The EU commented on March 9th that an acceleration in development will be able to attain the 1000GW solar installation target by 2030. According to the EU Market Outlook for Solar Power 2021-2025 announced by SolarPower Europe, the EU will arrive at 672GW of PV installations by 2030, which is an equivalence of 56.3GW for each of the subsequent year. The increment of target to 1TW this time means that new annual installation will climb to 92.8GW under a rough increase of 65%. The dependency on traditional energy has prompted Europe to surge in demand for renewable energy, which will only further enlarge the new energy market.
1. Exacerbating Energy Crisis in Europe
As indicated by the data of the International Energy Agency (IEA), Russia was producing approximately 11.3 million barrels of petroleum each day during January 2022 that is only second to the US and Saudi Arabia. The country exported roughly 7.8 million barrels of petroleum each day throughout December 2021, and accounts for about 25% of global exports in petroleum and natural gas. Russia mainly exports energy to Europe, where the export of petroleum and natural gas to Europe accounts for 50% and 78% of the country’s total export.
Russia is regarded as the energy pool for Europe. The dependency on Russia is varied among different European countries, where Bulgaria is almost at 100%, while Poland imports about 80% of natural gas from Russia, and the ratio is less than 10% for Belgium, France, and the Netherlands. Europe imported approximately 4.5 million barrels of petroleum each day during November 2021, which accounted for 34% of total imports in the continent. Russia broke record in natural gas production during 2021 at 762.8 billion m³ under a YoY growth of 10% that was only second to the US, for which roughly 1/3 (245.0 billion m³) was used for exports, while 7-80% was transported to Europe. Russia supplies 168.0 billion m³ of natural gas to Europe, which takes up 1/3 of the latter’s total demand.
As seen from the consumption end of energy in Europe, petroleum and natural gas are the two dominant energy sources in Europe at a combined ratio of 59% in energy consumption, of which petroleum sits at 33.8% and natural gas sits at 25.2%. Coal is the third largest energy source at 12.2%. Renewable energy sits at a ratio of 11.5%, making Europe the largest area of consumption for the specific energy source in the world. Nuclear and hydroelectricity each occupy 9.6% and 7.5%.
Energy Consumption Structure of Europe in 2020
Source: organized from public data.
TrendForce believes that Europe’s constant reduction in fossil fuel investment over recent years has prompted several European countries to shut down their coal-fired power plants and partial nuclear power stations, while also amplifying the propulsion of renewable energy on a continual basis. The path of energy transformation is aggravating the energy crisis of Europe, and was eventually exposed under the Russia-Ukraine war.
2. Europe Sees Surging Demand for Renewable Energy
As TrendForce understands it, Europe has been experiencing an increase of electricity prices since last year, and manifested a twofold elevation during the second half of 2021. Major European countries had exceeded EU€300/MWh in average electricity prices as of February 2022, while the same period in 2019 had registered a figure of within EU€50/MWh. TrendForce believes that energy is indispensable to Europe due to the corresponding climate, while the advancement of electricity prices has ascended the continent’s demand for energy, which stimulates an enormous new energy market as a result.
Policy target: Europe has been exceedingly spontaneous in stipulating policies for new energy, where each country has proposed respective target in renewable energy development. The outbreak of the Russia-Ukraine war has also bumped up the schedule of Europe’s development in renewable energy. The European Commission announced an independent energy roadmap on March 8th, which aims to extricate from the dependency on Russia’s energy import prior to 2030 starting from natural gas. This action plan is named “Joint European Action for More Affordable, Secure, and Sustainable Energy”. The European Commission announced RePower EU on March 9th that strives to resolve Europe’s existing challenges in energy security and prices. The particular program proposes that an accelerated development would be able to attain the 1000GW solar installation target by 2030.
Simultaneously, Germany has proposed a new draft legislation that aims to shift the target of 100% power generation through renewable energy to 2035, which is 15 years earlier than the previous target. The EU is also planning to advance its Fit for 55 package that was announced on July 14th 2021, which comprises of a particular proposal that is the release of 15TWh rooftop solar panels this year.
Annual increment in penetration rate of PV power generation: the increase of electricity prices in Europe during 2021 was attributable to the rise of petroleum and natural gas prices on the one hand, and the worse-than-expected power generation through renewable energy in 2021 on the other hand. Take PV power generation as an example, the monthly power generation between October and February each year would be 50% lower than other months due to the apparent seasonal factor. Despite Europe significantly increasing its PV installations in 2021, the lower degree of solar power generation during the wintertime had provided little to no help in alleviating power scarcity. Hydroelectricity and wind power are also largely affected by the weather, and the reduction in both power generation methods has led to a downward swing in overall power generation by renewable energy. It is within TrendForce’s understanding that Europe had supplied an insignificant level of electricity generated by renewable energy during February due to seasonal factor and a lower extent of insolation in early 2022, though the result is expected to improve drastically throughout March.
As indicated by the data of SolarPower Europe (SPE), the EU added approximately 25.9GW of new PV installations throughout 2021, which is a YoY growth of 34% from 19.3GW, and was considered as the best record in new annual PV installations for the EU. Europe has accumulated 164.9GW of PV installations as of now, of which Germany sits at 59.9GW and Italy sits at 22GW.
PV Installations in Europe between 2016 and 2019 (Unit: MW)
TrendForce believes that power generation through renewable energy is prominently influential on Europe’s power systems. According to the pricing method of Europe’s power market, power generation through renewable energy is first connected to the grid, and is only replaced by energy with higher marginal cost when it is unable to fulfill power consumption. Power generation through renewable energy in Europe is currently unable to satisfy most of the market demand, while petroleum and natural gas prices are obstinately high due to the Russia-Ukraine war. Electricity prices are thus maintained at a high level. Europe, should it wish to stabilize its power market for the longer term, would have to accelerate energy transformation, elevate utilization of renewable energy, and grasp on its energy system on the one hand, as well as implement diversified imports of petroleum and natural gas to reduce dependency on Russia’s energy supply on the other hand.
The persistently robust PV installation demand among various European countries in 2022 is expected to yield a capacity of 37.3GW. Judging by the market of different European countries, Germany, Netherlands, Spain, and France remain as countries with compelling demand, while Italy, Portugal, Greece, and the UK will become countries with a faster market growth in 2022 thanks to incentive policies and aggressive tender implementations. TrendForce estimates Europe to arrive at a total installation demand of 37.3GW in 2022 under a YoY growth of 22%, where the nine GW-grade markets will occupy 79.4% of Europe’s overall installation demand.
PV Installation Demand among Various European Countries in 2022 (Unit: MW)
Module import had risen evidently in 2021 amidst the surging demand for green electricity in Europe. As seen from the import and export of modules throughout 2021, European countries such as the Netherlands had elevated in module import compared to the previous year. Europe had accumulated 100.6GW of module export in 2021, of which the Netherlands had exported the most modules among all countries. Europe had imported approximately 25GW of modules in 2021 under an increment of 93%. It is worth noting that China’s average module export price had risen by 10.6% in 2021 compared to that of 2020, though such alteration did not affect the export volume of modules, and the country managed to achieve a MoM increment of 14% and a YoY magnification of 45% in module export as of December 2021.
Distribution of China’s Module Export for 2020 (Inner Circle) and 2021 (Outer Circle)
Source: organized from public data.
TrendForce estimates the total installation demand of Europe to arrive at 37.3GW in 2022, and further expansion in the renewable energy of Europe alongside EU’s proposal of various policies that would accelerate the attainment of the 1000GW solar installation target before 2030. It is noteworthy that Europe is expected to be more lenient towards PV module prices under booming demand, and the existence of the European distribution market makes it reasonable to infer that the overall volume and prices of PV module import would continue rising in Europe during 2022.
Despite Europe’s current lower penetration rate in renewable energy, the larger subsequent growth space will become the main body for future amplification in energy.