Research Presentation: U.S. Solar Outlook: The Decade Ahead
Transcript of Research Presentation: U.S. Solar Outlook: The Decade Ahead
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Research Presentation:U.S. Solar Outlook: The Decade Ahead
Austin PereaSenior [email protected]
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H1 2019 figures on track for annual growth
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2019: Poised to grow 17% driven by utility PV, though distributed solar off to a slow start
• Utility PV: 2.7GW Installed
through H1 2019
• Down 11%YoY; 39% QoQ
• Non-residential PV: 861 MW
Installed through H1 2019
• 2 GW forecast in 2019
• 7% decline from 2018
• Residential PV: 1.2 GW
Installed through H1 2019
• 2.5 GW forecast in 2019
• 2% growth over 2018
• Florida takes #2 spot in
Q2 2019Source: Wood Mackenzie Power and Renewables
Procurement Driver of Utility PV PPAs by Contract Execution Year
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4,000
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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD
Capacity
(M
Wdc)
Residential PV Non-Residential PV Utility PV
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2019-2021 will feature both ITC phase-down in conjunction with major changes to state-level solar policy and incentives
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California remains bedrock of residential solar market, but headwinds loom large Flat in 2019E, 4% CAGR from 2020-2030
Near-Term Outlook: Limited growth as market rebounds
Cost of customer acquisition remains high throughout 2019,
though installers have rebounded from the first wave of
Tesla & TPO provider declines
SCE super off-peak rates make resi difficult to pencil
Long-Term Outlook: Policy developments galore
1) NEM 3.0 expected to take effect in 2021-2022
CPUC will begin proceedings in 2019. Past proceedings have taken at
least 12 months to resolve, which means new installations through 2019
and 2020 will likely be grandfathered in under current NEM rules.
2) New home solar building mandate begins to offset impact
of NEM 3.0 beginning in 2020
3) However, uncertainty remains around the ongoing
bankruptcy proceeding of PG&E with both upside and
downside risks associated with residential PV.
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2019E 2020E 2021E 2022E 2023E 2024E
Capacity
(M
Wdc)
Total Retrofit New Home Construction
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Meanwhile, transition away from NEM continues but at slower pace in the Northeast…
Maine, New York, and Connecticut have all made improvements to bill crediting
Maine:Net Metering re-instated at full retail rate
Massachusetts (under SMART):• Community solar: Alternative on bill credit
• Residential (and small C&I rooftop) solar: NEMat retail rate
• Onsite C&I solar: NEM if NEM program caps areextended; otherwise projects will have to enrollas a QF (qualified facility)
Connecticut:NEM at retail rate until 2021 beforetransitioning to Value of DistributedEnergy Resources tariff
Vermont:NEM at retail rate but…with incentiveadders for < 150 kW systems andincentive subtractors for systems greaterthan 150 kW
New Hampshire:NEM below retail rate with 100% creditfor transmission and energy but onlypartial credit for distribution
Rhode Island:NEM available along with feed-in-tariff (REGrowth program) set above retail rate
Wood Mackenzie Power & Renewables
New York:VDER tariff still below retail rate but DPShas improved value stack, expanded NEMto small and mid-size C&I to 2021 whileexpanding access to CS
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Ten-year residential outlook driven by emerging state markets surpassing grid parity in mid-2020s
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With pivot from major markets, residential solar growth will be driven by a mixture of markets with strong fundamentals…
Florida, Texas, and Colorado lead the pack for unincentivized growth
2.2GW forecast 2020-2030Ranked #2
1.8Gw forecast 2020-2030Ranked #5
1.1GW forecast 2020-2030Ranked #10
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Residential solar to see limited growth with ITC stepdown and state-level policy reform
U.S. will add over 44 GW of residential PV from 2020-2030
High cost of customer acquisition will lead to
stable volumes in key major markets;
• Major market policy risk in 2019-2021
• MA SMART program delays
• CA transitions to NEM 3.0 in 2021-2022
• NY pivots away from retail rate NEM in 2021
Long-term growth driven by IL ABP, California new home
solar mandate, enhanced customer economics
• Retail rates escalation and system costs decline,
emerging state markets begin to reach grid parity
beginning in mid-2020s
• Under base case scenario, 19 states will add over
500 MW of residential solar
Source: Wood Mackenzie Power & Renewables
Residential PV Historical and Forecasted Capacity 2020-2030
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ual C
apacity (
GW
dc)
Base Case
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For non-residential PV, recent policy reform and budding community solar programs enable volume stability despite ITC phase-down
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A variety of state-level policy reforms have hindered non-residential installations in 2018-19
In 2017, CA, MA and MN accounted for nearly 70% of non-residential PV; 40% in 2018; 37% in 2019
- 500 1,000 1,500 2,000 2,500
2019E
2018
2017
Capacity (MWdc)
California Massachusetts Minnesota All Others
• California’s shift to on-peak time-of-use periods
has dramatically reduced the economic value
proposition for C&I customers
• Minnesota’s reform to community solar bill
credits likewise diminishes the value proposition
to most customers
• Massachusetts’ incentive shift from SREC to
SMART reduces value prop but a lengthy
transition period and burgeoning ITX issues
have bogged down development
• Other state markets have not made up the
difference
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0%
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30%
35%
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2014 2015 2016 2017 2018
Com
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sola
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et s
hare
Capacity (
MW
dc)
Community Solar On-site C&I CS market share
Though community solar is growing, the sub-segment hasn’t offset the decline of major state markets from 2016-2018
Minnesota leads the pack, but Colorado and Massachusetts are following closely behind
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While increased RPS activity could benefit DG
RPS Commitments
◼No energy standard
◼ Non-binding goal
◼ 10% - 25%
◼ 26% - 50%
◼ 51% - 100%
RPS increased since Jan 2018
Source: Wood Mackenzie Power and Renewables
States continue to push for more aggressive RPS, NY and ME both target 100% by 2050
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Non-Residential solar upside driven by state-level policy improvements
U.S. to add over 27 GW of non-residential PV from 2020-2030 bolstered by CS, RPS and improved economics
Near-term outlook to see another down year
Reforms to rate design, incentives, and CS programs are expected to
cause the top 3 state markets in 2018 to fall in 2019
• CA pipeline of C&I projects grandfathered under solar-friendly
TOU rates exhausted in 2018-2019
• Minnesota’s pipeline of grandfathered community solar projects
expected to be built out through 2018-2019
• Massachusetts’ transition from SREC-II to SMART will lead to
annual installation declines in 2018 before reboot
Mid-term outlook driven by community solar, long-term driven
by increasing economic attractiveness by mid-2020s
• MA, NY, and MD will begin to contribute to the national-level
community solar outlook in our mid-term outlook.
• Upside from NJ and IL ABP, while on-site solar increasingly gets
paired with storage – CS & solar-plus-storage account for 50% of
non-residential PV by 2023.
• Under base case scenario, 14 states will add more than 500 MW
of non-residential solar from 2020-2030 Source: Wood Mackenzie Power & Renewables
U.S. Non-Residential forecast 2020-2030
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ual C
apacity (
GW
dc)
Base Case
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Long-term utility PV growth driven by increasing economic competitiveness, corporate procurement, and 100% clean energy goals
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Economic competitiveness and corporate procurement drive new PPAs in 2019
• Voluntary procurement continues to be the
largest driver of utility PV in the US with
70% of 2019 procurement, YTD.
• As more states announce increase to zero
carbon or renewables mandates, RPS is
expected to drive a growing market share
• While PURPA is expected to drive little to
no additional solar, Duke Energy Florida
has suggested that it could see up to 500
MW of PURPA development over the next
10 years.
• CCA projects made up only 1% of new
capacity procured in H1 2019. However,
CCA procurement is expected to increase
in 2019 to comply with California law
SB350, which stipulates that CCAs have
65% of their RPS portfolio under long term
contract.
Source: Wood Mackenzie Power and Renewables
Procurement driver of utility PV PPAs by contract execution year
7%
12%
15%
33%
0.4%
8%
28%
73%
62%
68%
21%
19%
22%
5%
9%
1%
2.2%
4%
9%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2019YTD
2018
2017
2016
RPS PURPA Voluntary Procurement Corporate Procurement CCA
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Renewable / clean energy standards by state
MT15% 2025
WY
ID
WA100% 2045
OR50% 2030
NV100% 2050
UT
CA100% 2045
AZ15% 2025
ND
SD
NE
CO30% 2020
NM100% 2045
TX10,000 MW 2025
OK
KS20% 2020
AR
LA
MO15%2021
IA
MN27%2025 WI
10%2015
IL25% 2025
IN
KY
TN
MS AL GA
FL
SC
NC13% 2021
VAWV
OH13%2026
MI35%2030
NY100% 2045
PA10% 2021
MD 50% 2030
DE 25% 2026
NJ 50% 2030
CT 44% 2040
RI 39% 2035
MA 25% 2035
ME100% 2050
VT90% 2045
NH 25% 2025 MW in Development
◼No energy standard
◼ Non-binding goal
◼ 10% - 25%
◼ 26% - 50%
◼ 51% - 100%
RPS increased since Jan 2018
HI100% 2045
Source: Wood Mackenzie Power and Renewables
Eight states have increased RPS since 2018. RPS is poised to drive more utility PV in the next five years
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Utility PV market outlook, 2020-2030The bulk of new procurement is targeting 2021
Medium term:
• From 2021-2023, Wood Mackenzie has increased its utility PV
forecast by 2.8 GWdc due to increased procurement in Florida
• Xcel Energy, Idaho Power, and PacifiCorp announcements of coal
retirements or increases to renewable portfolio standards have
driven up the forecast considerably.
Long term:
• Utilities in TN, CA, VA, FL and the Carolinas have outlined plans
for hundreds of megawatts’ worth of solar procurement in 2024 and
beyond.
• Solar is also expected to grow in wind-dominant markets like
Oklahoma, Nevada and Missouri where utility PV will be more
economically competitive than after the PTC steps down.
• In the long-term, we begin to see greater corporate procurement of
large-scale solar, hastens coal retirements, and increases solar +
storage adoption beyond the mid-2020s – under base case
scenario, 33 states will add more than 1 GW of utility-scale solar
from 2020-2030Source: Wood Mackenzie Power and Renewables
U.S. utility PV installation forecast, 2020-2030
0.0
5.0
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Ann
ual C
apacity (
GW
dc)
Base case
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Under our base case scenario, the U.S. will add more than 227 GW of solar under the scheduled ITC phase-down from 2020-2030Utility PV will remain the dominant sector driving PV growth due to 100% renewables targets, corporate procurement, and increasing economic competitiveness of solar
Source: Wood Mackenzie GEM
Meanwhile, residential growth will be flat through the mid-2020s under an ITC phase-down due to stable customer
economics and increasing market saturation while state-level incentives support steady C&I volumes
17.5 17.6 16.1 17.0 17.2
18.1 17.9 19.8
25.4
29.1
31.3
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An
nu
al C
apacity
(G
Wdc)
U.S. Utility PV base-case forecast U.S. Non-Residential PV base-case forecast U.S. Residential PV base-case forecast
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Where does Washington stand?
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Washington ranks 30th in cumulative installed solar capacity through H1 2019
The Evergreen State is a laggard due to limited solar resources and weak incentive environment
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5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
Capacity (
MW
dc)
Washington ranks #30 in installed solar capacity to-date
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Wood Mackenzie projects 1.16 GW of solar from 2020-2030 for Washington
Washington’s 100% RPS provide upside to our forecast, but base-case forecasts do not take into account – meanwhile, wind generation supports lion’s share of RPS compliance
• Base-case scenario (which does not include the 100% RPS) driven between a balance of utility and DG
Wind power continues to be the dominant renewable energy source through 2030 despite PTC step-down
• DG economics continue to improve as solar costs decline 15-25% from 2020-2030 and retail rates escalate
• Still significant upside to Washington’s forecast as 100% RPS is incorporated
3316 22 23 24 25 31
42 4255
66 738
1114 19 23 28
26
31 31
36
43
50
0
115
1820
2123
32
36 38
39
36
37
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142
5462
6876
90
108 111
130
145
161
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70
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130
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2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Capacity (
MW
dc)
Residential Non-residential Utility Total