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The Solar Power Market - Macro Perspective

What Market?

Electricity Generation vs Energy ConsumptionCompanies that sell solar electricity generators operate in the overall electricity generation market.

Unlike other forms of energy, electricity, once generated, has to be consumed. Otherwise, any over-supply will just result in heat. However, due to losses in the distribution of electricity, more electricity has to be generated than will be consumed. See maps for distribution losses and electricity generation by country.

Demand for electricity is continuing to grow fuelled by a growing population. Interestingly, the demand for electricity has grown faster than overall energy consumption, which in itself has grown faster than the world population.

This difference is particularly pronounced in developing countries with significant economic growth. Nevertheless, even in developed countries the per-head demand for electricity is expected to rise despite anticipated energy efficiency savings.

Compound annual growth from 1990 - 2030 in demand for electricity is forecast to be around 2.6%, with the world population growing at an annual 1.14%.

Comparison with Non-Renewable Sources


Electricity generation by fuel typeAccording to the Energy Information Administration (EIA) of the U.S. government, overall demand will grow at 2.85% annually from 2006 - 2030.

However, the demand for different underlying fuels and technologies varies greatly.

For instance, zero-growth is anticipated for the use of oil in electricity generation. This is no doubt because oil is to expensive for this purpose. Coal and gas on the other hand will continue to grow although many financial institutions have stopped financing coal.

Of all fuels, the renewables however will grow faster, albeit from a lower base level of course.

One word of caution: This is one forecast of many. We have selected the EIA figures, because they seem to be the most conservative figures as far as renewables are concerned. There are other models that predict a far more aggressive growth for renewables. Yet even with this more restrained forecast, the renewables segment looks attractive.

Comparison with other Renewable Sources


Electricity Generation from RenewablesAmong renewables, hydro is the pre-dominant source, and will be so for at least the next 30 years. Only five nations get their energy from renewable sources, one of them geothermal, the other four from hydro.

On the other hand, wind energy has matured but will still see significant growth in the foreseeable future .

The other significant growth section is solar & others including bio-fuels.

 

What is the value of this market?


Investment in Electricity Generation and DistributionTo meet the growing demand for electricity, money has to be spent on new installations, refurbishment of existing capacity, transmission (high voltage from power stations to the grid) and distribution (low voltage delivery to consumer).

As man power plants will have to be replaced in the near future due to their age, more capacity has to be built than just matching the growth in demand. This could amount to 5% annually of existing capacity just for replacement.

The IAEA estimates investment into new electricity generating capacity to be $4,000bn over 30 years from 2001. In a very crude approximation, the annual size of the market is $136bn (in US dollars 2000- base). More than half of the investment will be in Non- OECD countries.

 

References for statistics on electricity and energy
on statistics and investment in electricity generation

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