The solar economy

Global new investments in renewable power reached an estimated USD 366 billion in 2021, a record high despite impacts from the pandemic. The annual increase of over 6% was largely due to the global rise of solar PV installations. Solar PV and wind continue to dominate new investment in renewables, with solar accounting for over 50% of the 2021 annual total (with wind for 40%). With the COVID-19 pandemic and the surrounding economic uncertainties, major banks seem to be cautious about lending more, leading to higher rates on loans and funneling funds only to developers and businesses with better track record and successful project completion.

It is a defining indicator that in the past few years, investments in new renewable power capacity accounted for almost 70% of all investments committed to new power generation capacity, which includes fossil fuels and nuclear power. Institutions have adopted fossil fuel divestment, in which a binding commitment is made to exclude any fossil fuel company from either all or part of its managed asset portfolio. Investors have indeed turned towards sustainable finances, due to consideration of regulatory requirements, risk management imperatives, and changes in demand and asset allocation. Environmental, Social and Governance (ESG) have also become a crucial pillar for business sustainability, yet there is no global consensus to define methodologies to track and quantify the environmental impact of businesses. But as witnessed by the prominence of green bonds, climate finance has become a medium for the global energy transition.

Market outlook (FYE 2024 update)

The global utility-scale solar photovoltaic (PV) market, in particular, is expected to grow at a compound annual growth rate (CAGR) of 6.3% and is projected to reach USD 94.03 billion by 2030. This growth is driven by several factors, including declining installation costs, technological advancements, and supportive government policies promoting renewable energy adoption. For instance, the U.S. solar PV market alone was estimated at USD 29.68 billion in 2022, with an anticipated CAGR of 13.7% from 2023 to 2030. More recently, global solar capacity installations are expected to exceed its preliminary forecasts of a 22% growth to a market size of 544 GW in 2024, approximately 100 GW more than in 2023. These trends underscore the increasing competitiveness and attractiveness of utility-scale solar PV as a sustainable energy source worldwide.

The global market outlook for solar power installations remains highly optimistic, driven by a confluence of environmental, economic, and policy factors. Rapid advancements in solar technology have led to significant cost reductions, making solar energy one of the most affordable and scalable renewable energy sources. Governments worldwide are implementing supportive policies, including subsidies, tax incentives, and renewable energy targets, to meet climate commitments under agreements like the Paris Accord. Increasing energy demand, coupled with heightened awareness of climate change, is propelling investments in utility-scale and residential solar projects. Additionally, rising energy prices and geopolitical tensions are pushing nations to diversify energy sources, with solar offering a reliable and sustainable alternative. These factors, combined with growing corporate interest in sustainability and decarbonization, are expected to sustain robust growth in solar installations over the next decade.