US utilities are still choosing solar
While there is substantive risk of COVID-19 affecting the cost of capital for new utility solar projects, utility PV is likely to remain the most economically competitive electricity source in the US.
Voluntary procurement remains the top driver of utility PV in development, according to our latest research – despite the stepdown of the federal investment tax credit.
As a result, we still expect utilities to continue signing new utility solar power purchase agreements.
Drivers of utility-scale solar procurement in the US
We define voluntary procurement as procurement based solely on solar’s economic competitiveness versus other energy sources of electricity generation – rather that policy-driven procurement related to the Public Utility Regulatory Policies Act (PURPA) or Renewable Portfolio Standards (RPS).
Behind voluntary procurement by utilities, procurement of utility-scale solar by corporate offtakers currently ranks second overall as a driver of US utility-scale solar.
The share of RPS-driven solar, which is procured to help utilities meet zero carbon or renewable energy mandates, has also grown and represented 28% of PPA contracts signed in the first half of 2020.
A strong pipeline despite Covid-19
Despite Covid-19 causing economic uncertainty, the pre-contract utility-scale solar pipeline in the US currently sits at 258.2 gigawatts (dc), with 34 gigawatts of projects having a signed interconnection agreement.
We find that Q1 saw 5 gigawatts of new projects procured in the US, a slowdown from 2019 procurement but still one of the biggest quarters for utility-scale solar procurement on record.
Q1 2020 was the strongest Q1 on record for most megawatts of new utility PV capacity installed in the US. A total of 2.3 GW came online the first quarter of this year, representing 16 percent of our 2020 US utility PV forecast.
While there have been a few reported cases of projects being delayed due factors related to the coronavirus, developers have, by and large, reported that delays are not significant.
However, the virus could still pose a risk to future projects that have yet to be contracted.