“In 2007, I got the feeling that solar would become the future of energy or at least electricity… and it’s happening today, it’s leading the energy transition,” said Pascal Rochat, CEO of Active Niche Funds and former chief risk officer of EOS, a Swiss utility. Back then, he explained, the solar business was a very small and non-competitive business. Now it’s “the biggest energy market in the world.”

Rochat observed that the solar market has experienced “exponential growth, multiplying by 100 since 2007.” He noted that, in the past year alone, 600 gigawatts of new solar panels were installed globally, “a capacity exceeding the combined power of Germany, Switzerland, and Austria.”

He remarked that such growth has propelled solar to become the largest sector for new power installations worldwide, accounting for 70% of all new power facilities installed last year, “far ahead of wind.” He also noted that gas, nuclear and coal are “super small” in terms of new additions.

Cheap and fast

The primary driver behind this dramatic shift is the cost-effectiveness of solar energy. Solar has become the cheapest source of electricity in most countries, costing between €0.03-€0.05 per kilowatt-hour without subsidies, significantly lower than gas (€0.08-0.18), coal (€0.10-€0.14), and nuclear (€0.15-€0.20). This economic advantage, coupled with the ease of scaling up solar installations quickly, has made it a dominant force in the energy sector.

Rechat reported that the International Energy Agency wrote that the world is entering an “age of electricity” characterised by increasing demand, estimated at a 4% annual growth rate compared to 2%-2.5% in the last decade. As decarbonisation must be a worldwide effort, he commented that solar and wind are the only technologies capable of meeting this rapidly growing demand due to their quick deployment times, compared to the longer timelines for gas (5 years) and nuclear plants (8-12 years).

Rochat also noted that, initially, government support played a crucial role in pushing renewables, but that the adoption of solar is now largely bottom-up, driven by individuals seeking to reduce high electricity costs and corporations aiming for stable, long-term energy prices through long-term power purchase agreements (more than 10 years).

Renewables on the up

Rochat estimates that renewables generate about one-third of global electricity, with projections indicating a rise to 50-60% by 2030, whereas solar is expected to be the fastest-growing source. Indeed, he reported that the latter is expected to increase its share from 7% to 23%-25% by 2030. Not far behind, wind will likely grow from 10% to 18%, and hydro will remain relatively flat at around 14%.

Nuclear power, despite ongoing debates, is expected to maintain a share of around 9%-10% for the next 20 years. Yet he remarked that achieving even this level would require a doubling of nuclear capacity within 15 years to keep pace with the overall increase in electricity demand.

China dominates but doesn’t threaten

Rochat noted that China is leading in both manufacturing--in terms of quality and scale--and installation, accounting for one out of every two panels installed globally at the stunning rate of one gigawatt per day, “the size of a big nuclear plant.”

This rapid development in China has impressed even seasoned experts in the field. Rochat argued that depending on China for solar panels, which are “merely machines,” is different from depending on, say, Russia for gas, because the sun’s energy is universally available. “It doesn’t really make sense for Europeans or Americans to compete on manufacturing [solar panels].”

He thinks that the decentralised nature of solar power, allowing individuals and corporations to generate their own electricity, further enhances energy independence.

He also observed that the existing trade war and tariffs imposed by the US on Chinese solar panels for over a decade have not significantly hindered the evolution of the sector despite tariffs of 50%. “The industry has adapted to these protectionist measures.”

Misinformation

A significant challenge in the energy sector is misinformation. Rochat emphasised the importance of relying on data from trusted sources like the IEA. He said that general knowledge about energy, even within the finance industry, is “quite low,” making it crucial to find and use factual data--such as solar power being the largest new source of electricity. “It’s just a fact.”