Sean McLoughlin, Head of Industrials Research, EMEA, HSBC
Cloudy now, brighter later
The global solar panel installation boom is under threat from the disruption of the COVID-19 pandemic. Growth is set to slow to only 4 per cent in 2020, potentially stalling the pace of the low-carbon transition. However, despite this short-term shock the market is expected to remain resilient and recover from 2021 onwards.
Construction activity in many key solar markets remains at a standstill or is only just beginning to ease. Supply has been dented by the economic slowdown in China, the industry’s main manufacturing base, during February and March. Just as China has begun to ease its lockdown restrictions, other markets are tightening theirs, leading to weak demand from major installations and residential customers. Global solar installations could fall by 30-40 per cent year-on-year in the second quarter alone, with poor volumes in the third quarter, too.
However, in some places activity could bounce back quickly. In China, the world’s largest solar market by some distance, installation is expected to recover strongly in the second half of this year, finishing 2020 with 33 per cent growth year-on-year. This implies an addition of 40 gigawatts (GW) of capacity, against an increase of 30GW last year. A further 45GW of capacity is expected in 2021.
“In some places activity could bounce back quickly”
Recovery will be slower in other markets. In Europe, much of the solar installation activity is in the residential consumer space. Mobility restrictions are currently limiting access to roof space and the downturn in the economy is forcing consumers to grapple with financial constraints. Low residential appetite could continue through 2020 and 2021, depending on the severity of the recession.
In the US construction quotation activity and permit approvals have largely continued, albeit at lower levels. Following the disappointment that renewables were not included in the USD2 trillion stimulus package in March, expectations in the US are rising for a cash-in-lieu-of-tax equity provision being included in a potential follow-on stimulus bill currently being discussed. Without such measures, renewables activity could come under further pressure.
In the longer-term, though, the positive outlook is undimmed: increasingly low costs mean solar should cement its place as the core renewable power generation technology to 2030. By 2022, cumulative solar capacity in China alone should reach 336GW, steady growth from the 204GW installed by the end of 2019.
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The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Sean McLoughlin
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