[Paradox in the home solar market]
(Source of the chart: Financial Times)
The years 2022 and 23 have been fantastic for solar companies in Europe, especially Germany. Demand has skyrocketed, as product supply prices have fallen. The reason for the surge in demand is that the Russo-War has more than doubled electricity prices, and the EU has heavily subsidized PV to reduce its share of natural gas generation. Prices for equipment such as Chinese panels have also fallen, helping companies.
However, the growth rate of 2024 has slowed significantly compared to 23 years, and especially profitable house-roofed solar power has grown back, putting severe management pressure on companies. It was difficult for Chinese PV companies to directly enter the house roof type because it costs more to install than the material cost and requires a variety of work such as construction materials, wiring work, and licensing depending on the house. However, the boom and lack of supply from 2022 triggered Chinese PV companies to directly enter the market, and the competition intensified and the number of employees increased due to the reverse growth in 2024, which became a perfect storm that demanded demand.
Germany installed 7GW of PV in 2022, 15GW in 2023, but growth stagnated to 16GW in 2024. Other parts of Europe are no different. During this period, several large PV complexes were built, so the home PV market has backgrown except for the balcony sector. Why did consumers become less enthusiastic about PV? Facility costs are down more than 30% compared to 2022?
This is due to the fact that household retail electricity prices in Europe are gradually falling past their peak in the second half of 2022. The economic situation in Europe is not good these days, and households are naturally not able to invest. Installing roof solar power costs a lot of money, but when I took out a loan, interest rates rose. As natural gas prices stabilized and wholesale electricity prices returned to 2021 levels, the EU, which has bad finances, also reduced subsidies. If retail electricity prices are unlikely to rise, the incentive to install roof solar power has been reduced by spending quite a lot of installation costs. Panel prices have fallen significantly as long as installation costs are not expensive, such as balconies or walls, not roofs, but roof solar power still bears the burden of installation costs.
Complex licensing, land acquisition, fixed-price contracts, procurement rates, and EPC amounts are important for large-scale utility solar above MW, but electricity and installation costs are important for the home solar market. Even if the panel is free and ESS is included, it is not easy to increase demand if the electricity bill is tolerable and the cost of labor installation is high. Business models that provide interest-free loans or rent roofs are needed, but they are not easy in today’s interest rate situation. In other words, in order for roof solar power to secure its own economy and create demand, it is necessary to solve various issues besides technological development and falling costs. Also, if energy prices and interest rates fall, prices and material prices stabilize, and even if material prices fall, there is no incentive to invest, so the market shrinks.
The role of the market is important in the energy transition, but market power alone is not enough. This is why careful policy design is necessary, such as whether localization of roof solar panels is important, whether job creation and proper salary for installation personnel are important, and whether new houses are obligated to construct roof solar power by establishing new building regulations (Tokyo, Japan). If you want to increase roof/wall solar power in a Korean city where you live together in apartments, you don’t have to simply modify the 11th edition. Further consideration and discussion are needed.