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TrendForce: Global PV Demand Will Reach 158GW for 2021 as Many Regional Markets Rebound, but Risks Remain as Subsidies Drop
2021-01-21   |  Editor:sun meg  |  265 Numbers

In 2020, the COVID-19 pandemic affected the release of the global PV demand. However, the impact of the pandemic was not as significant as expected because the global market also showed considerable resiliency. The newly installed capacity worldwide is currently estimated to have reached 127GW for 2020. Looking ahead, more than 25 countries have set targets to achieve zero CO2 emissions within the next decade. With carbon neutrality being the consensus of the major economies, the outlook of the PV market is bright. The total PV installations worldwide is projected to rebound significantly and come to 158GW for 2021, according to the latest analysis from EnergyTrend, the new energy research division of TrendForce. The global demand for 2021 is projected to show an increase of 25% compared with 2020. It should be noted that the projection of 158GW is a neutral view of the global PV market. Furthermore, installations in at least 21 regional markets will grow to the GW scale in 2021.

1. Asia-Pacific: Installations from the Five Largest Markets Will Surpass 80GW for 2021

China: Newly Installed Capacity Is Forecasted to Grow by More than 35% YoY for 2021

For the first time, subsidy-free projects will be the main demand generator in the Chinese PV market in 2021. Also, there will be another installation rush in 2H21 as project developers are under deadlines to complete grid connection. Since installation was delayed for local PV projects in 1H20 due to the COVID-19 pandemic, project developers had to speed up their work in 2H20 in order to meet their deadlines. Hence, there was a demand surge, and the newly added grid-connected capacity in the residential segment of the Chinese PV market surpassed 10GW for 2020. The newly added grid-connected capacity also surpassed expectations for both subsidy-free projects and projects under competitive bidding.

Regarding 2021, at least five provinces in China currently have plans for large-scale PV projects that are associated with the 14th Five-Year Plan (i.e., the development of new energy industries). These projects will also include energy storage systems for demonstration purposes. The outlook of the Chinese PV market is positive for 2021, and installations will increase dramatically in 2H21 due to the pressure related to deadlines and policies. However, as subsidies are being phased out in the Chinese market, the ability of the grid system in accommodating more PV generation will be a major factor that affects demand growth in the future.

Japan and South Korea: Their Total Demand Will Remain Constant at the Level 10GW for 2021

The total demand from Japan and South Korea for 2021 will be around the same level compared with 2020. The demand for distributed generation (DG) is expected to grow in both countries as their governments are committed to their ambitious goals of achieving zero CO2 emissions. In Japan, COVID-19 outbreaks and a supply bottleneck for PV modules from China caused minor delays in installations during 2020. Moving into 2021, the drop in the FIT rates and the delays that affected PV projects in the previous year will cause a moderate wave of grid connection for commercial (and industrial) PV projects.

In South Korea, the supply bottleneck for Chinese modules did not exert as much influence as in the case of Japan because domestic manufacturers of PV products were able to meet local demand. Moving into 2021, renewable energy policies will continue to drive demand in South Korea. Much of the attention in the Korean market will be paid to the development of floating PV power plants and PV project tenders under government programs for reducing carbon footprints. In sum, Japan and South Korea have, in succession, promised to achieve carbon neutrality by 2050. However, land-use laws and other local regulations are obstacles that hamper the development of large ground-mounted PV power plants in both countries. DG PV systems and project tenders from the government will still be the main sources of demand in these two markets during 2021.

India: Demand Is Expected to Double in 2021

The momentum of development in the Indian PV market is mainly generated in the utility segment of the market, and there is uncertainty in the amount of newly added installed capacity for 2021. In 2020, installations slumped in India because of COVID-19 outbreaks. At that time, many local projects encountered significant delays in their construction schedules on account of various factors. India’s PV demand came to less than 5GW for 2020. The actual demand was lower than the projection made at the start of the year by more than 30%.

Turning to 2021, the utility segment will remain as the main driver of installations due to the various project tenders that have been issued or under development. Government policies will also contribute to a recovery in the demand related to DG PV projects. Although installation potential is high in India, there are also many risks such as grid-connection constraints, problems with land acquisition, trade protectionism, and the continuation of the pandemic, etc. On the other hand, the Indian government continues to improve its renewable energy policies and aggressively attract foreign capital. Hence, there is considerable potential for further development in the Indian PV market over the medium to long term.

Southeast Asia: Vietnam Will Account for More than 70% of the Region’s Demand

PV installations in Vietnam have increased as a response to the phase-out of domestic subsidies, while other Southeast Asian countries including Thailand, Indonesia, and Malaysia also have a positive long-term demand outlook. The Vietnamese PV market experienced an installation rush during 2020 due to the changes in the country’s subsidy policies and the pressure from grid-connection deadlines. On the whole, the development of solar PV in Southeast Asia decelerated in 2020 because national governments there were dealing with COVID-19 outbreaks and could only provide limited support for renewable energy projects. In terms of newly added grid-connected capacity, Southeast Asia is estimated to have registered a YoY decline for 2020.

Looking ahead to 2021, the Vietnamese PV market is expected to release more demand related to the DG and utility segments as it transitions to the subsidy-free model. Vietnam is currently projected to account for around 75% of Southeast Asia’s installations for 2021. Installation growth will be limited for Thailand, Indonesia, the Philippines, and Malaysia. Southeast Asian countries generally have strong potential for expansion in solar PV over the medium to long term, but their developments in the future will still depend on policies and tenders.

 Australia: Demand Stays Hot for Residential and Commercial PV Projects

The growth of the Australian PV market is mainly propelled by the demand for DG PV systems. Grid-connection constraints have been a major factor in limiting the development of large-scale projects in the country. During 2020, installations in Australia was depressed by COVID-19 outbreaks and

various issues that hampered the construction of utility-scale PV projects. However, government policies continued to sustain the demand for DG PV systems. As a result, Australia’s installations for 2020 was roughly on the same level compared with 2019.

Regarding 2021, the Australian PV market is expected to experience moderate demand growth. The main drivers will be DG PV systems and projects that were previously postponed due to the pandemic. Going forward, attention needs to be paid on some factors that could negatively affect the demand. These include the reduction in the FIT rates by state governments and the review process for the application of a large-scale generation certificate. They impose additional conditions on project development. In sum, further observations are required to see if there are bottlenecks that further delay grid connection for large-scale projects in Australia.

2. Europe: Regional Market as a Whole Is More Mature, and Pandemic-Related Risks Can Be Relatively Brought Under Control

The German market for PPAs with ground-mounted PV power plants is showing strong growth momentum. However, Germany’s demand for DG PV systems is expected to decline slightly. The latest version of the EEG removes the subsidy cap that would be in effect when the cumulative installed capacity of the domestic PV market reaches 52GW. The utility segment of the German PV market is expected to keep expanding during the 2021-2022 period because of the robust growth of projects under competitive bidding. The PV projects supported by the EEG, including the additional 4GW of auctions that was introduced in the 2018 amendment, will lead to a YoY increase of 50% in the newly installed capacity of Germany’s large-scale PV projects for 2021. The number of residential PV systems installed in Germany has also risen thanks to the high electricity price and the low installation cost. However, the German demand for residential PV systems could fall in the future as the FIT rates and other subsidies step down.

The development of large-scale PV projects in the Netherlands has been supported by the country’s primary renewable energy program SDE+. The reforms of the net metering scheme after 2022 are something that warrants further observation in the future. PV installations in the Netherlands have been climbing over the past several years thanks to subsidies provided under SDE+. The Dutch government then launched SDE++ in 2020. This upgraded version of the existing subsidy scheme focuses on the reduction of CO2 emissions. With the implementation of SDE++, the growth of PV installations in the country is expected to accelerate significantly after 2021.

Extensive unsubsidized Spanish projects guide market, with insignificant increase in the demand for distributed generation. The COVID-19 pandemic and the substantial entry of wind energy during 2020 that had impacted the electricity prices of the market has destructed the demand for PV installation in the same year. However, the Spanish government announced in 2020 the recovery of the bidding project, and that 2021 is expected to see an additional 4GW of public utility tenders, thus the demand for installation is anticipated to slightly recover between 2021 and 2022.

France is expected to continue to actuate PV tender projects in 2021, and the relevant subsidization will carry on with the development of the DG market. Continuing from the construction of PV projects between 2017 and 2018, the previous 7GW capacity storage of PV tenders will propel a growth in the demand for installation of the country during 2021. On the other hand, the new energy plan of France comprises of a PV installation capacity of 20GW by 2030, with an average annual demand of over 3GW, which is anticipated to accelerate on the release of installation demand subsequent to 2021.

Italy experiences apparent rebound in demand amidst the post-pandemic era, whereas the favorable policy will expedite on the development of the DG PV market. Italy plans to realize the ambitious target that encompasses an accumulated installed capacity of 52GW by 2030, and the tender program released in 2019 is expected to propel a perpetual growth in demand for the country. In order to stimulate residential PV that has sustained quite a heavy blow from the pandemic, the government has increased the tax subsidization on installation from 65% to 110%, which may elevate the demand for PV and energy storage, despite the conflict with the net metering system.

Portuguese, Greek, and Danish markets enjoy constant PV growth in 2021 supported by policy and tenders. Among which, the demand for PV installation has increased 3-4 times for Denmark and Greece compared to that of 2019, and the primary factors for the substantial growth are the emergence of ground PV and the cost competitiveness of PV. The growth in installation has been rapid for Poland in recent years thanks to subsidy policy and tenders, whereas Portugal has accelerated on the release of installation demand owing to large-scale national project tenders.

3. North America: ITC Policy Actuates Demand Growth in the US for the Next 3 Years

The investment tax credit (ITC) policy of the US continues to invigorate the market demand, and the policy of various states helps with the growth of the DG market. The demand for new installation remained on a growing tendency in 2020, whereas the reduction in PV cost and the unrestricted land provision in several states had resulted in public utility projects becoming the primary force behind the demand under the global pandemic. Prospecting into the US PV demand in 2021, the net metering and financing policy of various states may likely stimulate a rebound in the business and household markets, which lays down a prospective path in PV demand for the US in the next two years. On the other hand, negative impacts seen from partial US states, including the pandemic, economic risks, and power grid licenses, have derived uncertainties in the temporal market, and the overall demand for PV installation in 2021 is expected to remain constant to that of 2020.

4. Latin America: Simultaneous Existence of Additional Space and Risks for the Market

The three major markets will impel 75% of installation demand for Latin America in 2021, with emphases required on local policy and economic risks. Brazil enjoyed a substantial growth in DG PV during 2020 under the support of duty and net metering policy, whereas Mexico, Colombia, and Chile are developing their respective market based on the previous tender demand for PV projects. Looking ahead to 2021, uncertainties surrounding the pandemic, economy, and the status of monitoring policy have resulted in a stagnant process for government-oriented PV projects in Brazilian, Mexican, and Argentinian markets, where risks such as the congestion of power grids and project profitability cannot be neglected. In comparison, the construction for public utility items in the PV markets of Chile and Colombia has been moving forward sturdily under the support of the policy and the actuation of foreign investment.

5. Central, East, and North Africa: Large-Scale Project Tenders Occupy 75% of the Regional Demand

Apparent advantages seen in financing conditions and large-scale projects, and market propulsion depends on the impact of the pandemic as well as the supervision and approval of the government. The Central, East, and North African market, primarily guided by the demand from United Arab Emirates and Saudi Arabia, has been sluggish in the progress of development during 2020 due to the PV construction and the approval on new items under the pandemic, and the market demand in Qatar, Oman, Jordan, and Israel is expected to improve steadily under the energy policy and the PV tenders led by the governments of various countries in 2021. Uncertain factors that impede the progress of the Central, East, and North African market include the obstructed grid connection under the pandemic, as well as the progress in the government’s procurement, tenders, and project planning.

Comprehensively speaking, TrendForce believes that the 2021 global PV market demand needs to pay attention to the three following attributes:

1. Global PV demand will arrive at 158GW, equaling a YoY growth of 25%, in 2021. The global PV demand remained sturdily at 127GW after sustaining a decelerated demand subsequent to the pandemic, as well as relevant bottlenecks within the supply chain. The figure is expected to escalate steadily to 158GW in 2021, whereas markets of India, France, Italy, and East Africa may achieve a growth of more than 50%, with the demand for PV installation expected to reach to 173GW under an optimistic anticipation.

2. Multiple regions will experience differentiated demand between 2021 and 2023. Emerging markets, including India, Vietnam, Saudi Arabia, and Brazil, possess significant amount of projects in construction during early 2021, and the market will welcome the peak of centralized grid connection in the next three years, while the demand from matured markets of Japan, Australia, and the Netherlands will gradually stabilize, whereas traditional markets of the US, Germany, Japan, and Australia will lead in the market of residential PV storage.

3. Risks derived from the pandemic and policy will require further observation. Indian, the US, and emerging markets may not achieve satisfactory demand release, should the global pandemic deteriorate. The acceptance of PV contains a certain degree of bottlenecks for multiple markets around the world, and the latent political and economic concerns amidst the development process of PV should not be treated lightly.