Bloomberg Intelligence’s Global Solar Energy 2023 Outlook predicts that solar energy is likely to be the fastest growing sub segment of the energy sector in 2023, with demand set to soar 20-30%.
This follows the International Energy Agency announcing it expects solar energy to surpass coal power by 2027 as the energy crisis and war in Ukraine drives a shift to renewables. The IEA believes renewable energy will become the largest source of global electricity generation by early 2025 and the world will add twice as much renewable capacity from 2022 to 2027 as in the previous five years.
Rob Barnett, BI Senior Analyst (Clean Energy) added: The growth of solar follows a record 2022, during which global solar capacity additions expanded about 47%. Best in class peers such as Enphase or First Solar could see their sales growth exceed 30% in 2023, and amid such fast line growth, we believe profitability metrics are poised to improve based on an easing of input costs and supply chain constraints.
Solar shares held up well amid broader pullback
Global solar demand rose about 40% in 2022 with industry revenues increasing about 50%, and such fast top line growth could be one of the factors that helped buoy solar share prices this year relative to the overall market. While solar shares have outperformed the broader market so far this year, we note that most solar shares are still well below their record highs in 1Q21.
2023 sales may top $220 billion
Regardless of the longer term trajectory, BI sees growth in solar demand surpassing 20% in 2023-25 with industrywide revenue for the companies in BI’s global solar theme basket on track to exceed $220 billion in 2023. Consensus expects 2023 revenue to increase the quickest at inverter manufacturers and equipment suppliers. Sales at Enphase are expected to be up 35% in 2023 and 29% at SolarEdge.
Cheap solar electrons fuel demand
BI believes double digit growth is fuelled by favourable economics: a new solar system’s levelized cost of electricity (the average cost of an electron produced by a specific power plant over the life of the asset) is about $40 a megawatt hour, roughly in line with a new wind plant and over 50% cheaper vs a new coal one. Unlike nuclear power, the cost of installing solar is likely to get cheaper in the future as efficiencies improve and manufacturing expands.
Battery rollout may hit its stride in 2023
Following successful 2021-22 battery-storage rollouts, the coming year could be a banner one, with Canadian Solar, SolarEdge and Enphase expected to have delivered a cumulative 10 gigawatt-hours of batteries in total.
European solar demand poised to soar on REPowerEU
European policy support for solar is also strong with the European Commission’s REPowerEU plan aiming to double the installed capacity of solar power to more than 320 GW by 2025, which may lift consensus sales estimates for 2023-25. By 2030, the EU is aiming for 600 GW of installed solar capacity, an indication that sales momentum could be maintained through the end of this decade.
