“A new set of challenges”

An interview with Dr. Winfried Hoffmann, President, European Photovoltaic Industry Association

Large photovoltaic systems with outputs ranging from one to several megawatts have gained growing market shares in the photovoltaics industry. In which regions in Europe do these play a special role?

The trend in Europe is moving toward rooftop segments (residential, commercial, industrial), even in countries where the ground-mounted segment has, in the past, been the main market driver. This latter category includes Spain and the Czech Republic, where the initial strength of the ground-mounted segment (in Spain it accounts for 90 percent of the cumulative capacity; in the Czech Republic for more than 80 percent) has waned. Because the uptake has not been as strong in the residential segment in those countries, public acceptance of the technology as a whole has not been as easily won.

Similarly, PV’s rapid development at the utility scale has drawn increased competition from conventional players. This is a lesson going forward in markets in Europe and beyond: A better balance of development in all market segments is more sustainable in countries where political support remains key to short-term success. This can be seen in Germany, Italy and France, where there is more of a balance among the three main market segments.

Free-field solar parks are leading in the competition for the lowest system prices. What role do they play or have they played in enforcing grid parity?

We should not always and only talk about “grid parity”, which can mean different things to different people – and is sometimes wrongly seen as a Holy Grail. Rather, we should talk about the “competitiveness” of PV. Specifically, for the ground-mounted segment, we define generation value competitiveness as the moment at which, in a specific country, adding PV to the generation portfolio becomes equally attractive from an investor’s point of view as investing in a traditional and normally fossil-fuel based technology, for example a CCGT power plant. Thanks to the intense competition among suppliers, this segment has helped drive prices down and added to the momentum towards competitiveness.

Generation value competitiveness is not the end of the story, however. Wholesale price competitiveness will be the key to sustainable market development in this segment. The current trend that shows wholesale prices going up fast could be offset by the fact that PV pushes prices down (or at least reduces the growth) during the midday peak when it produces power. Depending on how the electricity market design evolves, wholesale competitiveness is not expected to be reached before generation value competitiveness.

What significance do solar parks have for added value in regional areas?

By its very nature, PV is a decentralized technology. It creates jobs and economic benefit in places where it has not always been beneficial for utilities to install power plants. This economic value is over and above the other benefits PV brings to any region in which it is part of the electricity mix: energy independence, environmental protection and climate change mitigation.

Solar parks are also gaining in importance in Asia and North America. Will Europe remain leading in this field or will the project designers migrate overseas?

Again, the economics are different depending on the region. In areas outside Europe, the focus is less on individuals and small businesses (who typically have less ability to invest in PV) than on large projects. These are driving the market for the time being in the developing world. Even with all the remarkable growth in recent years, it’s fair to say the industry is now at a crossroads and faces a new set of challenges.

Europe can remain a leader but it will be important to develop markets outside of Europe if PV is to continue its remarkable growth trend. The industry will have to continue improving technology and economies of scale. Equally important, policymakers will have to provide more regulatory stability going forward in order to encourage continued investment in PV – both downstream and upstream.