A new era of solar power



The growth in demand for clean energy has reached unprecedented levels, and at a rate underestimated by many governments. Solar energy is the dynamic driver of this growth and decisions made now about how to tackle challenges and sustain innovation will shape the future success of the industry and the communities and nations that rely upon it.

While questions about scalability and grid stability along with distributed power generation have been largely answered, they are still topical and many countries, especially those in the sunbelt, are capitalising rapidly on their ability to generate clean energy sources.

Expansion of the industry is fueled by the changing nature of supply and demand, optimised through digitalisation and smart home technology, and shifts in consumer expectations. Their requirement is for greater choice and more comprehensive services that are seamless, intuitive and personalised.

Energy from renewable sources now contributes to 12% of the world’s electricity supply [1]. And the International Energy Agency (IEA) predicts continued growth; taking renewables’ share of electricity generation from 24% in 2016 to 30% in 2022 [2]. In 2017, annual installed solar capacity was 101,6 GW, almost double that of 2015. The pace of growth is forecast to slow over the next few years, but growth post-2020 will see the market increase to 144,6 GW in 2025 [3].

Fig. 1: An overview of the growing global solar landscape.

Solar is the fastest growing source of renewable energy and has overtaken the growth of all other forms of power generation. New solar capacity even outstripped the net growth in coal, and although coal is still the largest source of power generation, the IEA states that solar will continue to dominate future growth. Energy from renewable sources now contributes 12% of the world’s electricity supply and is predicted to increase to 30% in 2022.

Drivers of growth

The reasons behind market growth are interrelated:

  • Reduced cost of technology
  • Government initiatives and policy
  • Innovation in solar technology

The key is cost

Falling system costs, due largely to maturation of proven technologies, has resulted in government policies becoming more favorable. Their aim is to encourage the adoption of solar technology to meet national, industrial and residential demands. This is supported by increased PV plant efficiency, ongoing innovation and the environmental requirement for clean sustainable energy.

Core equipment costs have fallen faster than any other cost element that contributes to solar pricing. Thus, PV modules account for 40 to 45% and inverters accounted for only 20 to 35% of total capital costs in 2017. Lower costs and the need to cut emissions will drive the market until 2025, according to a Frost and Sullivan report “Global Solar Power Market 2018”. Project costs declined by 20% in 2017 alone. The cost of solar modules has dropped by 40% between 2010 to 2016 [4].

Driven by technology, economies of scale and an increasingly automated production process, costs are forecast to decline by a further 15 to 20% between 2017 and 2025. The IEA suggests that renewables may become cheaper than fossil fuels over the next five years.

While large-scale projects will still need to meet return on investment (ROI) targets to attract future investment, the diminishing cost of building solar capacity is proving increasingly appealing to governments, utilities and investors.

Financing

The spread of new business models that promote the use of solar power by instigating new ways of financing has travelled beyond developed markets such as the United States and Europe and into Africa and Asia. Long-term contracts such as solar power leasing programs and power purchase agreements (PPA) provide investors with the opportunity of reducing cost and risk by using clean energy.

The use of feed-in tariffs is no longer widespread, but certain markets offer incentives and regulations to support solar power and the reduction of life cycle costs will become increasingly significant. As solar power is a volume manufacturing business it is likely that consolidation of providers will continue. The opportunities for local niche players are diminishing except in a few relatively or fairly closed domestic markets.

Environmental drivers

Awareness of the excessive pollution levels in the cities of China and India has persuaded these nations to lead the charge for pushing their capacity targets over the next 10 to 15 years. The environmental benefits are compelling. The rise of digitalisation and smart grid technology and additional storage could reduce curtailment of solar and wind across the EU from 7 to 1,6% by 2040 according to the IEA. This would in turn avoid 30 Mt of CO2 emissions per annum.

Fig. 2: Prosumers produce electricity for their own use.

The role of solar in today’s societies

Smart cities

Solar powers a whole new way of thinking about how we live and interact with our environments. The rise of the smart city, one that uses information and communication technologies to improve the efficiency of urban systems, offers compelling answers to the problems of congestion, pollution and a creaking infrastructure. At the heart of the smart city lies digital connectivity and intelligent data management and a source of energy that is clean and sustainable.

Microgrids

The variability of solar as an energy source (even in the sunbelt, solar runs to nature’s timetable) means that reliability is a key development. This is where the microgrid comes in. They provide lower cost, high-quality power to facilities like hospitals or data centers, where even brief outages can cost money or lives. Operating as a distinct entity from the rest of the electricity grid they can disconnect from the main grid and rely on their own solar resources leveraging control software and digital connectivity to sense and respond to extreme weather conditions.

The rise of the prosumer

Also gaining momentum is the “prosumer” (or producer and self-consumer) movement: Those households which generate some, or all, of their own energy and use it when needed or feed it back into the national grid. The solar inverter acts as the “brain”, relying on digitalisation to sit at the centre of a complex network of communications that links the household’s devices and appliances. Self-consumers are still early adopters, but will move rapidly into the mainstream.

This move will be enabled by the decreasing cost of solar panels and inverters, and government subsidies and policies that encourage uptake. Innovation in the market sector is keeping apace. It is likely that the smart building package will include solar as a core element. This will include building energy management systems, storage, EV charging and smart appliances.

Future trends and challenges

The rate of growth and innovation in the solar energy market brings unprecedented opportunities for not just installers but all solar companies along the value chain, to maximise market share and become an integral part of the evolution. It is crucial to be aware of not only how the existing technologies will roll out into new markets and the mainstream, but also what the early adopters are likely to engage with next. This will help map the path that innovation will take.

Fig. 3: Solar benefits everyone.

The dawn of digitalisation

Digitalisation is already becoming an integral part of photovoltaic design specification and ongoing management of plant and installations. It will bring different benefits to different end users. For utilities, the support for greater stability and demand energy response. For residential and commercial consumers, it will drive the future of smart technology and the appetite for greater connectivity and convenience.

It is timely to consider how smart technology can integrate solar better into the grid and the benefits of doing so for all those involved in supply and consumption. The boost to revenues for renewables could be huge: analysts have estimated that €810-billion total renewable market revenue could be achieved by optimising digital grids over the next 12 years.

Enhanced digitalisation can be achieved with advanced technologies such as the cloud, internet protocols and wireless communication. These enable the availability of big data with real-time analytics and remote monitoring. All of these will drive efficiency through more accurate predictions of grid load and better matching of supply and demand.

The cycle of supply and demand completes itself: as traditional energy costs increase and prosumers take control of their energy requirements, the development for demand energy response and virtual power plants are likely to determine increased uptake of digitalisation and deliver greater need for solar power and storage.

Digitalisation and new business models

As smart home technology broadens access to living a self-consumption lifestyle and improves feed-in to the grid, so the profitability of the existing prosumer business model also increases. Extra value can be gained from other new areas made possible by digitalisation such as operations and maintenance, residual power supply, finance, and aggregation. These could be sold by the installer as add-ons to solar PV systems.

Apart from the residential environment, the benefits of using digital technology in large-scale operations such as utility ground-mounted solar include the reduction of operational costs and an increase in asset performance.

Interconnecting microgrids to the main grid also offers an alternative business model, allowing them to feed into the main system, and allowing each to disconnect as necessary and operate as a standalone. As a result, the two major business opportunities for grid-connected microsites are where these benefits could be of critical value – industrial areas and municipalities.

Fig. 4: The benefits of higher AC voltages.

The move towards higher voltages

Technology is also increasing AC voltage levels. New cost-effective platforms meet market demand by offering extreme high-power string inverters with ratings of 100 and 120 kW, as opposed to traditional 50 to 60 kW. Higher voltage levels allow for higher power density, lower losses and more compact power blocks.  They also help to optimise power generation through longer strings of PV panels with reduced system costs. Coupled with these benefits is reduced environmental impact and improved reliability.

Identify the influencers

To maximise on the opportunities afforded by this new and growing market, one should not only capitalise on existing technologies becoming widespread but also keep an eye on the developments and future demands of the influencers. Rapid advances in innovation are allowing many prosumers to realise their plans for energy independence.

For example, in Switzerland, eight families are living in a completely energy self-sufficient “house of the future” built by Umwelt Arena Spreitenbach in partnership with ABB. Solar panels cover the roof and façade and generate DC which is converted to AC by 26 solar inverters. In one hour, the system harnesses enough energy to power the building for a full day, with the excess energy stored in batteries for later use.

Increased competition and the need for strong partnerships

The growth of the solar market has seen competition between providers increase. Price is still highly significant as a competitive tool in utility-scale markets, and only slightly lower in other segments. Greater value, however, is placed on providing strong partnerships, excellent service and a robust pipeline of innovation. For installers, specialisation is the key to success, with a plethora of end-users requiring specific expertise. Bedrock relationships with reliable partners ensure that clients receive the right products for their projects, fully integrated with their requirements and invest in the more robust technologies available.

Fig. 5: Self-sufficient “House of the future” in Switzerland.

Conclusion

Today, the solar industry should not only focus on how it can produce cleaner energy but on how it can be controlled, integrated and balanced through the Internet of Things and digitalisation. The solar industry is poised to lead the charge on digitalisation to create a more sustainable, consistent energy flow. Although this is a period of dynamism and challenge for professionals employed in the solar industry, the unprecedented growth in demand and supply of solar energy offers huge opportunities to grow support and installation businesses and align success.

References

[1] Josh Gabbatiss: “World invested more in solar energy than coal, gas and nuclear combined in 2017, UN report reveals”, The Independent, Thursday 5 April 2018. www.independent.co.uk/environment/solar- energy-world-investment-higher-coal-gas-nuclear- combined-2017-un-report-a8290051.html

[2] Adam Vaughan: “Time to shine: Solar power is fastest-growing source of new energy”, The Guardian, Wednesday 4 October 2017. www.theguardian.com/environment/2017/oct/04/solar-power-renewables-international-energy-agency

[3] Frost & Sullivan: “Global Solar Power Market, 2018 Update Solar Photovoltaic (PV) Gains Momentum as a Globally Irreversible Mainstream Energy Source”, March 2018.

[4] Frost and Sullivan: “Global Solar Power Market 2018”, https://store.frost.com/global-solar-power-market-2018-update.html

[5] Leonardo Botti: “A bright spot for digitalisation”, The Energy Industry Times, January 2018.

[6] Digitalisation & Solar, Solar Power Europe, Published 4th October 2016, re-designed December 2017.

[7] Leonardo Botti: “A complete range of sun to socket options”, ABB PES Solar.

[8] Massimo Migiorini: “The rise of the prosumers”, ABB, www.rcimag.co.uk, September 2017.

Contact Shivani Chetram, ABB, Tel 010 202-5090, shivani.chetram@za.abb.com

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