Now, the latest International Energy Agency data for 2018 shows overall 2018 capacity additions flat with 2017 as China reduced its 2018 capacity additions over 2017 while trying to adjust its FIT subsidy policy. Flat investment and flat capacity combined imply flat prices.
What this implies is quite negative for the renewable energy outlook going forward. As I commented previously, the lack of PV investment growth despite significant PV cost reductions was a sign that unsubsidized prices were still too high for a natural market expansion and subsidies were still required to sustain the market. The effect of China’s 2018 pull back on subsidies clearly reinforces this interpretation of dependency on subsidy. More significantly, if investment and capacity were flat in 2018 this implies that prices were stable and the era of rapid price reductions has ended, at least for now.
To summarize, prices have not reduced sufficiently to sustain a normal unsubsidized market and prices have now stabilized, thus guaranteeing that subsidies are still needed and the market size will remain subsidy limited. The question is which way are subsidies heading? All the indications from China, the US and Europe are for reduced subsidies. This implies lower investment levels and declining renewable energy capacity additions going forward.
CO2 levels continue to rise with growing fossil fuel usage. Renewable energy is not having an appreciable effect and based on stagnant to declining investment it will not have an effect. Wishful thinking needs to end and new options need to be considered. Nuclear is on the table but there is no political will, the cost would be enormous and the time to develop and ramp safe clean reactors is many decades. Given the limited options and their problems Stratosolar does not look like an outrageous candidate.
By Edmund Kelly