Updated September 30, 2024 at 4:33 p.m.*
HAMBURG — Seldom in human history has one technology spread across the planet so rapidly: at the beginning of the millennium, almost no one generated electricity from solar radiation. But now, photovoltaic plants are ubiquitous — and global capacity is growing exponentially. In the 15 years between 2008 and 2023, the worldwide capacity of solar energy infrastructure has increased about a hundredfold. Growth could continue at a similar pace this year, according to a forecast by London-based energy think tank Ember.
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The most striking piece of data is that almost half of all solar plants worldwide are located in China. The Asian superpower is playing a crucial role in the solar boom: not only is it increasingly relying on solar energy for its own energetic supply, but it is also supplying the rest of the world with photovoltaic modules — at unbeatable low prices, thanks, in part, to massive government support. The lowered costs, combined with global climate targets, are the main drivers of the boom. Have we, without even realizing, just recently entered a new era?
The figures are impressive. Experts from Ember estimate that 593 gigawatts of worldwide solar capacity will be added to the planet’s production this year. That’s almost a thousand times the output of Germany’s largest solar park near Leipzig. Compared to last year, the yearly added capacity has increased by 29%, and compared to 2021, it has tripled. “Solar plants bring huge amounts of cheap energy into the world’s power grids,” says Euan Graham, from Ember. And the revolution is only just beginning: “Many of the sunniest countries in the world have invested very little in solar energy so far. There is still huge potential.”
Falling prices, growing demand
For their analysis, Graham and colleagues evaluated official installation figures from the 15 most important solar countries up to July and extrapolated their data. They also used statistics from the Chinese custom authorities on the export of solar panels. Currently, almost the entire world is reliant on China for solar infrastructure. “We assume that six months after being exported, around 85% of the panels have been installed.”
The result: dynamic growth.
Such rapid growth is only possible because production costs have fallen so sharply. This is also due to the so-called economies of scale: the larger the number of units, the cheaper the production cost per unit. Cheaper prices, in turn, generate demand — and the demand has never been higher. According to the Fraunhofer Institute ISE, the price of a photovoltaic power plant has fallen by 70% since 2006. The result: dynamic growth. Recently, the amount of solar power generated worldwide has doubled every three years. At the current growth rate, solar power might cover 64% of the world’s global demand in just 18 years.
Underdog story
In the past, experts have drastically underestimated solar power. At the beginning of 2022, the International Energy Agency published a forecast that predicted an increase of 232 gigawatts worldwide for 2024. Such a prediction had already been surpassed in the first half of this year, and by the end of 2024, the increase will probably be twice as high.
But it’s worth remembering that more solar does not necessarily mean less fossil energy. “There is no question that solar energy has incredible momentum,” says Ottmar Edenhofer, director and chief economist of the Potsdam Institute for Climate Impact Research. “But as long as we do not have CO2 pricing to push fossil fuels out of the supply chain, we will not have a solar revolution.”
Energy experts such as Simone Tagliapietra from the Brussels think tank Bruegel think that it will take at least another 10 years before renewables become the permanent and structural basis of our power intake. Oil, gas and coal are still the leaders — solar energy contributed to only 1% of global energy production last year. Exponential growth can never last forever, at some point every curve flattens out.
But hardly any energy expert thinks that this point is imminent for solar energy. “Solar modules are cheap and will continue to fall in price,” says Hanns Koenig from the consulting firm Aurora Energy Research. India and other countries are also entering the market in order to become independent from China and establish their production.
Efficient, but time-consuming
But there is a fundamental problem: The sun does not always shine when and where the electricity is needed. This is why the so-called system costs rise when we rely on solar. Such costs include the power plants that supply electricity when the sun is not shining — and which have to be expensively converted to hydrogen or even built from scratch. Or large power lines that direct solar power to where it is needed. Australia, for example, is currently planning the world’s largest solar farm and wants to supply green electricity to Singapore via an underwater cable thousands of kilometers long, which will use it to meet its electricity needs. All of these projects are expensive, time-consuming, and unpopular with citizens. “Solar power is already competitive in terms of production costs, but it is expensive to integrate it into the current, cumbersome grid,” says energy expert Tagliapietra from Bruegel.
A growing proportion of electricity in Pakistan comes directly from roofs.
Solar power can also be stored in batteries until it is needed, and the battery prices have been falling at a rate similar to those of solar modules. Conversely, energy usage can be adjusted to the hours of sunshine, but this requires price incentives for consumers. On the energy market, electricity is now often very cheap or even free at midday, but end users usually pay a fixed price per kilowatt hour. The system is slowly adapting, and flexible electricity tariffs will be introduced in Germany next year. Still, it will take some time before citizens and companies adapt to this.
The example of Pakistan shows how solar energy is revolutionizing the market.
In Pakistan, electricity consumption fell by 10% within two years, while the economy continued to grow. For economists, this is unthinkable. But it’s happening, and for a simple reason: a growing proportion of electricity in Pakistan no longer flows through the grid but comes directly from roofs. The country is now the world’s third-largest importer of Chinese solar modules — a consequence of the 2022 energy crisis. “Governments around the world are realizing that investing in solar energy makes their energy provision safer,” says energy expert Rupert Way from the Institute for New Economic Thinking at Oxford University.
Shifting the balance of power
Developments such as those we see in Pakistan or India show that the transition to solar could also change the geopolitical balance of power. Not immediately, of course, says Rainer Quitzow, who researches the geopolitical consequences of energetic and industrial transformation at the Helmholtz Center Potsdam. He emphasizes that the oil and gas exporting countries will continue to earn good money in the coming years. “But in the long term, the switch to solar and wind could shift the balance of power.”
Suddenly, countries such as Algeria, Mexico and Colombia are on the political map because they are potential producers of green hydrogen. Those who can harvest a lot of solar energy can store it as hydrogen and ship it around the world, for example to Europe. “The bottom line is that there will be more competition, as there will be more countries that produce green hydrogen than there are countries that export oil and gas,” says Quitzow, “and industrial locations are shifting: away from regions where little green energy is produced.” That, unfortunately, applies to Germany.
China will be key
It is already becoming clear that the U.S. and China will be leading the change. Washington managed to become independent from energy imports years ago by relying on the country’s gas production. And that is unlikely to change in a fossil-free world: “China and the U.S. have enough space for wind and solar plants and will be able to supply themselves with energy,” says Quitzow. Europe (and in particular its industrial powerhouse, Germany) will have to decide which industrial sectors it wants to keep active, and invest a lot of money to help them transition.
Once again China — the most important producer of solar modules and the biggest exporter — will play a key role in this reorientation. Because the authoritarian regime is often criticized, be it for its human rights violations or on unfair competition ground, many are worried about relying on Chinese technology too much.
Energy expert Rupert Way, however, calls for a pragmatic approach, hoping that in the medium term more and more countries will start producing modules at low cost: “What is worse: to install a solar module from China every 20 years, or to permanently depend on imports of oil and gas from Russia and other autocratically governed regions?”
*Originally published September 26, 2024, this article was updated September 30, 2024 with enriched media.
