Solar Energy: The Road Ahead


Faced with far-reaching changes, policy makers will need to reconsider a wide array of existing policies.

Policies should be updated based on the latest technology insights and planning techniques. Energy agencies are encouraged to improve their solar PV forecasting and take recent and short term projected market growth into account. Energy planning and predictions should consider state-of-the-art tools accounting for the characteristics of variable solar. Energy plans and policies should also incorporate the broader positive macroeconomic and societal impacts of solar.

Governments need to encourage and support continued research, development and demonstration activities to continue the exploration of advanced solar PV options. There are significant opportunities for reducing cost through best practice and innovation. Markets should be developed to allow further price reductions.

Solar PV panels require a global framework for standards and quality assurance. The market for solar PV is increasingly global and requires international standards as well as a resilient national quality assurance infrastructure. Standards and quality infrastructure for components and systems is critical to ensuring investor confidence.

Integration of solar PV into the electricity system deserves special attention: 

• The deployment of distributed solar PV requires fundamental market changes. There are technological solutions for connecting and managing power grids with a high share of solar PV. However, the engagement of households and industries in the production of electricity will require new regulation and market structures. Markets need to be designed to facilitate private sector operators and create a level playing field. Free global trade in components tends to reduce cost. Ideally panels should be sourced from anywhere but systems assembled and installed locally.

• Grids, smart grids and storage technologies allow high shares of solar PV to be efficiently integrated into pre-existing power systems. Enabling (smart) grids and storage technologies will accelerate the deployment of solar PV and improve the reliability and efficiency of power systems. Demonstration projects are important to creating the necessary human capacity to take advantage of the multiple co-benefits these technologies provide. Enabling grid infrastructure must be put in place, including strengthened interconnectors with neighbouring grids and countries where applicable. Access to land and rooftops is critical, as well as priority grid access. 

Solar PV deployment should be combined with end-use electrification rollout. Electric vehicles, hot water supply and flexible demand for electricity energy services like cooling and refrigeration can facilitate a much higher proportion of solar PV. The conversion of solar electricity to products like hydrogen can make a contribution once the solar PV share exceeds 15%.


While silicon solar PV has achieved maturity as a technology, the technical limits of other solar PV technologies are far from being met. Low-cost and high-efficiency cells are at different stages of development. Technological advances are making an increasing difference to smart grids, storage, operation and recycling. 

PV technology systems have come a long way. The PV effect was first discovered at the end of the 19th century, and its mechanics understood in the early 20th century. The first silicon monocrystalline cell was created in 1941, opening the door to the multi-megawatt solar PV farms of today. Basic R&D in semiconductors for industries like information and communication technology, followed by applied R&D in aerospace, culminated in today’s power generation technology. 

C-Si solar cells make up around 90% of global module production capacity. This is expected to continue to dominate PV technology. At the cell level there is still room for efficiency improvements. Commercially available cells have efficiency levels of around 21-23%, but some laboratories have managed 25.6%, and 29% is the theoretical limit. However, at a module and system level, additional improvements of around 2% of efficiency are still possible. This includes improvements in module efficiency, reducing manufacturing complexity. Key factors include concentrators, glass panels on the front and back of the modules, the amount of silicon used per watt and a shift to better metals. At the same time, solar forecasting and two-axis tracking have already shown that the capacity factors for solar power can increase by 10% or more. For example, two-axis tracking projects in the US city of Phoenix increased their capacity factors by 22% to as much as 33% compared to fixed tilt.

Research in thin-film PV technologies is also progressings. Amorphous silicon (a-Si) is now rivalled by CIGS and CdTe (Massachusetts Institute of Technology Energy Initiative, 2015 and NREL, 2016b). Both have achieved cell efficiencies of 22% compared with a-Si efficiency of 13% in laboratories (NREL, 2015). However, there are still issues with CdTe breakage and disposal due to the use of cadmium. Whereas silicon wafers have a thickness of 180 micrometres, thin-film technologies are only 3 micrometres thick. Emerging thin-film technologies have reached a thickness of 0.6 micrometres, which could open up a completely new set of applications. 

Both crystalline and thin-film solar PV technologies are experiencing continuous improvements. For example, for instance, passivated emitter rear contact (PERC) cells are enhanced silicon crystalline cells with efficiencies of up to 21.7% higher. Research is ongoing in high-efficiency cells, such as multi junction cells. These have already been shown to boost efficiencies to 46% with concentrator and 38% without concentrator (Green et al., 2016). At the same time, significant research into low-cost alternatives is in progress. Perovskite cells are among the promising technologies under examination and are based on low-cost materials. Their efficiency in laboratory conditions has improved dramatically from 14% to 22% for the last three years and has further upward potential. However, some practical issues still remain concerning their stability and sensitivity to moisture. Organic cells and dye-sensitised cells are lightweight and flexible and have the potential to be produced very cheaply but their efficiency has not exceeded 12% in laboratory conditions. Researchers are also exploring the use of quantum dots to create PV systems. In theory, these cells have efficiencies of 60% or more but have achieved around 10% efficiency in laboratories. 

A factor that is less well understood is the quality of equipment and installation. Deterioration, delamination and structural deterioration can affect the yield over time. Poor installation practices for example can result in a variability of output of 10% or more, under similar conditions. 

Today’s modules are typically guaranteed for 25 years. As solar PV is new and technology is evolving rapidly, tests can only provide a proxy for how long solar fields will last. Many are expected to last well over 25 years. Once PV life span is better understood, cost estimates per kilowatt-hour of solar PV generation may further decrease. As the market for ageing projects evolves, interest in sustained quality over time is on the rise.


First and foremost, technology costs will continue to fall. The increased energy efficiency of conventional c-Si solar PV panels will allow cheaper and more electricity production per panel. New thin-film technologies and organic cells can further reduce the cost of modules and cut the need for costly support structures for certain applications.

In addition, the yield per area unit will continue to increase. This can be important where space is constrained, such as in urban environments. Today, a single solar PV panel produces around 250-300 W while multi-junction solar PV would produce 600 W per panel. For many households, this means that annual electricity production from their rooftop (assuming ten panels) could increase from 4,000 kWh to 8,000 kWh. For most households, this would be more than enough to cover annual electricity demand.

On the other hand, low-cost solar PV panels will allow for a wider set of applications, such as the incorporation of thin-film technologies into building and road infrastructure or vehicles. This development will allow electricity to be harvested without the need to create new infrastructure.

As solar PV deployment increases, the technological challenges will also change. For example, the solar industry will need to integrate PV into building materials for houses and roads, develop new technologies and processes for recycling PV panels, and continue improving system integration technologies.


Utility-scale solar PV projects are already economically competitive, but considerable opportunities remain to reduce the cost of residential-scale solar PV. Globally, the shift to new finance and business models will play a growing part in reducing costs and increasing benefits.

The cost of solar PV has declined dramatically. In 2010-2015, the capacity weighted average LCOE for the technology fell by more than half. The LCOE of utility-scale PV systems will continue on its downward path and could fall slightly more than installed costs, assuming system losses decline somewhat and project developers come to expect longer economic lifetimes (IRENA, 2016a). For utility-scale applications, average global systems costs dropped from around USD 4/W in 2009 to less than USD 2/W in 2014 (Figure 3), with preliminary data for 2015 suggesting a further decline to around USD 1.8/W.

IRENA’s analysis shows opportunities remain to reduce the levelised costs of PV electricity within and across different regions. Lower-cost projects have arisen, with contract electicity prices less than USD 0.05/kWh, competitive with any other form of power generation. However, the lowest and highest-cost projects differ widely, by a factor of three. Cost reductions can be achieved by reducing balance of system costs, which account in many cases for more than half of project costs as well as increasing cost transparency.

The cost of PV modules and system components will continue to decline in coming decades. This is due to a combination of technological innovation, economies of scale, production automation and economic pressures. The average price for modules in 2015 ranged from a low pf USD 0.52/W in India to USD 0.72/W in Japan. Analysis of crystalline technologies points to module costs potentially falling to the USD 0.30-0.41/W range by 2025 (IRENA, 2016a). Where there is favourable solar resource quality and low financing costs, this opens up the prospect of solar PV electricity production in the range of USD 0.03/kWh, which is lower than any other source of power generation, apart from some hydropower projects. 

In the next ten years, the global average for total installed costs of utility-scale PV systems could decrease an estimated 57% from 2015 levels. The majority (about 70%) of cost reductions will come from lower balance of system costs. This would partly be driven by continued technology improvements and cost reductions, but mostly by the convergence of balance of system costs to best-practice levels. 

In 2015 the global weighted-average installed cost of utility-scale solar PV systems fell to USD 1.8/W, down around 8% compared to the previous year. Cost reductions on modules, inverters and balance of systems could mean the global weighted average cost of solar PV systems falls to just USD 0.63-1.04/W by 2025, with a central scenario of USD 0.79/W. 

Reducing the current cost differentials between markets, notably for balance-of-system (BoS) costs, presents a significant cost reduction opportunity. By 2025, utility-scale balance of systems costs are expected to fall by between 30% (in today’s most competitive markets) and up to 80% (in today’s less competitive markets), compared to 2015 BoS cost levels. 

The biggest cost reduction opportunities for solar PV modules are predicted to occur at both ends of the crystalline silicon module value chain. Polysilicon for PV production costs are expected to halve per watt by 2025 and will contribute about one-third of the crystalline module cost reduction potential. The next largest cost reduction potential comes from the cell-to-module manufacturing process. This cost is expected to decline by about one-third for crystalline technologies and to contribute about another third to the overall reduction potential. 

Continued cell efficiency improvements are an important contributor to the reduction in materials costs for modules. Average cell efficiencies of 20-22% could occur by 2025, compared to 16-17% in 2015. However, further improvements in heterojunction and back-contact cell structures, and advances in tandem and multi-junction cell types, have the potential to introduce efficiencies of over 25%.

From 2010 to 2015, the capacity-weighted average LCOE declined by 58%. To 2025, the global weighted average LCOE of utility-scale PV systems is expected to continue its downward trend and to range as low as USD 0.03-0.12/kWh. This represents a decrease of 59% from 2015 weighted average LCOE levels. The projected LCOE range also accounts for differences in irradiation levels between countries as well as the expected range in total investment costs for PV systems. 

The economics of solar PV depend not only on project costs but also on the business models for financing and recovering the revenues from solar PV. Governments providing low-interest financing and the availability of land for solar PV projects have facilitated decreasing production costs for utility-scale projects. Project bundling, yieldcos and green bonds are among the instruments being deployed.

At the same time, new business models have appeared for the deployment of solar PV. For example, consumer-oriented businesses in the US have emerged supplying upfront financing for rooftop applications, crowdfunding mechanisms, and leasing structures that are undercutting electricity prices from the grid. These models allow for a much wider expansion of solar PV in the rooftop sector. In the context of extending or improving electricity access, new models for the creation of a local value chain for solar products have been developed allowing local entrepreneurs to set up their own solar shops. In emerging economies, these new business models include pay-as-you-go systems, hybrid microgrids and business models in which individuals own utility-scale solar PV power plants to hedge against raising electricity tariffs (IEA-PVPS, 2015b).


The continued cost decline for solar PV will make its deployment competitive with other utility-scale power generation technologies. This will attract new investments and the need for specific policies to integrate solar PV into electricity sector regulation. 

At the same time, small-scale solar PV will become a widely adopted consumer product that will rival some of the functions provided by the grid. This will require the involvement of a whole new and more complex set of stakeholders, including consumer agencies. 

From a systems perspective, large-scale deployment of solar PV means the economics of the electricity system will be in transition. The practices of the typical incumbent utility, where power prices are shaped largely by fixed operating costs, will make way for an alternative approach. The production costs of solar PV are largely determined by upfront capital costs, since the resources to produce electricity (sun and wind) are free. In power systems with wholesale markets, this will change the price dynamics, especially in periods with high or low VRE power generation availability. As a result, the governance structure needs to revisit remuneration and compensation schemes for generators and system operators. It needs to focus on cost-efficient ways of ensuring the reliability and adequacy of the electricity system (IRENA, 2015a).


Utility-scale solar PV will continue to grow, but new markets are emerging for distributed deployment, including in buildings, transport, industry, agriculture, fisheries rural communities. 

Since the 1970s, solar PV applications have been mainly used off the grid. Even solar PV deployment in Germany was driven by residential systems up until 2005, while utility-scale projects only amounted to a few megawatts. In 2009, only five countries had more than 1 GW of installed capacity, and only 12 countries had more than 100 MW. Although the outlook for solar PV has changed dramatically, many governments and international organisations have not yet caught up with the impending energy transition (Figure 5).

Since 2009 we have moved from 1 MW systems to mega-scale solar farms across the world. In the US the Topaz Solar Farm in California was commissioned in November 2014 with a nominal capacity of 500 MW. Its panels cover almost 25 square kilometres and produce energy to supply around 160,000 homes. The size continues to increase, and more solar farms are in the pipeline. One example is the McCoy installation in the US, amounting to 750 MW. Dubai recently auctioned 800 MW of solar PV.

In other regions utility-scale solar PV systems are also growing rapidly. For example, India is planning 60 GW of utility-scale solar PV, of which 20 GW would be located in ‘ultra-mega solar power parks’ with a minimum capacity of 500 MW. Solar auctions in Africa, Latin America and the Middle East are equally encouraging for the large-scale deployment of utility-scale solar PV parks of 100 MW or more.

Utility-scale solar PV accounts today for around 65% of new solar PV capacity additions. The remainder is rooftop and off-grid systems.

Through cost reductions, the utility-scale applications are also having a positive impact on rooftop deployment. Globally, around 30% of electricity consumption is by residential users. In households with high electricity demand, rooftop solar PV provides around 40% of yearly electricity consumption – reducing the need for electricity supplied by the grid. Solar plus storage can increase the share of self consumption to 60%. Connecting multiple households with solar PV, storage systems and smart grids can increase self-consumption up to 80% (Wirth, 2016). Connecting multiple community networks could increase the share even further. This could lead to whole residential communities with limited needs for electricity from the grid.

“Up to 2015, we were doing 5 MW, 10 MW, in this part of the world. All of a sudden that moved across into 100-200 MW projects. Now, in 2016, we are already preparing a single, 800 MW solar PV project.” — Paddy Padmanathan, Chief Executive Officer, ACWA Power 

Rooftop solar PV is insufficient to meet demand in cities, particularly those with limited space and high living density. Mass-scale integration in cities calls for taking the technology into consideration in urban planning alongside new architectural concepts. Applications such as solar windows, solar roof tiles and bifacial PV modules are being tested. Such technologies are confined for now to a niche market, with only a small section of the population able to afford them. To be viable at this stage the equipment needs to be available in attractive designs that make solar PV an appealing high-end consumer product. 

Cooling is another potential application for solar PV. In general, it accounts for a major share of electricity demand in cities in developing countries. Cooling represents 70% of peak demand in comparatively urbanised countries with a hot climate, such as Saudi Arabia and the United Arab Emirates, where power demand could reach 10 exajoules (EJ) by 2030. This equates to peak demand of more than 3,000 GW globally. District cooling systems are well suited to accommodating VRE. In these systems, cooled water circulates through a pipeline, and the cold is transferred to building cooling systems through a heat exchanger. The water temperature in the pipeline distribution system may vary and the distribution system can store significant amounts of cold. Cold can be generated with electricity (e.g. from solar PV) or using residual heat (e.g. from concentrated solar power, or CSP). Both can be generated from renewable resources. A district cooling system, therefore, is also particularly suited to storing renewable energy. A cooling system of this kind can act as a low-cost battery.

District cooling systems are widely deployed. The United Arab Emirates is a world leader in this field. The second largest system in the world is operated by Engie in the French capital, Paris, while Malaysia and Singapore also operate major district cooling systems. Local or household-level cooling systems can also be operated in conjunction with cold storage with chilled water or ice. Several thousand such systems have operated for decades in New York. Initially they were designed to accommodate inflexible baseload but these systems would also be very appropriate as a flexibility option for integrating variable renewables. At the same time, these individual cooling systems could also be used for cooling demand for agricultural and fishery products, as well as cooling medicines in local hospitals (UNEP, 2016). 

Desalination plants are another important category. Reverse osmosis is the technology of choice for all future plants. More than 18,000 desalination plants are thought to be operating worldwide. Together they have a maximum daily production capacity of around 90 million cubic metres of water (International Desalination Association, IDA Desalination Yearbook 2015-2016). Installed and operational desalination plants worldwide are estimated to emit around 76 million tonnes of CO2 per year (Masdar, 2015), which could account for 50 GW or more than 1% of global electricity demand. With access to drinking water becoming a rising concern for a quarter of humanity, the increasing desalination can be expected just to ensure survival for large sections of the population. 

A planned desalination plant in El Khafji in Saudi Arabia is one of the leading examples of coupling reverse osmosis plants with solar PV. The USD 130 million facility will desalinate 60,000 cubic metres of seawater each day, ensuring a stable supply of drinking water throughout the year. The use of solar PV for desalination at the moment is minor. However, water is much cheaper to store than electricity is, so plant operation makes the most economic sense where solar electricity is available (Oxford Business Group, 2016). 

Coupling solar PV with water applications is also of interest to the agricultural sector. Solar-based solutions can provide reliable, cost-effective and environmentally sustainable energy for decentralised irrigation services in a growing number of settings. Multiple benefits result from solar deployment, including improvement of livelihoods (via increasing productivity, incomes and food security), social well-being (through poverty alleviation as well as emissions reduction) and reduce spending on fossil fuel subsidies and centralised energy infrastructure. Solar PV facilities, therefore, can help to fulfil several Sustainable Development Goals. New targets and initiatives announced by a growing number of governments, development agencies and the private sector attest to growing recognition of the broad socio-economic benefits of renewables, including solar energy applications. India, for instance, has set out to deploy more than 100,000 solar water pumps for irrigation (IRENA, 2016d).

Solar home systems consisting of a small panel with a battery already provide more than 6 million households with 100% of their electricity needs. More than 44 million pico-solar products – solar lanterns and home systems smaller than 10 W – had been sold worldwide by the second half of 2015. In the developing world, 89 million people already have at least one solar lighting product in their household, and 21 million have been lifted onto the first rung of the energy access ladder. About one in three off-grid households will use off-grid solar by 2020. The size of these systems is gradually increasing from lighting and recharging to TV, fan and refrigerator applications (Lighting Global and BNEF, 2016). 

As electricity demand increases, solar home systems can be connected to each other to create local microgrids that share production, storage and demand. Some of these initiatives, like SOLshare, already exist. Lithium-ion batteries have replaced lead-acid as the dominant battery technology, and the cost of batteries continues to fall. Islands offer a specific opportunity for the development of localised grids based on solar PV and storage, with the chance to achieve relatively quick results. The Pacific island state of Tokelau already supplies 100% of its electricity consumption through a combination of solar PV and battery storage technologies.

IRENA’s renewable energy roadmap shows that solar PV deployment will be global and spread across utility-scale applications and rooftop solar PV systems as well as pico-solar systems such as solar lanterns. In 2030, more than 20 different countries are expected to have over 15 GW of PV capacity installed, and at least some PV will be deployed in every country worldwide (IRENA, 2016 c). 


Solar PV growth is set to continue around the world. Utility-scale solar PV projects will require specific regulatory policies to manage the variability and impact of solar PV on electricity storage.

Furthermore, solar PV will rapidly expand from utility-scale projects. It will diversify into residential, commercial and industrial applications as well as solutions for rural areas and niche markets like the agricultural sector, the fishing industry and healthcare. As a result, users of solar PV will keep increasing, and new agencies will need to be formed to craft specific policies for these new markets. Stakeholders must be educated and policies realigned. 


Continued solar PV growth equires a transformation in the way existing grids are managed and operated. At the same time, distributed solar PV is catalysing developments in distributed grids. 

Some major economies have already attained significant proportions of solar PV in their electricity mix. For example, Italy generated around 10% of its electricity from solar PV in 2014. Germany has installed PV capacity of 40 GW in a power system where demand ranges from 40 GW to 80 GW. On 8 May 2016, Germany set a new record, achieving 88% renewable power for several hours during the day. More than half of all German power was produced from solar PV during this part of the day, and the country’s electricity exports soared. An increasing concern is how to deal with surpluses that can result in negative power prices as conventional must-run plants also continue to produce. 

Some impact on transmission infrastructure is inevitable. Most developers of utility-scale solar PV parks are planning their projects in areas with high solar irradiation because this lowers LCOE and improves a project’s competitiveness during auctions. However, locations with high solar irradiation may not correspond to places with electricity demand. This results in increased investment in transmission lines. For example, many project developers of utility-scale solar PV systems in South Africa are planning their projects in the sparsely populated region of the Northern Cape. Locating these projects closer to demand centres would increase LCOE but reduce grid investments in transmission lines. 

In addition to national transmission network expansion, interregional interconnections are another possibility for increasing the deployment and use of solar PV. Introducing more interconnectors in an East-West configuration allows access to solar PV for much longer periods of the day. A contiguous grid from China to Morocco could provide solar PV-based electricity for up to 20 hours of the day. Expanding interconnections in a North-South configuration, meanwhile allows solar PV power to be transmitted inexpensively to demand centres from regions with high-quality solar resources, generally nearer the Equator. This reduces seasonality. Examples of this approach (still in largely planning stages) include the Desertec initiative between Europe and Africa or the Gobitec in Asia. 

Except for very large projects, the majority of solar PV installations will be connected to the distribution network. In Europe the deployment of solar PV in distribution networks has lowered the costs for operating distribution networks. However, if the solar PV capacity exceeds 15% of local demand, additional investments are needed to ensure that all power can be evacuated whilst ensuring system quality. An EU-wide study suggested that costs of integrating 485 GW of solar PV into Europe’s distribution networks would amount to around USD 0.028/kWh. Demand response would decrease the investment needs to USD 0.023/kWh (PV Parity, 2014). 

The emergence of DC-based distributed systems also offers new opportunities. New DC household appliances can be connected directly to solar PV panel and battery storage systems, which increases efficiency and reduces operational challenges. New maintenance and safety standards are needed (NREL, 2015). For countries with rising electricity demand and the need to expand grid infrastructure, the deployment of smart grid technologies in distribution networks can create new models for managing supply and demand locally. This is much more effective and efficient. 

Energy storage technologies are sometimes the critical lever to solar PV deployment. In the short term, electricity storage for solar PV deployment in distributed systems will be a potential game changer for three reasons: 

1. Renewable power generation coupled with electricity storage is an economically and technically attractive alternative to diesel generators. 

2. Remote areas and islands often have weak interconnections and lack flexible power sources. This means that storage is one of the few viable solutions to support the integration of solar PV and wind power in existing power systems. 

3. Renewable power coupled with electricity storage can improve the reliability and security of power systems by providing a range of services from power management to long-term power planning. 

In larger systems, energy storage can be deployed at many different levels depending on needs. Pumped storage hydropower will be a key platform for bulk storage, while heat storage is required for seasonal storage. Distributed storage options, like batteries or electric vehicles, may be able to provide grid support services through aggregators facilitated by the latest smart grid technologies (IRENA, 2015b).

The electrification of end-use sectors is another strategy that will become increasingly relevant when the share of solar PV increases. For example, today we have total potential electric vehicle battery storage capacity of 130 GWh (125 GWh from two- or three-wheelers and 5 GWh from battery electric vehicles. In REmap 2030 this total increases to 8 TWh for battery electric vehicles (from 160 million vehicles with average 50 kWh battery size) to 1.8 TWh from two- or three-wheelers (from 900 million two- or three-wheelers with average 2 kWh battery size, an average from small and large vehicles) (IRENA, 2016c). 


Although most operational impacts of solar PV can easily be solved through various technical solutions, the rise of solar PV deployment will ultimately require a fundamental transformation of the power sector. The immediate driver for this transformation is the distributed nature of solar PV, which will entice new stakeholders into the power market to start producing their own electricity. As an immediate consequence, policy makers are already exploring different models of remuneration and compensation for use of the grid infrastructure. 

As the share of solar PV increases, its intermittency will increasingly need to be managed. Potential solutions are the creation of a generation mix with more flexible generation plants, interconnectors, demand-side management and electricity storage. Depending on the specific circumstances, one or all of these options are available. Furthermore, the management of both supply and demand at a local level represents a potential yet untested solution for dealing with this variability with knock-on effects on national and regional grid infrastructure. Either way, new regulation will be key to allow these  different flexibility tools to enter and engage in electricity markets. 


Governments must increasingly create integrated frameworks to nurture technology development, spur deployment and provide support mechanisms for local supply chains. 

Successful policies have been instrumental in encouraging investments in solar and stimulating the development of the sector. Experience shows how a combination of basic and applied R&D in the first two decades of PV uptake was essential. An additional 30 year period was required for commercial scale-up through policy instruments that created long-term demand, supported niche market formation and promoted industrial co-ordination. Innovation efforts based on a learning-by doing pathway, pulled by market incentives in countries such as Germany, brought about a reduction of two orders of magnitude in the cost of the technology. 

In 2016, solar PV is commercially available and economically attractive. At the same time, there are still plenty of opportunities to improve solar technologies. Consequently, deployment policies stimulating market pull and business engagement need to go hand-in-hand with technology and innovation policies to support continuous support for research, development and demonstration. In addition, energy policies cannot be considered in isolation from industrial policies. Institutional frameworks need to be developed to ensure that countries take advantage of solar PV contributions across the value chain from project initiation to operation and management of installed capacity. 

Current research, development and demonstration (RD&D) in solar PV is below the expenditure levels of the 1980s. For example, the US spent around USD 300 million annually on solar PV research in the 1980s compared to around USD 60 million in 2016 (McCormick et al., 2016). More research will have to be directed at the reduction of soft costs, innovations in manufacturing and system integration. This will require dedicated programmes to allow entrepreneurs and other early adopters to experiment with new deployment models and focus on learning by experience. Almost all countries have increased deployment. Standardisation and testing enables harmonised technical platforms to document technology developments while objectively benchmarking performance among industry players. This will thus be required to accelerate improvements based on competition. 

“Costs have come down because of incremental improvements in the industrial supply chain, and that will continue. What is important is the institutional setting; and the access to the electricity market for new players.” — Tomas Kåberger, Chair of Executive Board, Renewable Energy Institute, Tokyo

Deployment policies need to be designed taking into consideration the following key requirements (IRENA, 2015c, 2014): 

• A long-term policy framework showing government commitment towards the market. 

• Credible short, medium and long-term targets backed up by action plans designed to remove barriers. 

• Policies aligned between countries in order to minimise risks faced by investors domestically and internationally. 

• Smart remuneration arrangements which provide long-term predictable revenue streams and include built-in flexibility to allow for adaptation as costs reduce so as to minimise policy costs.

• Actions to tackle non-economic barriers, including streamlining planning and permitting, developing the necessary skills base and providing public information.

• Measures to enable technical and market integration once deployment grows.

Policy makers need also to make sure that their deployment policies are able to adapt to the dynamics related to the business environment such as technology costs. This is a delicate task which requires long-term planning and targets on the one hand, and an agile set of policies to support this long-term vision on the other. For example, Germany’s feed-in tariff for solar PV has a clearly defined expiry date with regular and predetermined evaluation steps along the way. As solar PV costs have fallen and deployment increased, market-based mechanisms like renewable energy auctions are increasingly being adopted to support deployment. The complete transformation of the energy system can only happen by addressing the three major sectors (power, heat and transport). Policies therefore need to be designed to support solar deployment across sectors. 


The impact of solar PV extends beyond the power sector and across the value chain, with business and policy implications related to equipment production, operation and maintenance. 

The rapid development of solar PV has some immediate consequences for the key indicators for the power sector in both established and growing economies: reliability, affordability and security. First, solar PV is cost-competitive with other power generation technologies in a growing range of locations and conditions. Second, solar PV produces electricity based on nationally available resources alleviating any security issues associated with imported fuels. Third, the variability of solar PV requires sufficient flexibility within the power system to ensure that supply and demand are matched at all times. The latter will require a transformation of the power sector on a technical and institutional level (IRENA and IEA, 2016). 

Beyond the power sector, solar PV has also direct consequences for the environment, economy and society at large. For the wider economy, solar PV accounts for the bulk of renewable energy investments to the order of USD 80 billion per year. Around half of this economic activity is related to production of hardware but local project development, installation, and operation and maintenance activities account for the other half. For the environment, solar PV is already contributing to greenhouse gas mitigation in the range of 200-300 million tonnes CO2 per year. Increased solar PV deployment from 200 GW today to 1,600 GW in 2030 will result in greenhouse gas emission reductions of between one and three gigatonnes in 2030. This emission reduction potential entails important economic benefits from the avoidance of climate risks. Another important advantage is lower water intensity, so that solar PV offers water-saving potential compared to thermoelectric options (conventional or renewable). At the same time, solar PV deployment in the power sector as well as in rural applications help to reduce local pollution and thus avoid some harm to health. 

Solar PV also has important implications for job creation. Solar PV is the largest renewable energy employer, accounting for 2.8 million jobs in 2015, of which about two-thirds were in China. China produced around 34 GW of solar PV modules in 2014 (70% of world’s production). The manufacturing segment employed close to 80% of China’s 1.7 million solar PV workforce, followed by installation, operation and maintenance. However, the manufacturing segment is not the only way to increase deployment. In the US, the latest National Solar Job Census indicates that installations (adding 1.4 GW during 2014) were the main engine of job growth. 

Installations accounted for 97,000 out of the 173,800 jobs in the US solar PV industry in 2014. In 2015, solar jobs in the US had grown to 300,000, two-thirds of which are permanent. The expanding global market for solar PV is also creating shifts in employment structure and along different parts of the value chain. For example, both market and manufacturing capacity has shifted from Europe to Asia.

This has led to a growth in solar PV jobs in Japan while jobs decreased in the EU. Solar PV deployment in the off-grid market also creates significant jobs. This is exemplified by the Bangladesh programme resulting in the installation of 3.6 million solar home systems and the creation of 115,000 direct jobs through manufacturing, assembly and deployment. In addition, the provision of electricity in rural areas has increased economic activities and creates an additional 50,000 downstream jobs.

Source- Letting in the light: How solar photovoltaics will revolutionise the electricity system

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