Talking New Energy: Rooftop solar in Europe: What’s ahead?

[00:00:01.780] - Jon Slowe

Welcome to Talking New Energy, a podcast from LCP Delta. I'm Jon Slowe.

[00:00:06.480] - Charmaine Coutinho

And I'm Charmaine Coutinho. Together, we're exploring how the energy transition is unfolding across Europe through conversations with guests at the leading edge.

[00:00:16.140] - Jon Slowe

Hello and welcome to the episode. Today we're looking at rooftop solar, the market for across Europe, where it is today and where it's headed. And to. To explore this important part of the energy transition, I'm joined by a couple of great guests. Jan Osenberg, Senior Policy Advisor at SolarPower Europe, the Trade Body for the Solar Sector. Hello, Jan.

[00:00:43.160] - Jan Osenberg

Good afternoon, Jon.

[00:00:45.860] - Jon Slowe

Welcome. And Dina Darshini, PV and Solar Expert here at LCP Delta. Hello, Dina.

[00:00:54.070] - Dina Darshini

Hi, Jon.

[00:00:55.600] - Jon Slowe

So, rooftop solar. Some of our listeners will have solar panels on their roofs, many be aware of the growth in the market. Jan, can you give us a picture when you look across Europe, how would you describe the rooftop solar sector today and its journey in the last years?

[00:01:14.760] - Jan Osenberg

In terms of total figures of rooftop PV installations across Europe, we've seen in 2023, 60 gigawatts of growth, ground mounted and rooftop PV. In 2024, this is going to grow to 64%... 64 gigawatt, and around 50 to 66% of this total PV growth is rooftop PV installations.

[00:01:42.220] - Jon Slowe

Jan, can you give us a picture of rooftop PV across Europe today and maybe its journey over the last years?

[00:01:52.950] - Jan Osenberg

Absolutely. We all know that rooftop PV has boomed in the past two years, and now we are slowly coming down from, let's say, the rush of the crisis towards a more steady market development. When we look at all market segments, so rooftop and ground mounted PV installations, we had 61 gigawatt installations in 2023 and are looking towards 64 gigawatt installations by 2024, which is a 5% growth. Of these total installations, roughly two-thirds are attributed to the rooftop PV both residential and commercial and industrial buildings. Of course, rooftop PV has particularly boomed across the past crisis years. We have seen roughly 50% annual growth year-on-year in aggregated overall rooftop segments, with extremes in the commercial segment, so between 10 and 80 kilowatt, which grew by... It's doubled year-on-year in 2023. This have been extremely strong numbers. Now, 2024 will be certainly more conservative here, with the residential market actually shrinking in our expectations, but the C&I market still holding up, with commercial market growing by 4%, but industrial growing by 27%. This is what we expect to see over the next years. So slow, steady growth between 5% and 10%, which is far above the pre-crisis years, but still it's still going onwards.

[00:03:36.790] - Jan Osenberg

Just to put this into context, even with 5% to 10% growth, we're still looking at more than doubling the total rooftop capacity by 2028 compared to 2023. We are still really radically rolling out rooftop PV across Europe in the next coming years.

[00:03:55.350] - Jon Slowe

Those are quite staggering figures, aren't they, Jan? That We see over 60 gigawatts a year across Europe, and that's 60 gigawatts of new capacity every year growing at that rate that you explained. And that close to two-thirds of that is rooftop solar. So, people may see big solar farms, depending on where in Europe you are, but the bulk of the majority of that capacity is still on roofs. So, I think that's quite something, and it's really the decentralised power, or the vision of a decentralised power system really accelerating and coming to fruition through rooftop solar. You explained the energy crisis was actually a great spur for the solar market as people look to manage costs. And this year has been a bit softer. Dina, do you want to dig a bit more into the softening of the market this year?

[00:04:53.940] - Dina Darshini

Yeah. I mean, absolutely. I think just a context to that following up on what Yann said, 2022 and 2023 were unique years. So, demand exploded for rooftop solar PV systems following record high retail energy prices, and we know this is linked to the energy crisis, like you said, but also the release of pent demand post-pandemic. So, households and businesses, they rushed to buy solar systems as a hedge against higher and more volatile grid electricity prices. But there were also subsidies and green economic recovery plans that further stimulated this market. And S did a rush in applications, pre-subsidy schemes ending. So, we always have an artificial spike of applications just before a subsidy ends. And if anything, supply chain disruptions and labour shortages held the market back from further growth. But the environment in 2024 actually is quite different. We have lower wholesale electricity prices impacting the rationale and urgency for consumers to instal solar panels. We have the cost of living pressures and higher costs of borrowing. This impacts both service providers' ability to offer financing models like leases and PPAs or power purchase agreement All the cost of these financing models. Exactly. And as well as impacts the end customer.

[00:06:21.250] - Dina Darshini

So, you have it in both sides. We've also seen some policy scalebacks. So for example, the removal of the net metering scheme in Poland, the exhaustion of the subsidy port in Spain, less generous as super and eco bonus subsidies in Italy. If you take that all as an aggregate, so across Europe, we're at LSP Delta still expecting roughly about a 20% plus decline in annual installations for residential rooftop solar in 2024 compared to 2023. Less of a decline in the commercial industrial space, so that's more a single-digit decline. But the one thing I'd add is that balcony PV is actually challenging that trend and it's likely to be up by more than 40% in 2024 compared to 2023. So a real good story there. It's boomed and come out of nowhere.

[00:07:16.410] - Jon Slowe

That's opening up the market for people in apartments, not with a north-facing balcony, presumably, but with a right-facing balcony to have solar, even if the capacity is small in absolute numbers, it's It's an interesting market segment. One thing stood out to me, Dina, and Jan, you must see this in your work as well, the difference in support schemes or the difference in national markets. I guess there isn't really a European market for rooftop solar. There are lots of national markets, and each of those national markets can be quite different.

[00:07:58.350] - Jan Osenberg

Yes, absolutely. I absolutely have to double down on this. It's not only the support schemes which are hugely different in terms of upfront cost support, tax reductions, VAT reductions, but also injection regimes, so net metering, feed-in tariffs, but it's also permitting regimes which are very different. Where you have to apply for a permit or how do you connect to the grid, this is all different, which creates for energy companies a very difficult environment to scale their operations across Europe. When we speak about the support schemes, Dina has mentioned very important ones. I think to add to this is also the Belgian market and the Dutch market. The Belgian market, which has to phase out their net metering to the beginning of 2024, and we've seen really radical drop in demand there. The same is happening in the Netherlands, where they are even probably going to phase out the net metering scheme retroactively, meaning that installations that had the right to have net metering over the lifetime of the installations will probably have to switch over within, let's say, after 5 or 10 years of the installation running, switch to a market-based compensation for their injections.

[00:09:18.120] - Jan Osenberg

That, of course, not only harms the business case or changes the business case, but it also just creates uncertainty across the users. People are suddenly asking themselves, Well, first, how am I going to get the money back? It's a totally different storyline. If you know there's a guaranteed offtake from the grid operator or from the supplier, which makes the business case, then if you have to think about, How am I going to sell my self-consumption? What are the grid What's going to be in the market? Am I going to get an electric vehicle or not? This creates an entirely different question on the mindsets of the customers, which they have to solve. But then also when you see the political movements in the respective countries and you see that when right-wing parties or far-right-wing parties enter governments, they might cut down support schemes. Then, of course, a business owner or a homeowner will be less likely if it doesn't have the certainty at the beginning of an investment that pays back over 20, 25 years that this plan actually will happen in real life. That's also something that's to be considered.

[00:10:30.400] - Jon Slowe

So, yeah, it's very different national markets. The overall trend I see, and I'm interested in what you both think about this, is the solar has existed, or the rooftop solar market has been, of course, connected to the energy market, but largely separate from the energy market, supported by maybe netmetering in Netherlands, for example, by some city schemes in Italy. But going forward, I see the solar market becoming much more intertwined and connected with the energy market. We're starting to see this with battery attachment rates. We're starting to see this with virtual power plants or aggregation of those solar and batteries together. So, yeah, interested in what you both think of that trend, solar becoming a much more integrated part of the energy transition rather than a standalone part of the market. Yeah, do you want to go first then, Dina?

[00:11:30.310] - Jan Osenberg

Yeah, happy to jump in on this one. No, absolutely. It's a very gradual movement as it goes along into… It's really a different product that we're thinking about. It's not just a rooftop system anymore, but as we are integrating a roof to PV into electricity markets, it's actually a smart, flexible, electrified building, which is the product that will ultimately determine the business case and how the product is being used. I'm thinking about it a little bit as a computer which was not connected to the internet, and before, you used it to write word documents, to write a letter to someone. The kids used it to play age of empires. But then the computer was connected to the internet. Then suddenly it completely changed how computers were used, what would be the usage of it. You would suddenly not read a book, but go get information from the internet. You would communicate immediately via internet. We all know about this. The The usage really changed. The drivers on the market for this are... Grid congestion is becoming a serious problem. We see that in the Netherlands, they are looking into injection fines for rooftop PV, which is, of course, a serious problem if customers don't have a battery, but then they have to suddenly pay their grid operators if they had to inject.

[00:12:53.080] - Jon Slowe

That's the first thing. That sounds tragic to me, Jan. The grid isn't ready for what homeowners as household social housing providers want to do, which is instal solar on their routes.

[00:13:06.510] - Jan Osenberg

Absolutely. The grid isn't ready. We see development on getting it ready towards more flexibility bills, either via flexible connexion agreements or also via dynamic tariffs. I think it will be quite a mix of getting regulators and all the stakeholders involved who write these new methodologies and getting it right to maintain the business case for rooftop PV, because there's actually also a risk involved in all this flexibility, which is that the business case for rooftop solar radically declines if you cannot make use of your self-consumption anymore as effectively as you can do today. The second trend, which is really critical, especially in the C&I segment, is negative electricity prices, which really challenges the business case in the line.

[00:14:01.010] - Jon Slowe

Yeah. So, Dina, what's your take on this? This integration, or my view on integration between the solar and the energy markets?

[00:14:11.710] - Dina Darshini

I can give you an example from... More from the market players' perspectives, okay. Because as Jan alluded, the actual market is changing. And then we can see even in the service providers, how they are reacting to it, how they are changing and evolving evolving. So, the traditional model of a solar PV provider just simply installing a solar system for one-off payment, it's a simple business proposition, but relatively low margin as it stands. It does not capitalise on the range of opportunities that exist in the market. And it also was a model that worked better in a period of subsidies, right? Because as heightened policy support stimulated demand, that's all you needed.

[00:14:56.020] - Jon Slowe

And it's very transactional. There's no long term relationship. It's a one sale, move on to the next one. And as long as you got the next one, everything's fine.

[00:15:05.570] - Dina Darshini

Exactly. Which is why to future proof and pursue higher margin models, several market players are incorporating these one stop shop models with multiple technologies offered and interoperability, or they offer subscription, financing services, home energy optimisation, dynamic tariff, you name it.

[00:15:23.500] - Jon Slowe

That home energy optimisation value proposition does shift. The dynamic tariff, that plays on what Jan was saying around self-consumption and finding ways to maximise self-consumption rather than just beating everything back into the grid.

[00:15:39.100] - Dina Darshini

Exactly. The value proposition does shift. It shifts from, Look, buy a solar panel now, quick, while subsidies are good, and it shifts it to, Look, invest in this home solution to reduce your energy bills and earn from energy system services. We, as the service provider, will help you in each step of your energy solution without compromising on quality customer service throughout. The offer is different in this more integrated world.

[00:16:09.240] - Jon Slowe

There's this integration between the solar and the electric vehicle charging, for example. And I know our reserach, shows that people that have bought an electric vehicle are much more likely to then instal solar on their roofs and probably likely to alter when they charge their car or the timing of when they charge their car according to a tariff, for example.

[00:16:29.370] - Dina Darshini

Yeah, yeah.

[00:16:31.540] - Jon Slowe

So, it does seem like there's much more of this interconnection between energy and solar in the market now and directionally going to be more of that in the future. Jan, the concept of electrified, flexible, electrified buildings, is that becoming stronger in your discussions at policy levels in Brussels?

[00:16:54.330] - Jan Osenberg

Absolutely. The question of electrification is becoming more and more prominent as we see that we are advancing quickly on renewable energy policies or let's say, let's say, let's zero policies on the renewable side, but other sectors are slower to advance. This interlinks strongly with the renewable sector, which are struggling from increased data and fluctuations on the markets. Here we have two benefits, which is one, you have electrification as being the solution towards selecting the most efficient technology to get net zero to mobility or to get net zero to heating devices in the areas where it's actually proven to be the most efficient solution. Home heating, low temperature heating, but also individual mobility. Here there's this push on the policy angle to the US working on an electrification action plan, which has recently been announced. It's very high-level concept at the moment where they are looking towards, hopefully, creating national targets for flexibility, but also, hopefully, developing a national financing framework for electrification, as well as develop an action plan to improve grid management in highly electrified grids. This is a push. Then ultimately, this will also feed into the solar ecosystem, which because these devices, of course, will consume if they are managed flexibly will consume the mid-time day electricity, which then hopefully eases the pressure on negative electricity prices and can also ease the pressure on grid management.

[00:18:43.350] - Jon Slowe

The more that solar systems have batteries with them. I think the jargon in the trade is attachment rate or battery attachment rate. Typically, I think more solar systems are coming installed with batteries, and that gives that flexibility or much more of that flexibility that you're describing, Jan.

[00:19:04.600] - Jan Osenberg

Absolutely. We see an increase in battery uptake across all markets, but we still have to acknowledge that in most European markets, the attachment rates are rather low. I'm not sure if, Dina, you have more information on this. I understand that the German market is by far the strongest market in terms of attachment rates. Then there's Austria and Italy, which have decent attachment rates. But And through that, there's quite a drop.

[00:19:32.480] - Dina Darshini

Can you confirm this? Yeah, no, that's absolutely right. In Germany, you're talking about 80 % plus attachment rate. Italy, I would say, again, artificially spiked because of the subsidies that were available at the time. We do see attachments go up during these periods, and then it comes down a bit. But yes, the theme of our session today, it's quite different depending on the country. There's no Europe battery attachment rate.

[00:20:02.980] - Jon Slowe

Yeah, there'd be very little battery attachment in the Netherlands if there's been net metering. Why would you have a battery, for example?

[00:20:09.580] - Jan Osenberg

And then there's another question on how you manage the battery, because we see in Germany it has high attachment rates, but the batteries are not used in a way to actually ease integrations on the grid. How it works is people charge their batteries in the early morning hours, but actually in the middle of the day when the pressure is highest, the batteries are sometimes already full. So, what we need is not only battery attachment rates, but also to use them as effective as possible to mitigate grid congestion and to mitigate negative electricity prices.

[00:20:42.690] - Jon Slowe

I'd like to move on from the trend of integration between solar and energy markets to the EU Solar Standard. This is a topic of discussion in Brussels. I think our listeners will be really interested to learn a bit more about this and how powerful it will at... will it drive a lot more rooftop solar across Europe?

[00:21:06.140] - Dina Darshini

Actually, just to chip in, because Jan might be quite modest, but I think he's played quite a big role in this from SolarPower Europe's perspective. But I'll let him talk I'd like to talk about it a little bit more.

[00:21:17.250] - Jan Osenberg

Essentially, the EU has adopted the EU Solar Standard, which is a requirement to instal rooftop PV on a majority of European buildings. It's a requirement to get solar. It's staggered across several building types. Really, by far the most strongest it is on public buildings because it requires buildings owned by public authorities, be it schools, hospitals, public authorities, to get rooftop solar, even retroactively on the existing building stock. From 2027 to 2030, these installations have to be made. Then Then there are requirements on new C&I buildings as well as on new residential buildings, which are in place at different times, as well as on C&I buildings, so commercial and industrially-used buildings by 2028 when they undergo a renovation. These renovations also have to be attached with a PV system. With all this bundle of required PV installations, We expect from Solar Power Year, we have a back-of-an-envelop calculations. We expect 150 to 200 gigawatts of additional PV capacity to be added on top of the market growth that we are that we're actually expecting. Now, this goes with the caveat that we have the EU directive. It's adopted, which is amazing, but it has to be implemented at national level now.

[00:22:56.580] - Jan Osenberg

There are always in these EU laws a lot of room for conditions for exemptions, which are also absolutely necessary. Not every building can carry rooftop PV. Some buildings don't use any electricity, so maybe they should be exempted. But there will also be exemptions on churches, on historical buildings, which are totally reasonable. So there will be exemptions. Now it's really up to look at the National Ministries to define the details of these requirements. We're probably going to see a range of very ambitious ministries and very rather slow or conservative ministries. And now we have to advance on the work on the technical details to make this work with the ministries.

[00:23:40.090] - Jon Slowe

The bit that I find most interesting there, Jan, is the retrofit. Well, Both the retrofit and the renovation. I've seen examples in parts of Germany of renovation of heating systems and requirement for renewables when you're renovating a heating system. But I think the retrofit would be really powerful on those public sector buildings.

[00:24:01.380] - Jan Osenberg

Absolutely. For public sector buildings, it's, of course, also a challenge on procuring these devices. We know the public procurement processes can be lengthy, so we'll have to look at how this can play out then.

[00:24:17.510] - Jon Slowe

Yeah, but we certainly help to drive solar into more of the market, and that's only a good thing. Absolutely. Keeping on time, let's I'll now bring out the Talking New Energy crystal ball. I wanted to set the dial this week to 2035, so 10 or just over 10 years away. The question for both of you, how do you How do you see rooftop solar's role and position in the wider energy market or the wider energy transition in 2035? So quite a broad question. You can interpret it how you want. Solar StopSolar's role and position in the wider energy transition in 2035. Dina, do you want to go first and then Jan?

[00:25:08.280] - Dina Darshini

Yeah, I absolutely see it as playing a critical role. It's in line with the energy transition ambition. It enables households and businesses to become prosumers. At a local level, it helps individuals and communities take charge of their energy needs. It offers potential financial potential benefits by selling excess power back to the grid or participating in community energy programmes. We discussed, when paired with batteries and other flexible electric loads and smart metering, it can be a powerful package for flexible solutions. Absolutely, I think it has a critical role in the wider energy market and the energy transition.

[00:25:55.380] - Jon Slowe

Jan, how about you?

[00:25:57.390] - Jan Osenberg

Thanks, Dina. I agree, but I do see that there are some caveats to make sure that rooftop solar actually fulfils the potential that it has. In terms of our market projections, we expect 1 terawatt of cumulative PV to be installed across Europe by 2030, which will be around 600 gigawatt of rooftop PV by 2030 across Europe. By 2035, we can expect to be well above one terawatt of PV installations. That, of course, means that solar PV will take a critical role in providing the electricity on the electricity grid. From today's 10%, probably moving more towards 20 and 30% of the actually providing the electricity grid. That means, of course, that the production patterns shift and demand patterns will have to shift accordingly. In terms of total numbers of buildings that have rooftop PV, we see in the Netherlands that around one quarter of the buildings already have PV. It's the highest market with per capita shares. Maybe we can see more towards, let's say, 30 to 50% of buildings across Europe than having PV, which would already be a huge win, considering that some buildings might still have statistical problems on getting PV. Then there is another a role to play, which is that rooftop PV can be the gateway to demand response.

[00:27:35.630] - Jan Osenberg

Rooftop PV can ultimately unlock consumer flexibility. The reason why I'm saying is that the first reason why people do smart charging of electric vehicles or they get a battery in the first place is that they get a roof to PV system. Without rooftop PV, it might become difficult to actually unlock electric vehicle flexibility, to unlock battery flexibility, and to unlock heat pump flexibility for the grid. It will be really up to roof to PV to, let's say, open the minds of the consumers to a more flexible steering of their assets. But then really I think we have to be also a little bit careful on the developments on negative electricity prices, on the developments on the grid tariff methodology, on the grid management techniques done by the grid operators. If we see too much curtailment, it can really be a problem for the business as well as on support scheme developments. These are absolutely can be game-changing developments. If we get them wrong, it might look less rosy, so to say.

[00:28:43.920] - Jon Slowe

I was going to ask each of you for the biggest challenge in getting to that vision that you each described. Jan, is that summing up for you, the biggest challenge is integrating these huge amounts of rooftop solar into the grid and into the energy markets and integrating them into an electrified home?

[00:29:07.080] - Jan Osenberg

The biggest challenge from my side is electrification. From the policy angle is to get more electric vehicles to the grid, to get a part of these vehicles to be V2X ready to also contribute to the grid, but also to unlock heat pumps. As we said before, the market has not been as strong as the renewable deployment market. So, getting a more stronger uptake will absolutely be critical because then you also get great capture prices for the PV installations, which will then ultimately improve the ease the grid management problems. It will ease the electricity market price fluctuations, which will then in turn be great for solar PV.

[00:29:53.320] - Jon Slowe

Dina, what's your view? What would be the biggest thing keeping you awake at night about achieving that vision that you and Jan outlined?

[00:30:02.200] - Dina Darshini

I think first, well, first we need the solar on everyone's rooftop. So we are moving from early adopted to mass market. So in a post-subsidy world, how do we get that mass market?

[00:30:15.810] - Jon Slowe

There is a management on that time. The financing, the propositions around that. Yeah.

[00:30:21.140] - Dina Darshini

Then the integration, as you just mentioned, it's not just solar anymore. The integration with the grid, with all all the other assets out there and making sure each are not cannibalising as well on each other's opportunity. As a whole, net, the household, the business, the grids, everything should be one step improved from prior to any of these initiatives.

[00:30:49.620] - Jon Slowe

Well, the solar rooftop market has grown incredibly in the last years. It may have hit a little bump this year, but I think the trajectory continues to be upwards. And I think it's so exciting to see the journey beyond early adopters into mass market, as you described, Dina, and the journey for solar to become part of that electrified energy system that we're moving towards. Jan, thank you very much for your time. Dina, thank you.

[00:31:21.220] - Jan Osenberg

Thank you very much.

[00:31:23.400] - Dina Darshini

Thank you.

[00:31:24.400] - Jan Osenberg

Thank you very much, Dina. Thank you very much, Jon. Nice to speak to you.

[00:31:28.030] - Jon Slowe

Really great conversation. Again, thanks to everyone for listening. We hope you enjoyed the episode. If you haven't got solar on your roof and you could get solar on your roof, go and think about it. I look forward to welcoming you back to the next episode next week. Thanks and goodbye.

[00:31:44.280] - Charmaine Coutinho

Thanks for tuning in.

[00:31:46.700] - Jon Slowe

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[00:31:54.770] - Charmaine Coutinho

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