Market Analysis Update

China drives tenth year of solar PV growth

Strong demand from China will drive a tenth year of consecutive growth for the global solar PV market, according to a report by consultancy IHS Markit.

“The proposed feed-in tariff cuts announced in China since September have resulted in stronger than projected growth in the fourth quarter,” said Josefin Berg, senior analyst at IHS Technology.

“Therefore, we forecast annual installed capacity to be 77 GW in 2016, and 79 GW in 2017. This is a year-on-year growth rate of 34 per cent in 2016, which follows the 32 per cent year-on-year growth in 2015.”

Since the 2010-2011 period, global PV demand had not grown by more than 30 per cent for two years in a row, the IHS Technology report said.

However, IHS Markit forecasts that global demand will only grow by 3 per cent in 2017 due to the decline in PV installations in the two largest markets in 2016 – China and the US.

“There will be two years of single-digit growth before a stronger market recovery in 2019,” it predicts.

“Until China officially publishes the changes to the feed-in tarrif rates, and the timeframe for the reductions, the forecast for total installed capacity in 2017 and the quarterly distribution remain highly uncertain,” Berg said.

China has also lowered the 2020 minimum target for solar power from 150 GW to 110 GW. This reduced ambition reflects a projected decline in Chinese additions in 2018, followed by relatively flat demand in subsequent years, enough for China to exceed its target and reach 169 GW of cumulative installed capacity in 2020.

Meanwhile, India – at a projected 10 GW of installations – is set to become the third largest PV market in 2017, overtaking Japan.

“The Indian solar market is rapidly maturing and it is benefiting from low system costs globally,” Berg said. India is currently the world’s fourth largest market with a projected annual demand of 5.8 GW. Japan is currently in third place with 8.7 GW of newly installed capacity.

Report reveals multi-billion power project cost over-runs

On average, power and utility megaprojects run $2 billion over budget and two years behind schedule, analysis has revealed.

In a study titled Spotlight on power and utility megaprojects – formulas for success, EY analyzed 100 of the world’s largest – by capital expenditure – power generation, transmission and distribution and water projects across all asset lifecycle stages, from pre-financing through to decommissioning, and found that 64 per cent experienced delays and 57 per cent were over budget.

Safia Limousin, EY Global Power & Utilities’ capital & infrastructure leader, said: “Large and complex power and utility megaprojects are under massive pressure to come in on time and budget – and yet the majority of all megaprojects in the sector don’t. This worldwide phenomenon often comes with a large price tag for overrunning costs that companies can’t afford any longer.”

The highest reported average delays occurred in North America (a little under three years), while South America reported the highest average cost overruns at nearly 60 per cent.

Almost three quarters (74 per cent) of hydropower, water, coal and nuclear infrastructure projects were over budget by 49 per cent on average, with hydro and nuclear suffering the greatest cost overruns at $4.6 billion and $4 billion respectively.

Project delays were longest for coal and hydropower technologies, at nearly three years on average. Meanwhile, offshore wind and gas-powered generation projects saw significantly fewer delays and cost overruns.

Some 80 per cent of executives surveyed identified financing and delivering projects on schedule and on budget as a top challenge. And the majority also believed that project financing and delivery challenges will continue in the future.

EY states that investment in power sector infrastructure is expected to be close to $20 trillion between now and 2040.

Limousin added: “Cost overruns and late delivery are symptoms of greater underlying problems in the power and utilities sector. Companies must address these issues head-on in the next wave of infrastructure investment or risk sacrificing the full economic and social benefits megaprojects offer. That means leveraging leading practices and innovations to enhance value.”

The report outlines how harnessing digital innovation is an important step toward more effective control and enhanced project performance. Embracing innovations in project fitness assessment, big data management and decision support management methods, for instance, can improve power and utility companies’ ability to formulate a holistic view of projects and accurately anticipate and address time and cost overruns to keep them on track.

Appetite for renewables in Middle East ‘stronger than ever’

Squeezed budgets from lower oil prices and rising energy demand will significantly heighten the demand and use of renewables and energy efficiency technologies in the Middle East.

That’s the key finding of a new white paper from Lloyd’s Register, based on an industry executive briefing at the Abu Dhabi International Petroleum Exhibition and Conference, where participants debated the challenge regional economies face in establishing a cost-efficient low carbon future while not jeopardizing their energy economics and security. Most participants were of the view that the growth of the low carbon market is not a threat to the prominence of hydrocarbons, which will be a primary source of energy for at least five decades. Instead they felt that “renewables open a gateway for hydrocarbon producers, and wider industry, to expand the scope of their R&D to cut costs and enhance operational efficiency”.

Alasdair Buchanan, Lloyd’s Register’s Energy Director, said: “This is a timely issue, considering the International Energy Agency recorded a 25 per cent reduction in field investments in 2015 to $583 billion and said in September that oil prices could stay within today’s $50 a barrel range until mid-2017.”

He added that the unnerving outlook for oil-centred economies in the Gulf, such as Saudi Arabia, Qatar, Kuwait and the UAE, can be increasingly offset by low carbon solutions.

“The environmental incentives underpinning political appetite for renewable energy policies and technologies are also stronger than ever.”

“The Middle East would benefit from an integrated energy policy, which would provide signposts to guide all the stakeholders towards a low carbon future. There is a considerable level of multilateral co-operation and collaboration already happening here – this has created a strong and united movement to see positive change. The adoption of new technologies to help define a low carbon future with widespread and cost effective implementation is the next step in helping the region realize this vision.”

Participants at the briefing unanimously agreed that the Paris Agreement spells a new chapter in the historically fragmented narrative of international climate policy. The success is best illustrated by the US and China’s agreement in September to formally ratify the Agreement – the world’s two largest economies, responsible for 40 per cent of global carbon emissions, are now on board.

But governments and financial institutions in the Middle East and beyond must enhance existing frameworks that encourage exploratory projects. The executive briefing heard how successful R&D and the resulting renewable energy technologies rely heavily on a well-measured trial and error approach.

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