Over the past few years, there has been a quiet revolution you may have missed — and which could make a difference in the transition to a greener economy. The technology behind solar panels floating on water, rather than clinging to rooftops, has improved costs and output. Their advantages in terms of energy distribution are also better understood.
While floating solar energy’s global capacity was around 10 megawatts (MW) in 2014, project sizes have steadily increased to allow for the production of more than 1600MW by the end of 2019. There is further growth ahead, with gigawatt-scale projects now in development, including the 2.1-gigawatt (GW) Saemangeum project in South Korea. The industry is set to expand from its largely Asian roots in Japan, China and South Korea, to regional and global scales.
In its 2019 paper ‘Where sun meets water: floating solar market report’, the World Bank estimates that using only 10% of the surface of man-made freshwater reservoirs globally could support 4 terawatts of floating solar capacity, equivalent to the annual energy consumption of about 400,000 US households. Various estimates expect the operating base of floating solar energy to grow to 10GW by 2025 and continue to expand at a compound annual growth rate of 20-30%, going some way to quantifying the true potential of this source.
Various estimates expect the operating base of floating solar energy to grow to 10GW by 2025
Moreover, projects located on reservoirs are usually close to the demand base for power, allowing for colocation with hydroelectric energy projects. This presents several benefits, including shared infrastructure, pumped storage and faster development. In some countries, it can even resolve land-use issues while boosting the capacity of existing assets. It has been estimated that installing floating solar arrays on just 1% of the reservoir surface in Africa could double the continent’s hydroelectric output.
The finance community, and many of its clients, has largely been behind the curve of commercial project financing of floating solar projects, focusing instead on panels with fixed foundations. The $3.9bn Saemangeum project, for example, is funded by the South Korean government. However, the $260m financing of the 180MW Changhua floating solar project in Taiwan, in which Société Générale has played a key role, has demonstrated that financing is available for the sector and, hopefully, has provided a template for future deals to follow.
Increasing awareness of the benefits, falling costs and mounting interest from both leading developers and the finance community will see floating solar become critical in the decarbonisation of the global economy.
Allan Baker is global head of advisory and project finance at Société Générale.
