Global solar demand ‘staggering,' on track to grow 30%: analyst

·4-min read

The energy transition is well underway as solar demand blazes higher.

Rob Barnett, a senior clean energy analyst at Bloomberg, forecasted that solar capacity installations are on track to grow by 30% globally this year and see sustained double-digit growth in 2023 through 2025.

“At the end of the day, the global solar picture is just staggering at this point," Barnett told Yahoo Finance Live (video above). "We are on track to install something like 250 gigawatts of solar capacity this year. I know most folks don't think in gigawatts, but that is a very large amount. It's more than the installed capacity of a number of European countries.”

China leads the world in solar capacity and plans to double the amount of solar panels deployed this year.

Renewable energy is reaching record highs in other countries as well. Germany broke its record for solar generation on July 17, Bloomberg reported, as a searing heat wave swept Europe. And thanks to solar and wind installations, U.S. renewable energy generation hit an all-time high of 28% in April.

The boom in solar is just beginning, Barnett said, “and so there really is this big, top-line growth scenario that we see unfolding for all of the companies that are participating in the solar supply chain."

Investors can play to this theme in a number of ways, Barnett explained. "You've got First Solar, Canadian Solar — these companies that make the modules that you see out on, perhaps, roofs or out in a field somewhere," he said. "And then you've got other supporting companies like SolarEdge or Enphase, which make the inverters that convert the DC electricity from solar into AC for the grid."

Electricians with IBEW Local 3 install solar panels on top of the Terminal B garage at LaGuardia Airport, Nov. 9, 2021, in New York. (AP Photo/Mary Altaffer, File)
Electricians with IBEW Local 3 install solar panels on top of the Terminal B garage at LaGuardia Airport, Nov. 9, 2021, in New York. (AP Photo/Mary Altaffer, File)

Energy costs driving clean power

As extreme weather events around the globe demonstrate the climate crisis happening in real time, many countries have held fast to their climate targets, at least on paper.

However, soaring oil and gas prices, particularly in Europe, have complicated the picture in recent months.

In early July, the European Union voted to label natural gas as a green energy source in some instances, which threatened to derail its climate ambitions. But at the same time, higher natural gas and oil prices have made renewables seem cheap by comparison.

“I do think that there is increasing focus on all sorts of solutions to try to help manage emissions and tackle the concerns of climate change,” Barnett said. “But I would actually argue that the bigger driver for clean energy demand, particularly here in Europe, is elevated energy costs.”

And while higher oil prices sparked by Russia's invasion of Ukraine have made solar a more cost-competitive option, it helps that the price of solar had already fallen precipitously in recent years.

Experts who predicted an incremental drop in solar prices have marveled at just how quickly they've plummeted due to improved efficiency and lower module prices. In 2000, the cost of solar modules hovered around $4.88 per watt. By 2019, that cost fell to $0.38 per watt.

In 2021, the International Renewable Energy Agency (IRENA) reported that renewable energy was the cheapest source of power. IRENA also found that around two-thirds of renewable energy projects were cheaper than bringing new coal plants online, something unthinkable just decades ago.

As a result, solar demand is likely to sustain its momentum — even if oil and natural gas prices subside.

"It's certainly possible that if you had some easing in the traditional fuel markets, that it might take the accelerator off," Barnett said. "But I don't really see that as being a material risk on the demand side of the equation for clean energy."

Barnett added that while renewables like solar aren't always a “turnkey solution” due to intermittencies, “I do think that the economics are already quite good. And so you'd have to see such a sea change in terms of gas prices or coal prices, if you're thinking about the power grid, to really reverse some of the trends. And I just don't think there's any appetite for it either.”

Grace is an assistant editor for Yahoo Finance.

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