Covid-19 has disrupted the global supply chain, making it difficult for solar PV developers to pursue project development activities, and impacted the annual installed solar capacity this year. However, the drop in solar PV levelised cost of energy (LCOE) and power purchase agreements (PPA) over the years, combined with the limelight shifting to renewables during the Covid-19 pandemic, is anticipated to increase the rate of utility-scale solar PV projects by a considerable amount.
GlobalData estimates that the second half of the year is expected to see some increase in annual capacity build-up as global markets open, leading to the annual solar PV capacity additions of 90GW – 112GW in 2020. Although factors such as lowering LCOE and PPAs favourable to additions, the pandemic paused the installations to some extent. As global economies open, the situation is anticipated to act as a hiccup in the growth rate – if not 1.4TW, the overall installations by 2024 are expected to be approximately 1.1TW – 1.2TW.
A recent study by SolarPower Europe expects the global solar PV market will return to normal growth between 2021 and 2024. This may well be possible if governments include support for renewables in their post-Covid-19 economic stimulus packages. However, the scenario that sees 1,400GW overall capacity by 2024 looks to be slightly on the high side since the pandemic and its overall impacts have created a hiccup in the rate, at which the installations were taking place. A slowdown in the rate of installation would render achieving that kind of overall capacity by 2024, a little too optimistic.
SolarPower Europe’s future outlook might be a possibility, considering that utility-scale solar PV plants are growing cheaper than conventional sources such as nuclear, coal and combined-cycle gas turbine plants. The average LCOE for solar PV has been on the decline since 2013. In 2019, it experienced a drop of 27.1% from 0.07kWh and in 2020 it is expected to decline by a further 7.8%.
Declining PPA rates are also expected to provide thrust to the market going ahead. Solar electricity prices are considerably lower in economies with stable policy frameworks and high credit ratings compared to developing countries. However, in recent years, there have been low PPAs in developing countries as well with Ethiopia seeing bids of $2.5 cents/kWh in 2019, while developed countries such as Portugal and UAE saw bids of $1.65 cents and $1.7 cents/kWh.