The solar business has boomed in recent years thanks to decades of continued investment and innovation in solar panel technology. The solar manufacturing industry is booming and is expected to continue growing at an even faster rate in the future. Led by China and the United States, countries around the world are investing heavily in improving solar power generation capacity to support green transformation.
The International Energy Agency's (IEA) World Energy Outlook 2023 (WEO) explores the growth potential of the solar industry, building on its already strong performance in recent years. Based on the current project pipeline, renewables are expected to contribute about 80% of new generation capacity by 2030, with solar power accounting for more than half of the new generation capacity. However, the World Economic Outlook highlights that the potential of solar energy is much greater.
Global annual solar panel production capacity will reach around 1,200 GW by 2030, but only 500 GW of this is expected to be deployed. However, according to the International Energy Agency's forecast, if China's new installed solar photovoltaic power generation capacity reaches 800 GW by 2030, China's coal-fired power generation will decrease by another 20%, and coal-fired power generation in Latin America, Africa, Southeast Asia and the Middle East will The volume will be reduced by another 25%.
Over the past decade, solar manufacturing has boomed due to a significant increase in investment in solar power generation. This is expected to support the green transition goals of several countries around the world.
Currently, however, five countries dominate solar manufacturing – China, Vietnam, India, Malaysia and Thailand. China's solar module production capacity has exceeded 500 million watts, accounting for about 80% of global production capacity. This means that many countries rely heavily on imported solar panels to develop solar projects. Increasing manufacturing capabilities in small solar manufacturing markets such as the United States, South Korea, Cambodia, Turkey, and the European Union can reduce dependence on a few markets and strengthen supply chains.
The solar market is expected to experience a compound annual growth rate of 26% over the next five years and become the dominant source of electricity generation in the United States within the next decade. Additionally, recent innovations and widespread adoption of the solar business are driving down production prices, with utility-scale solar costing between $24 and $96 per megawatt hour without subsidies. This is 56% cheaper than nuclear and natural gas power generation and 42% cheaper than coal power generation. Coupled with subsidies provided by the Biden administration's Inflation Reduction Act, solar production costs are significantly lower than other energy sources.
At the same time, China leads the world in solar power generation, setting an example for other countries. Wind and solar power are expected to surpass coal-fired power plants this year, and China will add 217 gigawatts of photovoltaic capacity by 2023, more than the rest of the world combined.
When it comes to solar energy, China and the United States are leading the way, and many other countries around the world are following suit. However, greater diversification of the solar module manufacturing market could improve supply chains and reduce reliance on a few high-volume countries. All areas of the solar supply chain must be strengthened to ensure that growing manufacturing capacity matches production and demand along the supply chain to support optimal deployment rates.