In 2017, the global solar market will experience a contraction -- something that hasn't happened in 16 years or more. According to GTM Research, global PV installations will shrink by 7 percent in 2017. However, this is just a bump on the road. Driven by falling system prices, new procurement methods like tendering and auctions, and emerging markets such as India and countries in Latin America, GTM Research forecasts a cumulative average growth rate of 8 percent over the next five years, resulting in a 109-gigawatt market by 2021.
Each quarter, GTM Research analysts put together a quarterly briefing that summarizes the most important findings from their research.
While direct incentives and feed-in tariff programs are fading, GTM Research counts 33 national markets where tendering or auction schemes are in place and an additional 14 markets where there have been discussions about or plans made for them. Tenders will be universally established as the global model for solar procurement from both governmental and nontraditional sources, applying downward price pressure to tariffs globally and establishing a virtual price ceiling for unsubsidized solar.
FIGURE: Markets With Tendering or Auction Schemes in Place, Under Discussion, or in Planning Stages,* Q1 2017
In 2016, the Abu Dhabi Water & Electricity Authority (ADWEA) announced a $24/MWh solar bid by Jinko Solar and Marubeni, which is expected to be finalized in the coming month. While the 350-megawatt ADWEA project is not expected to complete construction until 2019 and required a perfect storm of cheap debt, high solar resources, and other levers, price-competitiveness in tenders is intensifying.
With larger economies of scale, continued cost reduction of hardware and soft-cost components, more sophisticated asset management and longer time horizons, a $20/MWh bid isn't entirely out of reach under the most optimal conditions. While regional and global averages will remain far above $20/MWh for the time being, expect more record absolute lows in 2017.
FIGURE: Price-Competitiveness Increasing in Tenders Globally, Q2 2015-Q4 2016
In 2016, huge first-half demand followed by a second-half dip drove widespread module oversupply and crashing module prices. Although annual global PV demand is expected to fall in 2017 vs. 2016, more balanced early and late demand seasonality may help to stabilize module pricing throughout 2017.
FIGURE: 2017 Quarterly Demand Trends, Major Global Markets
Vertically integrated developers account for the largest share of O&M among existing projects (23 percent), but the market is fragmented among six major vendor categories. Over the next five years, the megawatt-scale O&M market is expected to exceed 501 megawatts, although tightening margins due to falling project pricing and regional market slowdowns will compel continued portfolio consolidation.
By the first half of the 2017, utility fixed-tilt PV system turnkey engineering, procurement and construction pricing will land at less than $1.00 per watt (DC). Systems in many low-cost labor environments like South East Asia will see the lowest pricing.
FIGURE: U.S. Utility PV Fixed-Tilt Turnkey EPC System Pricing, H1 2016-2021E ($/Wdc)