The World’s Most Attractive Solar Markets

The solar energy industry is growing as a very promising, international opportunity for investment. Therefore IHS Technology,  a “global information company with world-class experts in the pivotal areas shaping today’s business landscape” compiles a quarterly assessment of the “attractiveness profile” for emerging photovoltaic markets. In early 2014, this list is topped by South Africa (score of 67), Turkey (45), and Mexico (43).

This is an exciting development, given the position of these countries in the global emissions scene. Though not individually producing a significant amount of CO2e they are part of a group, along with South Korea, that are responsible for a critical 5% of global emissions.  By considering this smaller group with the larger emitters, over 75% of global emissions are accounted for in fourteen political units (with the EU counting as one.) Therefore the fact that these countries have become a magnet for solar investments is very promising.

South Africa’s solar attractiveness far outstrips its competitors. This is due in part to the critical shortage of power in the country. Coal has proven insufficient for providing consistent electricity to the population.  Despite the coal industry’s gripe over intermittent renewable energy not being a good fit with the greater stock of coal power plants, a rain soaked supply of coal proved that relying on coal is not enough. This shortage of power has let to South Africa’s Renewable Energy Independent Power Producer Program which allows the state utility company, Eskom, to buy renewable energy from solar and wind producers. This program set a target of 8.4 GW solar capacity by 2030. Once South Africa set the stage for a solar boom, global providers have jumped to the occasion. The percentage of solar in the country’s energy mix is expected to go from 1% in 2012 to 12% in 2020. As of result of this growth, it is expected that 2020 predicted electricity prices could drop from $0.171/kilowatt hour (already one of the cheapest in the world) to $0.075-$0.127.

The second ranking country is Turkey. This is true despite relatively low feed-in tariffs. The 9GW worth of bid submittals for Turkey’s first round of licensing (to be capped at 600MW) were from large investors with a long term eye, rather than small scale projects hoping for feed-in tariffs. This is unique in the solar market. The structure of Turkey’s licensing contributes to this by a pre-licensing scheme that is more feasible for end investors than for project developers. Yet the real reason why large investors are moving in is for the expectation that in time, given the growing energy demand, Turkey will reach grid parity where solar energy no longer needs feed-in tariffs and subsidies. The investing companies are taking a long term view and setting up their infrastructure now for when solar energy is fully integrated and just as competitive as any from other source.

Finally, Mexico is the new third place contender. Its rise from a score of 40 to 43 accompanies increased activity. There are currently 300MW under construction and a third of them began in the last quarter. This new growth comes after a National Energy Strategy (2013-2027) that estimate Mexico’s solar potential to be 6GW by 2020. As with Turkey, the potential for continued GDP, population, and demand growth are a big incentive for investing in infrastructure now. One final hurdle, the complexity of markets and financing/regulatory hurdles is being addressed in part by the state-owned utility company CFE’s recent announcement of public-private partnerships for promoting renewable energy generation.

All in all, there are very profitable markets opening up for solar energy. The fact that the most attractive markets are also in the developing countries that ride the line between too small to matter and being part of the 14 largest emissions is very exciting. All of the reasons mentioned for their attractiveness are based on the countries opening up their doors for licensing and creating an apparatus for the growth of solar energy to meet demand. Clearly they are on the right track.

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