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Understanding the Sun Machine

The cover story of this week’s edition of The Economist is a long look at the present state and future trajectory of the global solar industry. I was fortunate to have the chance to speak with the newspaper and provide thoughts on an industry I’ve looked at closely for almost two decades. 

One defining element of solar’s story this century is the fact that even highly technical industry observers and analysts have massively undershot actual demand for this highly distributed, ever-improving technology. A few years of this undershoot was unavoidable; a few more years of it, perhaps defensible; decades of it is probably problematic. When models consistently fail to reflect near-term (never mind long-term) reality, then models need changing. 

Here is what I said:

"Expecting exponentials to carry on is rarely a basis for sober forecasting. At some point either demand or supply faces an unavoidable constraint; a graph which was going up exponentially starts to take on the form of an elongated S. And there is a wide variety of plausible stories about possible constraints, from manufacturers going bust, to solar farms not being able to connect to grids, to extensively solar-powered grids not being stable, to excessively solar grids no longer being attractive sites for further investment.

All real issues. But the past 20 years of solar growth have seen naive extrapolations trounce forecasting soberly informed by such concerns again and again. In 2009, when installed solar capacity worldwide was 23GW [gigawatts], the energy experts at the IEA [International Energy Agency] predicted that in the 20 years to 2030 it would increase to 244GW. It hit that milestone in 2016, when only six of the 20 years had passed. According to Nat Bullard, an energy analyst, over most of the 2010s actual solar installations typically beat the IEA’s five-year forecasts by 235%. The people who have come closest to predicting what has actually happened have been environmentalists poo-pooed for zealotry and economic illiteracy, such as those at Greenpeace who, also in 2009, predicted 921GW of solar capacity by 2030. Yet even that was an underestimate. The world’s solar capacity hit 1,419GW last year."

Here’s how I reached this conclusion. Getting the relevant numerical forecasts together is straightforward: they are found in data tables in the IEA’s annual medium-term market reports for renewable energy capacity. That’s a structured data problem, and how you get to the finding that actual solar installations beat the IEA’s forecasts by at least 235% in any given five-year period.

But the ‘plausible stories’ bit is an unstructured data problem within those same reports, a problem for which Halcyon’s platform is well-suited. The reasons why the IEA thought that solar might not grow are worth understanding. This is how we did it. 

Halcyon_analysis of IEA medium-term renewable energy outlooks_21 May 2024 (2)

This is what the issues holding solar back look like. The number of issues varies per year, but there are common throughlines which The Economist mentions: technology risk, grid integration risk, financing difficulties, policy and market challenges. 

Halcyon_analysis of IEA medium-term renewable energy outlooks_21 May 2024 (3)

And here is the list of attributes supporting further solar growth in the same reports. You may notice that in some years, diametrically opposed ideas appear as both issues holding back growth and also supporting further growth - such as solar policy uncertainty in 2014…and solar policy support in 2014.

Halcyon_analysis of IEA medium-term renewable energy outlooks_21 May 2024 (4)This is an instance where Halcyon’s ability to quickly ask the same question of a sequence of documents was instrumental. Each IEA medium-term outlook is hundreds of pages, and reading each one is a heavy lift for one analyst or even a team of analysts. Even if a team could read it, there will still be significant interpretation performed by readers, and different attention paid to different parts of reports. To put it another way: there’s no way to know that a person who read a report actually read it. 

Halcyon can effectively see everything in every document queried. And, because I asked the same questions of every document, the resulting responses are comparable across years. 

The resulting information is useful to anyone beginning their own medium-term market projections of the solar power sector. If the persistent issues holding back solar growth, identified by the world’s most-established energy forecasters year after year, were neither persistent, nor issues, then they should be discounted in future analysis. Conversely, the  attributes supporting solar power may be more durable than we might expect in any given year. 

The article concludes on a hopeful note: 

"But that human ingenuity finds useful things to do with better access to energy is one of the clearest messages of the past 200 years. If real energy costs drop dramatically across the global economy, and access to energy expands, to bet against great things is to bet against the innovative engines of capitalism. It is not a wager history encourages." 

We agree. Betting against global solar technology has been a losing bet. So too has been betting against the innovative things that better energy access enables - like understanding energy’s own future, and acting on it.

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