reign of the Trump administration, with many delisting from the New York Stock Exchange since the President’s election victory in 2016.

The US solar industry recently came away empty handed from an end of year clean energy deal, after months of lobbying, with onshore wind as the only technology receiving an extension to its tax credits. Bifacial solar also looks set to soon lose its exemption to the 30% trade tariffs within the solar. Government support is unlikely to ramp up with a presidential election looming, and the 20% increase figure may be over optimistic if Chinese manufacturers determine other markets as a safer bet.

With solar ambitions ramping up globally, the report sees Europe add 24 GW in 2020 – a 5% increase on last year. This will largely be led by countries in the south of the continent, with northern countries like the UK and Denmark turning more focus to offshore wind.

While political support has wavered in India, massive renewables promises and record-low solar costs are key drivers behind an anticipated growth in solar, with installations set to surpass 14 GW in 2020 according the study.