This is an extract from a recent report titled “EU Market Outlook for Solar Power 2021-2025” prepared by SolarPower Europe. This present extract focuses on top European solar markets and the prospects for 2022-2025.
Solar power in the Europe Union has again demonstrated a stellar performance in 2021 despite adverse market conditions on various fronts – from the continued negative effects of COVID-19 on our daily lives to PV product supply shortages and consequent solar module price hikes. Unlike in 2020, when electricity prices had dropped in the first half of the year due to lower economic activities during the first EU COVID-19 lockdowns, in 2021 electricity spot prices had jumped to new heights, improving solar power’s very attractive business case. Now, even in a northern country like Finland, solar investments make sense also in a very high interest rate environment.
The 27 member states of the European Union saw around 25.9 GW of new solar PV capacity connected to their grids in 2021, an increase of 34% over the 19.3 GW installed the year before. This growth makes 2021 not only another record year for solar in the EU, it was also the best year in history, taking place exactly one decade after the former record was set at 21.4 GW in 2011. While the former peak ended the first European solar boom phase, marking the start of a several year-long market slump in the context of a solar energy market transition phase away from traditional feed-in tariffs to new incentives and market models, the new record is considered only another milestone towards much higher annual installation levels in the coming years.
Top 10 EU solar markets 2020
The Top 5 markets in the European Union have stayed the same, and among the Top 10, there are only 2 newcomers that are from northern Europe (Denmark and Sweden), replacing two established PV markets, one in central Europe (Belgium), the other in the south (Portugal).
Germany: Like last year, Germany is again Europe’s major solar market in 2021. It connected 5.3 GW, compared to 4.9 GW the year before. The EU’s largest economy has largely held the No. 1 position since the start of this century. The year 2021 was characterised by a revision of the Feed-in Law (EEG) in January, which has made investments in residential and small commercial systems more attractive after a self-consumption levy was eliminated but put a financial burden on larger rooftop self-consumption systems to force this segment into a tender scheme. In consequence, the German market that grew by around 1 GW per year between 2017-2020, is estimated to have grown by less than half a gigawatt or 8% in 2021.
Spain: Spain has maintained the second rank in Europe, after installing an estimated capacity of around 3.8 GW in 2021, slightly up from around 3.5 GW in the previous year. Nearly 3 GW was realised from PPA based systems out of a gigantic pipeline under development in Spain. This makes the Southern European country probably the world’s largest market for subsidy-free solar, but it also demonstrates that grid constraints can be a major burden for rapid deployment of large solar volumes. The 2.9 GW of solar power plants allocated in two auctions in 2021 will be mostly installed in 2023.
Netherlands: The third spot is taken again by the Netherlands after installing an estimated 3.2 GW, up 11% from 2.9 GW added in 2020. The commercial rooftop market remains the main driver of the Dutch solar market. Its share has grown a little over 40%, while the net metering backed residential segment has seen its portion slightly shrink to around one third, and ground-mounted systems continue to contribute around 20%.
Poland: Poland continues to surprise the sector, increasing its annual solar additions again – this time by 28% to 3.1 GW, from 2.5 GW in 2020. This means, Poland keeps the fourth rank. The country is a solar ‘newcomer’, installing more than a GW in 2020 for the first time. The substantial increase in PV capacity over the last years has been primarily due to a favourable self-consumption scheme for prosumers, a net-metering system that is complemented with a rebate scheme for residential systems, and reduced VAT and income taxes.
France: France remains the EU’s fifth largest PV market. It installed an estimated 2.5 GW in 2021, which marks a new record after more than doubling solar grid connections from 0.8 GW in 2020. This can be considered a breakthrough after years of installation levels hovering close to the 1 GW level, when long administrative procedures and challenging grid connection processes hindered developers to speed up installations.
Greece: Greece has more than tripled annual PV deployment to an all-time record of 1.6 GW in 2021, significantly up from 0.5 GW connected to the grid in 2020. Exceeding the annual GW installation level for the first time translates into the sixth rank for Greece among the EU’s solar markets. The boom is driven mostly by small ground-mounted PV projects up to 500 kW, for which the government recently extended the feed-in premium until the end of 2022.
Denmark: None of the EU’s Top 10 solar markets have grown as much as Denmark in 2021. The European Union’s latest solar shooting star boosted annual installed capacity 6-fold to 1.2 GW, from a mere 0.2 GW in 2020. Gigawatt scale has been achieved almost exclusively through ground-mount utility-scale PV power plants built without subsidies for supplying solar power to corporate buyers.
Italy: A COVID-19 recovery fund supported 110% tax bonus triggered larger demand for residential and storage installations in Italy, but severe permitting issues and disappointing auction results for solar resulted only in 0.8 GW newly installed capacity in one of Europe’s largest and most sunny economies.
Hungary: Large interest in the small ground-mount systems segment, and residential and commercial rooftop installations up to 50 kW, have resulted in another very good solar year for Hungary, which has increased its yearly solar grid-connections to 0.7 GW in 2021.
Sweden: The latest entry to the Top 10 is Sweden, where tax incentives and grants have continued to fuel demand. With growing activity in the solar PPA segment, installations have augmented to an estimated record market size of 0.7 GW in 2021
As another very good year for solar comes to an end, the EU solar sector has grown by an estimated 34% to 25.9 GW, which means an all-time high for the European Union, beating the decade old 21.3 GW record from 2011. The coming 4 years until 2025 will be characterised by further strong growth, according to our Medium Scenario. While analysts anticipate inflated module prices will return to ‘normal’ levels in the second half of 2022, it remains to be seen when exactly this will happen. In any case, the elevated module prices will have negative impacts on certain projects in 2022, and probably even more than in 2021 when developers and EPCs had still volumes on hand that were ordered at much lower price levels, even if the actual quantities received were often less than expected. However, at 16% annual growth rates, 2022 will turn into another record year for solar in Europe and the first time the 30 GW threshold will be reached. With prices back to normal and Germany’s massive new plans for solar to gain traction in 2023 and for the first time reaching a 10 GW annual market size, we anticipate a 28% growth rate to 38.5 GW in the EU. Though the growth rates will turn more moderate in the following two years – 16% in 2024 and 11% in 2025 – this will be enough to result in annual solar deployment volumes above the 40 GW level – 44.6 GW in 2024 and at 49.7 GW in 2025, thus nearly touching the 50 GW level.
This year’s EU Market Outlook’s PV market scenarios 2022 to 2025 show continuous, two-digit annual growth rates that are all slightly higher than in our previous edition. The Medium Scenario now forecasts 18-20% growth rates compared to 16-17% levels last year, adding around 162.7 GW to reach 327.6 GW by the end of 2025. This means the EU solar power generation fleet will double within four years from the 164.9 GW in operation today. It also means that the member states’ solar targets with a combined capacity of 335 GW in their 2030 National Energy Climate Plans (NECPs) will be reached five years early in our most likely market scenario. The High Scenario sees the EU reaching a total solar capacity of 371.5 GW in 2025, but even our Low Scenario assumes additions of 105.2 GW to operate a 270 GW solar capacity by the end of 2025.
The complete report can be accessed here