A new report suggests that solar energy could outstrip other renewable energy sources to become the fastest growing sub-segment in 2023, with demand set to soar by 20 to 30 per cent.
Bloomberg Intelligence’s (BI) Global Solar Energy 2023 Outlook predicts that solar energy is likely to see a huge boom in demand during the next year, with sales projected to top $220 billion.
This follows the International Energy Agency’s (IEA) announcment that it expects solar energy to surpass coal power by 2027 as the energy crisis and war in Ukraine drives a shift to renewables. The IEA believes renewable energy will become the largest source of global electricity generation by early 2025, and the world will add twice as much renewable capacity from 2022 to 2027 as in the previous five years.
“The growth of solar follows a record 2022, during which global solar capacity additions expanded about 47 per cent,” said Rob Barnett, BI senior analyst for clean energy. “Best in class peers such as Enphase or First Solar could see their sales growth exceed 30 per cent in 2023, and amid such fast line growth, we believe profitability metrics are poised to improve based on an easing of input costs and supply chain constraints.”
Global solar demand rose about 40 per cent in 2022, with industry revenues increasing about 50 per cent. According to the report, such fast top line growth could be one of the factors that helped buoy solar share prices this year relative to the overall market. While solar shares have outperformed the broader market so far this year, BI noted that most solar shares are still well below their record highs during the first quarter of 2021.
Regardless of the longer term trajectory, BI sees growth in solar demand surpassing 20 per cent between 2023 and 2025, with industrywide revenue for the companies in BI’s global solar theme basket on track to exceed $220 billion in 2023. Consensus expects 2023 revenue to increase the quickest at inverter manufacturers and equipment suppliers. Sales at Enphase, for example, are expected to be up 35 per cent in 2023, and 29 per cent at SolarEdge.
BI also said that it believes double digit growth is fuelled by favourable economics: a new solar system’s levelised cost of electricity (the average cost of an electron produced by a specific power plant over the life of the asset) is about $40 a megawatt hour, roughly in line with a new wind plant and over 50 per cent cheaper compared to a new coal one. Unlike nuclear power, the cost of installing solar is likely to get cheaper in the future as efficiencies improve and manufacturing expands.
Additionally, following successful battery-storage rollouts between 2021 and 2022, the coming year could be a banner one, with Canadian Solar, SolarEdge, and Enphase expected to have delivered a cumulative ten gigawatt-hours of batteries in total.
European policy support for solar is also strong, with the European Commission’s REPowerEU plan aiming to double the installed capacity of solar power to more than 320 gigawatts (GW) by 2025, which may lift consensus sales estimates for the period between 2023 ans 2025. By 2030, the EU is aiming for 600 GW of installed solar capacity, an indication that sales momentum could be maintained through the end of this decade.
