10% PV Installations Will Incorporate Storage Within a Decade: DNV Report

DNV, an expert in assurance and risk management, has recently released its ‘Energy Transition Outlook, 2023’ report, focusing on the progress of solar photovoltaic (PV) technology.

The report gives an overall trends stating that, in 2004 the annual solar installations were a modest 1 GW. However, by 2019, this figure skyrocketed to 100 GW despite setbacks in 2021 due to the COVID-19 pandemic and regional tensions. By 2022, the world had reached an impressive 250 GW of solar installations, signaling a sharp upward trend. The report predicts that by 2040, global installations will reach 500 GW annually.

The report foresees a significant integration of dedicated storage with new PV installations, with 10% incorporating storage within a decade, rising to 62% by 2050. It predicts that by 2050, solar PV capacities will reach 8.8 TW, and an additional 6.5 TW will include storage, bringing the total to 15.3 TW – a 13-fold growth from 2022. This massive expansion is expected to account for 54% of installed generation capacity by mid-century.

On Grid and Off Grid

Regarding on-grid and off-grid solar, the report notes that on-grid solar will make up only 39% of global on-grid electricity generation. This is due to efficiency factors and capacity considerations, with solar lagging behind wind and hydropower. Nevertheless, solar’s rapid growth is attributed to falling costs, especially in the early 2020s. However, the report cautions that cost reduction rates will slow over time.

The economics of solar PV have evolved, with increased penetration within the energy mix curbing solar PV costs and the need for conventional energy during daylight, says the report. This trend has the potential to drive electricity prices close to zero or even into negative values, necessitating a paradigm shift in energy storage systems. The report particularly highlights the importance of co-located solar+storage systems in supporting solar energy during non-sunny hours.

The Levelized Cost of Energy in Solar: 

The report emphasizes the role of the declining levelized cost of energy (LCOE) in solar cost competitiveness. Currently, the global average LCOE for solar PV is around USD 41/MWh and USD 69/MWh for solar combined with storage. The report anticipates a further dip in LCOE for solar PV to approximately USD 21/MWh by 2050. Some projects may even cost less than USD 20/MWh. This cost reduction is attributed to decreasing unit investment costs, with a projected drop below USD 700/kW shortly after 2030 and further reduction to USD 560/kW by 2050.

The report highlights the significance of the learning rate in solar cost reduction, which is expected to decrease from 26% to around 17% by 2050 due to declining expenses. Despite this, solar PV is poised to be a highly cost-competitive electricity source on a global scale.

Use of Solar+Storage in Minizing Cost: 

In terms of solar+storage, the report sees it as a revenue booster with unique advantages, despite coming at a premium. This system’s ability to store excess energy during peak sunlight hours and sell it when prices are high gives it an edge over standalone solar PV. The report envisions that by 2040, most global solar capacity additions will incorporate storage, offering undeniable cost advantages. Shared costs, both in terms of permissions and equipment, significantly reduce initial investments, while combined operational costs are minimized by sharing transactional expenses. Despite the challenges of co-location, such as site suitability and financial optimization, has its benefits as the report illustrates through an example in the US.

Conclusion

Before the 2022 Inflation Reduction Act, co-located storage projects enjoyed nearly 30% capital cost benefits from government incentives, driving North America to the forefront of solar+storage development. However, policy shifts in 2022, have removed the need for batteries and the exclusive reliance on renewables. this can affect the drive for co-location. Nevertheless, falling prices of batteries and solar modules will play a pivotal role in shaping the future energy landscape.