Photovoltaic capacity increased to 505 GW

The annual global market for solar photovoltaics (PV) increased only slightly in 2018, but enough to surpass the 100 GW level (including on- and off-grid capacity) for the first time. Cumulative capacity increased approximately 25% to at least 505 GW; this compares to a global total of around 15 GW only a decade earlier. igher demand in emerging markets and in Europe, due largely to ongoing price reductions, compensated for a substantial market decline in China that had consequences around the world.

Despite the single-digit growth rate of the global market in 2018, solar PV has become the world’s fastest-growing energy technology, with gigawatt-scale markets in an increasing number of countries. 

Demand for solar PV is spreading and expanding as it becomes the most competitive option for electricity generation in a growing number of markets – for residential and commercial applications and increasingly for utility projects – even without accounting for the external costs of fossil fuels.
Eleven countries added more than 1 GW of new capacity during the year, up from 9 countries in 2017 and 7 countries in 2016, and markets around the world have begun to contribute significantly to global growth. By the end of 2018, at least 32 countries had a cumulative capacity of 1 GW or more, up from 29 countries one year earlier.
There are still challenges to address in order for solar PV to become a major electricity source worldwide, including policy and regulatory instability in many countries, financial and bankability challenges, and the need to integrate solar PV into electricity markets and systems in a fair and sustainable manner.

But solar PV already plays a significant and growing role in electricity generation in several countries.

In 2018, it accounted for 12.1% of total generation in Honduras and substantial shares also in Italy (nearly 8.2%), Greece (8.2%), Germany (7.7%) and Japan (6.5%).

By the end of 2018, enough capacity was in operation worldwide to produce close to 640 TWh of electricity per year, or an estimated 2.4% of annual global electricity generation.
In most countries, the need still exists for support schemes for solar PV, as well as for adequate regulatory frameworks and policies governing grid connections. 

Government policies – particularly tenders and, to a lesser extent, traditional FITs – continued to drive most of the global market in 2018. Corporate purchasing of solar PV expanded considerably, and self-consumption was a significant driver of the market for new distributed systems in Europe and the United States.

Although still a negligible share of the annual market, a number of purely competitive (“unsubsidised”) systems were being constructed in 2018; interest in this segment is significant and growing quickly.
For the sixth consecutive year, Asia eclipsed all other regions for new installations, despite declines in the region’s top three markets (China, India and Japan). China alone accounted for around 45% of global additions, but this was down from nearly 54% in 2017. Asia was followed by the Americas. The top five national  markets – China, India, the United States, Japan and Australia – were responsible for about three-quarters of newly installed capacity (down from about 84% in 2017); the next five markets were Germany, Mexico, the Republic of Korea, Turkey and the Netherlands.

The annual market size required to rank among the top 10 countries continued to increase, reaching 1,330 MW in 2018 (up from 954 MW in 2017).
At year’s end, the leading countries for cumulative solar PV capacity were China, the United States, Japan, Germany and India.

China’s annual solar PV market declined for the first time since 2014 but the country had its second-biggest year so far, with 45 GW newly installed. While down more than 15% relative to 2017, the scale of new installations was greater than expected following significant subsidy reductions by the central government in May 2018, and the country’s additions were more than four times those of the next-largest market. By year’s end, China’s cumulative capacity of 176 GW was well beyond the national target of 105 GW by 2020 that was established in 2016.

These still-substantial additions came despite policy changes in China that reduced the FIT payment for solar generation, capped distributed projects at 10 MW for 2018, and ended approvals for new subsidised utility-scale plants (abolishing the 13.9 GW target for 2018), mandating that they go through auctions to set power prices. The policy changes also shifted project approval to local governments.

Key factors driving China’s policy revisions included a backlog in FIT payments and a growing deficit in the nation’s renewable energy fund, as well as concerns about uncontrolled growth and a realisation that bids under the country’s Top Runner programme were much lower than the national FIT.
The changes reportedly signalled the central government’s shift in focus from high-speed growth and dependence on subsidies, to high-quality development in order to reduce costs through technological improvements.
China’s market in 2018 was driven largely by the Top Runner and Poverty Alleviation programmes (and the FIT until late May).
Centralised utility power plants (above 20 MW) accounted for nearly 53% of the year’s installations (and 71% of the year-end total); the remainder was in distributedii systems, which were up considerably in both their capacity added in 2018 and their share of total additions relative to previous years.
Curtailment of China’s solar PV generation continued to decline, from a national average of 6% in 2017 to 3% in 2018, although curtailment rates remained far higher in the remote provinces of Gansu (10%, down 10 percentage points) and Xinjiang (16%, down 6 percentage points) due to insufficient transmission capacity.
Reduced curtailment and rising capacity helped increase China’s solar PV output 50%, to 177.5 TWh.32 As a result, solar PV’s share of total annual electricity generation in the country rose to 2.6% in 2018 (from 1.9% in 2017).
The second-largest market in Asia was India, which added an estimated 10.8 GW for a total of around 32.9 GW. Installations were down relative to the previous year, for the first time since 2014.

The decline was due to several factors, including land and transmission constraints, a safeguard dutyiv on imports from China and Malaysia (the sources of about 85% of India’s imports of solar product), flaws in the tender scheme and uncertainty surrounding the Goods and Services Tax, all of which affected large-scale installations. 

Investment in India’s solar sector fell 27% by one estimate, despite an increase in investment in new manufacturing facilities, because of the decrease in installations and the decline in system costs.
Even so, solar PV was India’s largest source of new power capacity for the second year running, and, for the first time, it accounted for more than half of the capacity added during the year. India is targeting 100 GW of installed solar PV by fiscal year 2022.
The Indian rooftop market continued to grow rapidly, up about two-thirds during 2018 by one estimate. But total rooftop capacity remained relatively low, reaching as much as a few GW by year’s end, a long way from the national target of 40 GW by 2022. 

The rooftop market continued to consist mainly of large commercial and industrial companies, as well as government entities and educational institutions, all seeking to reduce their electricity bills; few residential customers can afford the upfront costs.
As in recent years, most of India’s newly installed capacity during 2018 was in large-scale installations, with the bulk of this in five states: Karnataka, Rajasthan, Andhra Pradesh, Tamil Nadu and Maharashtra. At least three of these states (Andhra Pradesh, Karnataka and Tamil Nadu) continued to face curtailment challenges, in the range of 10-25%, which resulted in significant losses to project developers. More than 40 GW of additional large-scale solar projects was tendered in India during 2018.
However, the gap expanded between tenders issued and auctions completed. Many auctions were cancelled retroactively, and several gigawatts of awarded capacity were annulled during the year.
The market in Japan also contracted (down about 13%), for the third consecutive year, with 6.5 GW added for a total of 56 GW. Japan’s market continued to suffer from high prices of solar generation (Japan’s prices are some of the highest worldwide), land shortages, grid constraints and high labour costs.

The country’s first three tenders, held in late 2017 and 2018, resulted in relatively high bid prices and were undersubscribed.
Even so, the number of large solar plants in Japan continued to grow, raising some conflicts between developers and local citizens and their governments due to concerns that include potential negative impacts on landscapes and the natural environment.
By early 2019, the national government was considering covering solar PV projects larger than 40 MW under a revised national environmental assessment law.
Japan’s residential rooftop sector remained fairly stable, and interest expanded in the use of solar-plus-storage for selfconsumption.

The market for larger rooftop systems also has grown as falling solar costs relative to electricity from the grid have increased the commercial sector’s interest in self-consumption.
Community power movements in Japan continued to make progress in their financing and business models.
For the year, solar PV accounted for an estimated 6.5% of Japan’s total electricity generation (11% in the Kyushu region), up from 5.7% nationally in 2017. Late in the year, Japan’s first curtailment of solar PV (and wind) generation occurred on the island of Kyushu due to periods of high shares of variable renewable output combined with inflexible nuclear generation, which also increased its share in the electricity mix in 2018.
Elsewhere in Asia, the Republic of Korea added more than 2 GW to end 2018 with 7.9 GW.

The market has been driven primarily by a renewable portfolio standard (RPS).

Turkey followed, installing 1.6 GW for a total of 5.1 GW, already surpassing the national target for 2023. However, Turkey’s additions were down 37% relative to 2017 due to several factors, including uncertainties regarding national support schemes, issues related to land acquisition, permission and financing, as well as delays as project developers await further cost reductions.
Others in Asia to add capacity included Chinese Taipei (almost 1 GW), driven by a FIT and a target of 20 GW by 2025, as well as Pakistan (0.5 GW) and Malaysia (0.4 GW).

Several countries in the region held tenders, including Bangladesh and Kazakhstan, which held its first solar auction; in the Philippines, solar PV (and wind power) competed favourably against coal, and several solar PV projects were approved for construction.
The Americas accounted for around 14.5% of the global market in 2018, due largely to the United States. The United States added an estimated 10.6 GW for a total of 62.4 GW. California again led all states in added capacity (3.4 GW), and during the year it became the first US state to mandate solar installations on most new homes (starting in 2020). California was followed by Texas (added 1 GW) and North Carolina (0.9 GW). Overall, a geographic shift in capacity additions continued, with progress in many states that previously did not have significant markets.
The US market as a whole was relatively stable (down 2%) compared to 2017. The residential sector expanded 7%, driven by emerging state markets, but the non-residential and utility-scale sectors contracted by 8% and 3%, respectively. The decline in new utility-scale capacity commissioned during the year was reportedly due largely to new federal duties on imported solar cells and modules, which led to project cancellations and delays
(timelines shifted based on the tariff schedule); the effects of import tariffs were countered somewhat by a global oversupply of modules (resulting from China’s policy changes and subsequent decline in module demand), which drove down prices.
Late in the year, the US market also was buoyed by increased interest from corporations, including utilities, eager to begin construction of new projects before the federal investment tax credit begins to phase out in 2020.

Companies signed a total of 13.2 GW of utility-scale solar power purchase agreements (PPAs), pushing the pipeline of contracted projects to the highest level ever, at 28.3 GW. While commercial and industrial off-takers were responsible for only 153 MW of capacity additions during 2018, they accounted for 21% (2.8 GW) of new deals signed, or 1 GW more than in all previous years combined. Innovations such as aggregation are helping to open the market for smaller businesses as well.
A few of the US projects contracted in 2018 included energy storage; large-scale solar-plus-storage projects are already undercutting new gas plants in some markets (with the help of federal tax credit support). Interest in solar-plus-storage is increasing in the US residential market as well.To the south, several countries in Latin America and the Caribbean are seeing a rapid expansion of annual installations, thanks to an abundance of solar resources and a favourable political climate. Large companies are flocking to the region
with expectations of massive expansion.
The region’s top country for additions in 2018 was Mexico, which ranked among the top 10 globally for the first time. Mexico added more than 2.7 GW (up from 285 MW installed in 2017), boosting its total capacity five-fold to nearly 3.4 GW. This substantial growth in capacity resulted from the grid connection of several very large projects (a result of auctions as well as private PPAs) and from a significant increase in distributed projects under Mexico’s net metering scheme.
Chile followed Mexico in the region for cumulative capacity, with almost 0.5 GW installed for a total of 2.6 GW. Most of Chile’s capacity is in large-scale projects, many of which support mining operations and other major energy consumers.
Much of the capacity installed in Latin America has occurred via large-scale PPAs, with many new ones announced in 2018, and the region is home to a good portion of the world’s
merchantii solar plants.

But distributed solar PV has begun to see significant growth, particularly in Brazil, where cumulative distributed capacity surpassed 0.5 GW in 2018. Nearly 0.4 GW of this total was added during the year, thanks to the extension of Brazil’s national net metering programme as well as to a rising number of state-level incentives, falling module prices, rising electricity tariffs and increased environmental awareness. In total, Brazil added more than 1.1 GW in 2018, doubling its capacity to nearly 2.3 GW.
Access to financing remains a challenge in much of Latin America for projects of all sizes due in part to volatile interest rates and currency instability.

To overcome these challenges, several developers have turned to green bonds, which have been issued for projects in Argentina, Chile, Colombia, Peru and Uruguay.
Europe was the third-largest region for new installations (9.7 GW) but maintained its second-place ranking for total operating capacity. The region continues to represent a shrinking portion of cumulative global capacity as emerging economies with rapidly growing electricity demand deploy more and more solar PV. In 2018, however, demand increased significantly within the EU and beyond, with the cost-competitiveness of solar energy stimulating investment also in Belarus, the Russian Federation and Ukraine.90 Ukraine installed more than 0.7 GW to nearly double its total capacity (1.6 GW), thanks to a FIT for large-scale installations and net metering for smaller systems enacted in part to address energy security concerns.
The EU added around 8.3 GW of grid-connected solar PV in 2018, up 36% over the previous year’s additions, bringing total capacity to 115 GW. Relative to 2017, 22 of the 28 EU countries recorded higher installations, driven by national binding targets for 2020, which many member states have yet to meet. Other drivers included the removal of tariffs on Chinese solar panels in September; rising emissions prices in the EU’s Emissions Trading System, which improved the competitiveness of solar PV relative to fossil fuels; and a continuing decline in solar PV system prices.
A significant development in the EU in 2018 was the emergence of direct bilateral PPAs for solar PV.95 Developers have begun to build projects with plans to sign long-term PPAs with large industrial consumers (or even to sell electricity to utilities at the market price).

One estimate shows PPA activity in the region increasing from 360 MW in 2017 to 2.4 GW in 2018. By late 2018, about 15 projects that did not rely on direct government subsidies to make a profit were under way in the EU, and banks had begun to provide funding for such projects in Italy, Spain and elsewhere.
Germany was the EU’s largest market, regaining the region’s top spot for the first time in five years. The annual market was up more than 70% relative to 2017, to nearly 3 GW, bringing total capacity to 45.3 GW. The main drivers of the increase were self-consumption and feed-in premiums for medium- and large-scale commercial systems. By the end of 2018, Germany had more than 1.7 million solar PV systems. More than half of all new systems were installed with storage, and approximately 120,000 solar-storage systems were in operation by year’s end.
It also was a successful year for lining up future capacity: solar tenders were over-subscribed, and solar PV won all the capacity in Germany’s first joint auctions for solar and onshore wind power.
The country’s solar output increased more than 17% in 2018 (to 46.2 TWh), due largely to unusually dry and sunny summer weather, and amounted to 7.7% of annual gross electricity generation.
The Netherlands has seen steady market growth since 2014 and, in 2018, added a record 1.4 GW to close the year with 4.3 GW. While more than 40% of additions were installed on residential rooftops, the market is driven increasingly by utility-scale projects in the commercial sector, where additions were up 90% relative to 2017.

France ranked third in the region for new installations (0.9 GW), despite a slight contraction relative to 2017.

France was followed by Italy (which pushed its total capacity over 20 GW), Belgium, Hungary and Spain, all of which installed around 0.4 GW. The United Kingdom, which in 2017 ranked second in the region and ninth worldwide for installations, saw its market continue to decline, to below 0.3 GW, due to the removal of support policies.
In Italy and Spain, installations rose slightly in 2018, following several years of negligible installations; both markets have been driven predominantly by self-consumption in recent years.
Self-consumption is playing an important role in Australia as well. Solar energy is already cheaper than electricity from the grid in most of the country, thanks to the falling price of solar PV generation, existing subsidies for small-scale installations, and high wholesale electricity prices. By late 2018, more than 2 million Australian homes and businesses were powered by rooftop solar PV, meaning that one in five households in Australia generates at least some of its electricity with solar energy.
Australia’s capacity additions nearly tripled relative to 2017, to about 3.8 GW, raising total capacity to more than 11.1 GW.
Every state and territory but Tasmania broke records for new capacity in 2018. Residential and commercial rooftop installations were up more than 40% (to nearly 1.6 GW), for a total of around 8 GW. Capacity additions of large-scale utility projects surpassed annual additions of rooftop systems for the first time: more than 2.4 GW was added, up from 0.1 GW in 2017,
increasing the total capacity of utility projects to 3.1 GW. At year’s end, more than 3 GW of additional large-scale capacity was under construction.
The corporate PPA sector in Australia is still at an early stage, but in 2018 it accounted for contracts worth hundreds of megawatts of future capacity.
Generation from Australia’s rooftop systems was boosted an estimated 22% during the year due to the installation of additional capacity, but also as a result of greater understanding among system owners of how to maximise system output, as well as the use of smart energy management systems and monitoring equipment; rooftop systems accounted for 4.2% of the country’s total electricity consumption.

Overall, Australia’s solar PV output increased more than one-third in 2018, at the expense of coal and gas, to 11.7 TWh, or 5.2% of total generation.
The rising penetration of rooftop and large-scale solar PV (and wind power) continued to reshape Australia’s grid during the year, challenging electric utilities. In Queensland, where about half of the new large-scale capacity was installed, solar generation has depressed wholesale power prices. The dramatic increase in large projects in 2018 began to cause network constraints; by year’s end, the greatest concerns for project developers were delays and changing rules for grid connections, which have resulted in cost-overruns and have undermined investor confidence, slowing the project pipeline.
The Middle East and Africa saw substantial progress in 2018, with an estimated 2.6 GW added for a year-end total of at least 6.7 GW.

In the Middle East, most of the new capacity was in the United Arab Emirates (as much as 0.6 GW), Israel and Jordan (both adding around 0.4 GW). However, many countries across
the region have begun to take advantage of falling solar PV prices to diversify away from fossil fuels, or to power their oil and gas extraction industries.

Tenders were held during 2018 and early 2019 in several countries, including Jordan, Kuwait, Oman and the United Arab Emirates (Dubai and Abu Dhabi), and Lebanon held a 300 MW solar-plus-storage tender.

Distributed solar PV generation remains a nascent market outside of Jordan and Dubai, but in 2017 and 2018, several countries in the Middle East and North Africa – including Egypt, Morocco, Oman, Saudi Arabia and Tunisia – launched rooftop solar PV programmes to help
reduce energy costs and to secure reliable electricity in areas where supply does not meet peak loads.
From northern Africa to the continent’s southern tip, solar PV is viewed increasingl

Egypt inaugurated the first phase of its planned 1.8 GW Benban solar park in early 2018 and was Africa’s top installer for the year. A former gas exporter, Egypt now imports liquefied natural gas at great expense, and solar (in addition to wind) power represents part of the country’s plan to expand energy options and reduce blackouts.
At year’s end, Africa’s top countries for cumulative capacity were South Africa with 1.8 GW (added 60 MW), Egypt with nearly 0.7 GW (added at least 0.5 GW) and Morocco, which added the vast majority of its 0.6 GW capacity during 2018.

Several other countries on the continent held solar PV tenders or had large plants being planned, under construction or commissioned in 2018.
Across Africa and around the world, companies are erecting solar PV plants to power their operations for mining, manufacturing and fossil fuel extraction. Motivating factors include economics as well as favourable regulations, environmental considerations and the flexibility of solar power systems.

A firm in Zimbabwe announced plans in 2018 to construct a 300 MW solar PV facility rather than the originally planned 600 MW coal plant for platinum mining operations. In August, a US long-term electricity contract was signed for a 240 MW project to provide electricity for a steel manufacturer, reportedly the largest behind-the-meter solar PV project to date. Soon thereafter, two of the world’s largest coal mining companies announced a joint venture to invest more than USD 1.6 billion in 3 GW of solar power capacity in India.

Mining companies in Canada, Chile and elsewhere also have invested in solar PV (and wind power) capacity.
The size and number of large projects continued to grow during 2018, with a total of at least 235 solar PV plants of 50 MW and larger operating in at least 37 countries (up from 28 in 2017) by year’s end.
Newly commissioned plants included the 828 MW Villanueva park in Mexico, the largest solar PV project in the Americas; the 750 MW Rewa project in India, from which a quarter of the generation will be used to power the Delhi Metro; and Jordan’s largest project to date (105 MW), which is expected to provide enough electricity for 50,000 homes.142 Planning or construction began on very large projects in nearly every region of the world.
Large-scale plants can cover vast areas, raising concerns about potential environmental impacts, grid-connection challenges and the use of agricultural lands. Interest in floating solar PV is increasing rapidly due in part to some of the concerns linked to land-based projects. Hybrid solar PV-hydropower systems are at an early stage, but they provide mutual benefits and have been proven at scale.