The International Energy Agency (IEA) has highlighted big shifts in global energy trends in its recently released document called the World Energy Outlook 2024. Not surprisingly, solar power has been tipped to remain at the forefront of the energy sector’s “Clean Transformation,” with projections showing that global solar electricity generation could grow fourfold by 2030. This growth is set to accelerate the decline of coal and reshape the global energy mix.
According to the report, global energy markets stabilised in 2023, with natural gas prices dropping after a spike in 2022 and energy demand growing by 2.1%, aligning with the pre-2020 average. However, demand growth is expected to slow to 0.7% annually until 2030. Most of this growth will be in emerging markets and developing economies.
By 2033, solar will surpass nuclear, wind, hydro, and natural gas as a major electricity source. Eventually, it may even overtake coal to become the largest source of electricity globally.
The evolving renewable energy industry
The IEA predicts that as more renewable energy like solar and wind comes online, global CO2 emissions from non-renewable energy will reach their peak around 2025, which could be a major step forward in reducing the impact of climate change.
However, the global body warns that these changes alone aren’t enough to meet the goals of the Paris Agreement, which aims to limit global warming to well below 2°C, preferably to 1.5°C, above pre-industrial levels. Even with the growth of renewables, CO2 emissions are expected to fall only 4% below 2023 levels by 2030. This would still result in a global temperature increase of about 2.4°C, higher than the desired target.
To reach the 1.5°C target, the IEA outlines a path that it calls “increasingly narrow, but achievable.” This roadmap includes strategies like a rapid shift to clean energy technologies, faster adoption of electric systems, and a big reduction in emissions, around 33%, by 2030. Achieving these goals will demand new policies and large investments in renewable energy, especially in regions that still rely heavily on fossil fuels.
Solar and wind will provide nearly 60% of global electricity by 2050. However, fossil fuels still met 80% of global energy needs in 2023, though their demand could peak by 2030, as per IEA’s estimates. The rise of clean energy also has a correlation with the falling cost of solar and wind power, which has made them competitive with traditional fossil fuels. The IEA estimates that solar capacity could exceed 16,000 gigawatts (GW) by 2050, a huge jump from current levels.
According to a recent Allied Market Research report titled “Solar Fuel Market,” the market was valued at $2.6 billion in 2023 and is projected to grow at a CAGR of 7.7%, reaching $5.4 billion by 2033.
The report also raised a warning for the sector, as it stated, “The global solar fuel market is experiencing growth due to several factors such as escalating greenhouse gas emissions, advancements in solar energy technology, and growing investment in green hydrogen projects. However, the high technical cost and lack of widespread infrastructure hinder market growth. Moreover, the shift towards green hydrogen production will provide opportunities for expanding the solar fuel market.”
Extreme weather events: Worry for policymakers?
Solar energy generation is fundamentally dependent on weather conditions and daylight hours, resulting in fluctuations in energy output over time. This factor also introduces uncertainty and variability in the availability of solar resources, which can disrupt continuous fuel production processes. Consequently, reliance on solar energy as the primary input for fuel production may lead to inconsistent output and operational challenges for solar fuel facilities.
There is a constant need for tactics to enhance energy storage technologies, in addition to the necessity of introducing hybrid systems that integrate multiple renewable energy sources to mitigate the effects of intermittency and ensure reliable fuel production.
Between 2013 and 2022, 46% of global renewable energy investments went into solar photovoltaics, according to the International Renewable Energy Agency (IRENA), which also highlighted that in 2022 solar PV accounted for 60% of this investment, around $300 billion. However, as extreme weather events increase in frequency, insurers and lenders want assurances that potential threats to productivity, performance and resilience of these assets are being addressed.
Towards the end of the last decade, a significant loss for a utility-scale solar PV plant typically ranged from $100,000 to $200,000, with some losses reaching as high as $1 million.
According to GCube, a specialist renewables insurer owned by Tokio Marine HCC that has underwritten over 20 GW of solar capacity, claims resulting from hailstorm damage to solar PV plants in the US now average approximately $58.4 million each. These claims account for 54.21% of the total costs incurred from solar loss claims.
GCube director of operations and legal counsel, James Papazis, said, “The premiums for the solar plant’s construction phase as well as its operational phase have increased, along with increases in deductibles and imposed sub-limits and limits.”
“Today $100 million-plus losses from hail damage at solar sites in the US are not unusual with sub-limits at $50–$60 million. The loss is shared by multiple insurers and reinsurers. Even then the project is exposed with an uninsured loss for a substantial figure. This had led to tension between financiers, lenders and insurers,” he stated, while adding about more due diligence and effort occurring at the planning stage of projects, and also insurance too is being discussed at a much earlier stage of the project’s development because lenders want to know about sub-limits, premiums and deductibles.
“As solar PV projects have increased in size and are increasingly being sited in more remote locations, longer construction phases ensue. Supply chain bottlenecks and limited availability of components and equipment have also impacted projects so they are taking longer to build,” Papazis remarked.
According to Paul Raats, principal consultant, energy systems at risk management consultancy DNV, financiers and insurers are paying increasing attention to the risk that comes with climate change and extreme weather events.
DNV has been advising IRENA on developing a set of recommendations to help the solar PV industry better manage extreme weather event-related risks regarding solar projects and assets.
“More attention needs to be given to sudden harsh weather during construction as the PV systems are not at their full bearing capacity and are more vulnerable to heavy loads,” said Raats, while adding, “developers and their contractors are advised to schedule construction by considering short-term weather forecasts, a practice that is more usual in offshore wind.”
DNV recommends that the assessment of the 100-year flood probability should be included in project evaluations. Any recommendations from this assessment should be incorporated into the project design. Potential measures may include raising the height of mounting systems so that the bottom edge of the solar PV module is positioned above the highest recorded water level, installing inverter cabinets off the ground, reinforcing foundations, and implementing or improving drainage systems.
Insurance against damage should provide an additional layer of financial protection to the projects located in such regions. DNV has been pitching for projects having owners’ engineers for oversight and inspection activities during the plant construction phase, apart from contractors putting proper insurance in place.
In its latest study, UNSW Sydney noted that shifts in temperatures brought on by climate change would result in solar panels having greater risk of degradation due to prolonged exposure to harsh outdoor conditions.
The findings, published in the journal “Progress in Photovoltaics: Research and Applications,” show degradation of future PV modules will result in up to a 12% increase in power loss, leading to approximately a 10% rise in future energy prices by 2059.
For the study, the researchers used regional climate model projections to study the forecasted levels of temperature and relative humidity in Australia and track their impact on the degradation of PV modules across Australia.
The study looked at three degradation mechanisms that are typically observed in silicon modules: hydrolysis degradation, which considers temperature and relative humidity; thermal degradation, which takes into account changes in temperature of the module; and, photo degradation, which factors in UV radiation temperature and humidity.
The weighted average degradation rate was calculated using the probability of occurrence of each of these mechanisms under specific climate types including hot and humid, moderate, and desert conditions. To assess the impact of climate change on module degradation, the researchers estimated and forecasted the changes in the weighted average module degradation rate under a low and high emission scenario.
Finding the solution
American solar plant owners and developers are adopting approaches where they use ground weather monitoring stations, and onsite sensors, at their project site for a minimum of one year. The gathered data will then be compared with high-resolution satellite data, sometimes going back 20-30 years, to produce bankable site-specific data.
Solargis, which provides this kind of modelling service, counts solar PV project developers and independent power producers, as well as technical advisers and independent engineers on projects, while banks also use its data and services for their financing process.
Accurate historical temperature and irradiation values are crucial for analysing trends, predicting scenarios, and making informed decisions, said Giridaran Srinivasan, Solargis America’s CEO, as he explained, “This allows for more accurate prediction of output, based not only on the best-case scenario but also for periods of extreme or non-typical scenarios. More and more, lenders in the solar PV sector are including rigorous due diligence procedures for project funding.”
As part of this process, the solution mainly opts for calculations and simulations that incorporate more extreme event models upfront to account for the worst-case scenario in terms of energy production. The aim is to provide an accurate representation of the solar PV project’s potential performance.
Kevin Christy, Head of Innovation & Operational Excellence (in North America), at Lightsource bp, said, “The US is experiencing severe hail events in Texas, Kansas, Oklahoma, to name a few. A large hailstone can do a lot of damage if it hits a solar panel dead on. Our hail monitoring and mitigation system, Project Whiskyball, helps to mitigate damage.”
The trackers that the company uses in its projects tilt in order to maximise the incoming light from the sun. But when the risk of a hailstorm is detected, the trackers stow the modules in a more vertical position.
“Any hail striking the modules will be reduced to a glancing blow rather than a direct hit. It is extremely effective at reducing the force applied by any hail and greatly reduces the potential for damage. Project Whiskyball is now operational across all of our completed solar assets in the US,” Christy added.
Talking about innovation, Solar Defender Technologies has developed a protective net that covers modules mounted on single-axis tracker systems, used in ground-mounted utility-scale installations, while allowing the modules to move to achieve optimum energy output.
GCube director of operations and legal counsel, James Papazis, said, “This is becoming a big issue for the industry. When lenders have to factor in increased premiums or uninsured hail losses, the economics of projects can change significantly. There isn’t really a clear answer yet.”
“Where developers are building projects that they intend to operate and own for the majority of the operational lifetime, lenders are more comfortable with these sorts of companies to partner with. This long-term approach does change the economics, making it attractive for those with large balance sheets and large portfolios,” he added.
Portfolios with projects spread across different locations and regions mean that ones in a hail-prone part of a state or by the coast can be offset by others that are in areas where weather is less severe.
“Wildfires are the latest issue for the industry. Generally, solar projects in some parts of the US are becoming more expensive to finance and insure due to mitigating against more weather events, not just natural catastrophe,” Papazis observed, as he concluded, “The industry has options available to support mitigation and underwriting of risks, including paying more attention to site selection, equipment and technology choices and making better use of weather modelling, as well as looking at water tables and frequency of flooding events. There are multiple factors so use of multiple different modelling tools, including satellite imagery, is important.”