Solar Officially Becomes Global Leader in Renewable Energy: How Did This Happen?

People staying in tune with the news about renewable energy will be well aware how solar energy in the last decade has been a cycle of ups and downs. However, this year marks the best year for solar energy so far. How did this happen?

According to Fox Business, it's important to look back in some significant events in the past. For instance, Germany's generous solar tariffs have driven the industry for most of the 2000s before the country cut subsidies. Then, the U.S. investment tax credit (ITC) helped drive a boom in installation. Its installation in 2015 led to a decline in demand for 2017 since utilities have little urgency to sign solar contracts.

Reuters noted that even China's solar boom suddenly went downhill in mid-2016. However, that trend may be coming to a close with some good news. One of the best indicators would be that solar is no longer running via subsidies. These boom and bust cycles in the industry can be traced back to subsidy changes for solar installations.

These changes have made it tough for manufacturers to match supply with the demand that they expect to materialize. According to LA Times, for instance, Canadian Solar, JinkoSolar and SunPower have expanded solar capacity in 2016 as they expected demand to grow, but an oversupplied market forced them to cut back because of an expected decline in the year.

Still, 2016 was a good year for solar as it came head to head with fossil fuels in competitive contract bids worldwide. Mexico, Chile, and the United Arab Emirates were just a few of the locations around the globe where solar won based on cost and not subsidies.

The year 2017 may definitely be a warm-up for renewable energy. Solar energy's cost competitiveness is starting to reveal itself through the years, and 2016 was just the beginning. Mexico, for example, needed new electricity capacity and opened auctions for wind, hydro, co-generation, combined-cycle natural gas, and solar for its power. Solar won 74 percent of the country's available capacity. Countries such as Brazil and Chile are doing similar moves.

This creates a strange dynamic for solar manufacturers, as the industry is oversupplied and thus have low panel prices. However, visibility into demand for 2018 and beyond is growing strong. This year will be the calm before the big storm of demand.