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Solar PV

More efforts needed
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About this report

Solar PV generation increased by a record 179 TWh (up 22%) in 2021 to exceed 1 000 TWh. It demonstrated the second largest absolute generation growth of all renewable technologies in 2021, after wind. Solar PV is becoming the lowest-cost option for new electricity generation in most of the world, which is expected to propel investment in the coming years. However, average annual generation growth of 25% in the period 2022-2030 is needed to follow the Net Zero Emissions by 2050 Scenario. This corresponds to a more than threefold increase in annual capacity deployment until 2030, requiring much greater policy ambition and more effort from both public and private stakeholders, especially in the areas of grid integration and the mitigation of policy, regulation and financing challenges. This is particularly the case in emerging and developing countries. 

Energy

Power generation from solar PV increased by a record 179 TWh in 2021, marking 22% growth on 2020. Solar PV accounted for 3.6% of global electricity generation, and it remains the third largest renewable electricity technology behind hydropower and wind.  

Solar PV power generation in the Net Zero Scenario, 2010-2030

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China was responsible for about 38% of solar PV generation growth in 2021, thanks to large capacity additions in 2020 and 2021. The second largest generation growth (17% share of the total) was recorded in the United States, and third largest in the European Union (10%). Solar PV proved to be resilient in the face of Covid-19 disruptions, supply chain bottlenecks and commodity price rises experienced in 2021 and achieved another record annual increase in capacity (almost 190 GW). This, in turn, should lead to further acceleration of electricity generation growth in 2022.  

However, reaching an annual solar PV generation level of approximately 7 400 TWh in 2030, aligning with the Net Zero Scenario, from the current 1 000 TWh requires annual average generation growth of about 25% during 2022-2030. Although this rate is similar to the average annual expansion recorded in the past five years, it will require increased effort to maintain this momentum as the PV market grows.  

Technology deployment

Utility-scale plants were responsible for 52% of global solar PV capacity additions in 2021, followed by the residential (28%) and commercial and industrial (19%) segments. The share of utility-scale plants was the lowest since 2012, as generous policy incentives drove record distributed PV capacity additions in China, the United States and the European Union in 2020-2021.  

Solar PV power capacity in the Net Zero Scenario, 2010-2030

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In the environment of increasing fuel and electricity prices in 2021, distributed PV became an increasingly attractive alternative for many consumers, which has driven investment. Utility-scale PV remains the most competitive source of PV generation in most parts of the world; however building large-scale installations is becoming increasingly challenging in many parts of the world due to the lack of suitable sites.  

Increased support for all segments will be needed to get on track with Net Zero Scenario milestones, reaching annual solar PV capacity additions of about 600 GW to correspond with the 2030 capacity level. Distributed and utility-scale PV need to be developed in parallel, depending on each country’s potential and needs.  

Innovation

Crystalline polysilicon remains the dominant technology for PV modules, with over 95% market share. The shift to more efficient monocrystalline wafers accelerated in 2021, with the technology capturing almost all crystalline PV production. In parallel, more efficient cell design (PERC) is also expanding its dominance with almost 75% market share. New, even higher-efficiency cell designs (using technologies such as TOPCon, heterojunction and back contact) saw expanded commercial production and captured about 20% of the market in 2021.  

Policy

Policy support remains a principal driver of solar PV deployment in the majority of the world. Various types of policy are behind the capacity growth, including auctions, feed-in tariffs, net-metering and contracts for difference. The following important policy and target changes affecting solar PV growth have been implemented in 2021-2022: 

  • China published its 14th Five-Year Plan in June 2022, which includes an ambitious target of 33% of electricity generation to come from renewables by 2025 (up from about 29% in 2021), including an 18% target for wind and solar technologies. 
  • In August 2022 the federal government of the United States introduced the Inflation Reduction Act, a law significantly expanding support for renewable energy in the next 10 years through tax credits and other measures. 
  • In July 2021 the European Commission proposed to increase the bloc’s renewable energy target for 2030 from 32% to 40%. The proposed target was further increased by the REPowerEU Plan to 45% in May 2022 (which would require 1 236 GW of total installed renewable capacity, including 600 GW of solar PV). Many European countries have already expanded their solar PV support mechanisms in order to accelerate capacity growth with a view to the 2030 targets and in response to the energy crisis caused by Russia’s invasion of Ukraine.  
  • During COP26, held in November 2021 in Glasgow, India announced new 2030 targets of 500 GW of total non-fossil capacity and 50% renewable electricity generation share (more than double the 22% share in 2020), as well as net zero emissions by 2070, with solar PV being one of the main technologies used to achieve these goals.  
International collaboration

Beyond global renewable energy initiatives that include solar PV, there are numerous international organisations, collaboration programmes, groups and initiatives aimed at accelerating solar PV growth around the world, such as:  

  • The IEA Photovoltaic Power Systems Technology Collaboration Programme, which advocates for solar PV energy as a cornerstone of the transition to sustainable energy systems. It conducts various collaborative projects relevant to solar PV technologies and systems to reduce costs, analyse barriers and raise awareness of PV electricity’s potential. 
  • The International Solar Alliance, which is a treaty-based intergovernmental organisation that provides a platform to promote solar energy across 86 member countries in a safe, affordable, sustainable and equitable manner.  


Private-sector strategies

The private sector’s main activity in solar PV deployment can be divided into two categories: 

  • Companies investing in distributed (including rooftop) solar PV installations on their own buildings and premises – responsible for almost 30% of total installed PV capacity as of 2021. 
  • Companies entering into corporate power purchase agreements (PPAs) – signing direct contracts with solar PV plant operators for the purchase of generated electricity. Solar PV plants dominate renewables PPAs, with a share of almost 75% in 2020.  
Recommendations for policy makers

Lengthy and complicated permitting processes are one of the main challenges to the faster deployment of utility-scale solar PV plants in many parts of the world, especially in Europe. Establishing administrative one-stop shops, developing clear rules and pathways for developers applying for a construction permit, determining strict timeframes for application processing, and public engagement in the identification of land suitable for investment could significantly accelerate solar PV deployment.  

Distributed solar PV expansion, driven by rapid cost reductions and policy support, is transforming electricity markets. Currently, some distributed solar PV policies can have undesirable effects in the long term, disrupting electricity markets by raising system costs, challenging the grid integration of renewables and reducing the revenues of distribution network operators. Tariff reforms and appropriate policies will be needed to attract investment into distributed solar PV while also securing sufficient revenue to pay for fixed network assets and ensuring that the cost burden is allocated fairly among all consumers.  

The wide array of system designs now available – off-grid, mini-grid and on-grid – increases the number of methods available to obtain electricity access. Such decentralised systems can help fill the energy access gap in remote areas by delivering electricity at a level of access that is currently too expensive to be met through a grid connection, and in urban areas by providing back-up for an unreliable grid supply.  

While dramatic scale effects have been achieved in solar PV, R&D efforts focused on efficiency and other fundamental improvements in solar PV technology need to continue to get on track with the Net Zero Scenario. Public support for R&D in solar PV technology can be an important factor in achieving further efficiency gains and costs reductions. 

Higher PV shares, particularly in distribution grids, necessitate the development of new ways to inject power into the grid and to manage generation from solar PV systems. Making inverters smarter and reducing the overall balance-of-system cost (which includes inverters) should be a key focus of public R&D support, as they can account for 40-60% of all investment costs in a PV plant, depending on the region. 

Resources

Analysis