India and China to benefit as global solar power photovoltaic returns to pre-recession growth

Following a period of uncertainty due to the financial crisis, the global solar PV industry grew by around 70% in 2010, driven by Western European countries, particularly Germany and Italy. The next decade is expected to be a strong one for the industry, led by established solar power markets as well as emerging ones such as the US, China, and India.

Shrugging off the effects of the financial crisis, the total global solar installed solar energy capacity grew to 40 GW in 2010, according to the 2011 Solar Generation Report from the European Photovoltaic Industry Association (EPIA). The sector registered growth of around 70% from its 2009 level of 23GW, on the back of investments of over $65bn in 2010.

Much of the growth was observed in parts of Europe with supportive state policies, particularly feed-in-tariffs (FiTs) and investment subsidies. Of the total new installed capacity of almost 17 GW, nearly 13 GW came from Europe overall. Germany and Italy, which have high FiTs in place for solar photovoltaic (PV), contributed 7 GW and 3 GW, respectively. On the other end of the spectrum, the developing markets of India and China currently account for less than 1GW of installed capacity combined. However, ambitious solar PV programs from both countries mean that they are expected to be big players in the sector over the next decade, both as manufacturing hubs for solar panels and as key consumers.

China is already the world’s largest producer of solar panels, and even though its installed capacity was a miniscule 606 MW in 2010, this represents a jump of over 60% from its 2009 installed capacity. The country is looking to introduce a FiT scheme to meet its goal of having 20GW of solar power installed by 2020, of which 5GW is to be installed by 2015. However, given the country’s current pace of growth, the EPIA expects China to easily exceed its 2020 target, fueled by government support and a well-established manufacturing base.

In comparison to that of China, the Indian solar PV industry is still quite small. India presently has about 200 MW of total capacity, according to the EPIA, and a nascent manufacturing base. Nevertheless, India’s solar program took off with the launch of the Jawaharlal Nehru National Solar Mission in 2009, and the country aims to have a total installed capacity of 20 GW by 2022.

The bulk of this is expected to be sourced from Indian producers, due to domestic sourcing requirements being attached to most government-funded projects. Datamonitor believes that, if the manufacturing sector is to keep pace with demand, there will need to be an increase in the number of partnerships with international players. Such deals could provide Indian companies with much-needed access to technology, while at the same time giving international PV firms a foothold in the Indian market.

If India is to achieve its solar ambitions, it will have to take its cue from the success of established markets like Germany and Italy. This would mean strengthening its manufacturing base, introducing measures like FiTs, and streamlining the approval process for projects.

In both India and China, the highest growth is expected to come after 2020, by which point both countries will have well-established domestic solar PV consumption levels, resulting in economies of scale and increased demand for solar PV in mainstream power production. The EPIA expects solar PV installed capacity to increase by a factor of four in these countries during the 10-year period between 2020 and 2030.

Overall, the global solar energy market is set to continue on its high rate of growth over the next decade, as established regions like Germany, Japan, and France and developing ones like the US and those in Asia maintain high growth rates. The turning point over the coming 10 years will be the achievement of grid parity, which will make the technology more viable for mainstream power production and enable the sector to grow without the high level of government support it currently needs.