19 June 2012


"Global market potential in the range of 400-600 GWp in 2020"

McKinsey published a global pv market potential study. What are the main conclusions?
Given the recent upheaval over the last 18 months, we decided to revisit the fundamental drivers and outlook for the solar sector. The conclusion from this work is that the long term outlook for solar to play a meaningful role in the energy space is very promising. Firstly, significant cost reduction potential remains for solar PV from traditional and well understood industrialization levers like procurement, system design optimization and improvements to the current manufacturing platforms. Further, as costs continue to come down, solar PV becomes economically viable for an increasing number of geographies and end user segments. Our analysis suggests that the global market potential could be in the range of 400-600 GWp leading up until 2020, and that the overall market mix will be more diversified than before. As a result of these drivers, winning players in the up- and mid-stream part of the value chain will benefit from focussing on developing or securing access to cost competitive and scalable technologies, whereas winning downstream players need to develop commercial models and customer offerings that are tailored to each specific customer segment.
How will cost of pv systems develop in the coming 5 years? What will drive down these cost?
Our bottom up analysis of cost reduction initiatives indicates that large scale ground mounted systems could reach cost levels of ~$1.45 by 2015 and approach ~$1.00 by 2020. (Roof top based residential systems will be about 30% higher). The cost reductions will be realized by well understood and traditional industrialization levers like operational excellence, procurement and low country cost sourcing, scale, technical improvements to the current production processes and design optimizations for the total systems that to a large extent reduce BOS and installation costs.
If you look 5 years ahead, which will be the top-5 leading markets in the world in terms of MW's annually installed?
A difficult question to answer, but demand is likely to shift increasingly towards areas where there is a significant increase in energy demand, like China, India, the Middle East and other Asian countries. In 5 years time the market is likely to be more balanced between the traditional OECD markets (which are primarily rooftop based) and these new emerging markets (mainly utility scale based).
Picture yourself in the year 2017...Which market did we underestimate in the past years?
It’s impossible to make any predictions, but the Latin American markets and Africa might be underestimated, for example in the opportunities around Micro grids, off-grid applications and industrial scale applications aimed at reducing (not replacing) diesel based power generation.
What LCOE could be reached in 2015 for large scale pv plants in sunny regions?
It could decrease towards the $0.10/kWh mark, but this will depend on key assumptions such as lifetime and the cost of capital – one of the most important drivers that is likely to be a highly relevant theme particularly as solar gets increasingly deployed in emerging markets.
What is your vision on which of the market segments will show the biggest growth? Utility scale projects, commercial projects, residential projects or off-grid applications (Diesel replacement)?
In percentage growth terms your guess is as good as mine, as markets move fast when they open up. In absolute terms global demand could be split in four big parts between 1) North and Central America (primarily rooftop), 2) Europe (primarily rooftop), 3) Asia (mixed between rooftop and utility scale) and 4) rest of the world (mainly utility scale)
What are the major threats or thresholds that could prevent the global market from further strong growth?
The macro outlook and availability of financing – both in established markets and in emerging markets – could be key sensitivities for the deployment rate of solar.
Do you see the major manufacturers make further steps into downstream project financing in the coming years and will that be a smart strategy?
Successful strategies depend on each company’s specific starting point. For manufacturing companies to be successful in the downstream space they would need to acquire or build supplementary skill sets in areas such as market analysis and marketing, business development and commercial structuring in addition to the traditional operational excellence capabilities in which they excel at today.


What to your opinion will be the surprise in the PV business the coming years, that we did not foresee looking back in 2015?
The extent of the commercial and business model innovation that will take place to serve the rooftop based market segments in OECD countries. If solar continues its rapid evolution and extends its innovation pace towards the downstream segment, it could be a tremendous discontinuity in the power sector.

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