Utility solar sets record, but tax credit phase-down looms

Source: By David Iaconangelo, E&E News reporter • Posted: Tuesday, September 17, 2019

More large-scale solar projects are waiting to be built than ever before, as utilities and corporations move to lock up deals before federal tax incentives diminish, according to an analysis released today by Wood Mackenzie and the Solar Energy Industries Association (SEIA).

Utilities and others signed up for just over 11 gigawatts’ worth of solar in the first half of this year, adding up to almost 38 GW in the project pipeline — “the highest it has ever been” in the industry’s history, according to the analysis.

Big technology companies and corporations like Anheuser-Busch drove a sizable chunk of demand for large-scale solar — about 17% in the second quarter — along with decarbonization goals from states and cities and clean energy commitments from utilities themselves.

But the main reason for the growth in utility-scale projects, said the groups, was solar power’s low cost relative to other resources.

By the mid-2020s, solar could be cheaper than wind, partly because tax credits for wind projects will be phased out in 2020.

The investment tax credit that helps drive solar development, conversely, has a slower phaseout period. SEIA launched a campaign in July to extend the credit at its current 30% level.

Abigail Ross Hopper, president and chief executive of SEIA, said the enlarged pipeline of utility-scale projects came as “no surprise,” but added that the preservation of the ITC and other policies would be “critical” if solar is to constitute 20% of the country’s electricity by 2030, as her group hopes.

For nonresidential solar, installations in the second quarter were down 2% over last quarter and 16% compared with the second quarter of last year. Reduced incentives in states like California and Massachusetts were to blame, according to the analysis.

The residential sector fared better, growing 8% in comparison with the same period in 2018. States not known for hosting much solar were responsible for much of that growth, offsetting sluggishness in “legacy markets.”

That trend will have to continue if the solar industry is to keep growing after the ITC is phased out, said the report.

In a “post-ITC world,” long-term growth would be contingent on improved technologies and business models, as well as “geographic diversification,” it said.

Despite the solar record, the growth in the second quarter across all project sizes paled in comparison with natural gas. Almost half of the power generation capacity added was for natural gas, compared with 36% for solar and 14% for wind.