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Three Key Takeaways from the Q3 2018 U.S. Solar Market Insight Report

September 17, 2018

By Jamie Evans

Last week, the Solar Energy Industries Association (SEIA) and GTM Research (Wood Mackenzie) released the latest edition—Q3 2018—of their ever-popular U.S. Solar Market Insight report. It looked back on the first half of the year, with a particular focus on Q2. From where we sit, here are the three key takeaways:

1. Utility solar is a juggernaut that’s regaining momentum.

In H1 2018, solar PV accounted for 29% of new electric generating capacity in the U.S. That’s on par with the annual totals for recent years, apart from a particularly strong 2016 when solar PV contributed 40% of new capacity additions. By comparison, in H1 new installed wind capacity was less than half that of solar, at 13%. Meanwhile, coal—which in 2010 contributed 32% of new capacity—has remained non-existent in recent years.

During H1 of this year, solar PV added 4.7 GWdc of new capacity. Utility-scale solar in particular accounted for more than half of that number (55%). In addition, Q2 was the 11th consecutive quarter that the utility solar segment installed 1 GW or more of PV.

Beyond the new installs, U.S. utility solar is booming. Utility solar procurement “experienced a massive rebound,” noted the report’s authors. With 8.5 GWdc of new projects announced in H1, the first half of 2018 was the largest half-year for utility solar procurement ever. That total includes 26 projects 100 MWdc or larger. The total U.S. contracted utility solar pipeline now stands at a whopping 23.9 GWdc (4.3 GWdc under construction). Another 36.1 GWdc have been announced but are still pre-contract.

Large-scale corporate procurement has been making further inroads as well. Physical power purchase agreements (PPAs), virtual PPAs, and green tariffs for corporate off-takers has now grown to 12% of projects in development.

2. State markets are diversifying and expanding.

It comes as perhaps no surprise that following H1 2018, California again retains its #1 spot for new solar PV installs. But beyond that business-as-usual statistic, the broader market become interesting. After coming in 6th in 2016 and 4th in 2017 for new solar installs, Texas—long known for its robust wind market—has leapt into the #2 spot for H1 2018. Even more incredibly, it’s less than 200 MWdc behind California for the year so far in solar PV.

In addition, other states that in recent years have found themselves just outside the Top 10 have now jumped decidedly into the mix. For example, New York and New Jersey sit at #4 and #5, respectively. Meanwhile, last year Florida ranked an impressive #3 nationally for new installed solar capacity, boosted in part by Coronal Energy’s 165 MWdc Gulf Coast Solar Center that flipped the switch in August 2017, but the Sunshine State slipped to #13 for Q2 of this year.

Overall, solar’s nationwide macro trajectory is strongly positive. Compared to 2010—when just two states had 100+ MWdc annual solar markets—by 2020 SEIA and GTM Research expect 28 states to earn that distinction. Of those states, 25 will each be home to more than 1 GWdc of operating solar PV.

3. Solar’s economics are getting even more compelling, despite near term hurdles.

Nearly across the board, system pricing is now at its lowest level ever. Utility fixed-tilt solar is the cheapest of the lot, and has crept even further below the magical $1/W threshold. The report’s findings align well with headlines from earlier this year. In January, Public Service Company of Colorado—Xcel Energy’s subsidiary in that state—caught industry attention with record-low bids for solar-plus-storage in an all-source solicitation. More recently, in June Nevada’s NV Energy likewise made headlines with nationwide record-low prices for a solar PPA.

Importantly, with record-low solar prices continuing solar’s ongoing cost declines—86% in 8 years, according to Lazard—it’s critical for off-takers to evaluate bids not just on bid price but also confidence variables such as a developer’s credit-worthiness, ability to deliver, engineering expertise, and other factors that translate into long-term project performance.

In the coming years, two competing forces temporarily complicate the market’s economics. On one hand, as pre-tariff module supply dries up in current projects, there’s motivation to wait out the Section 201 import tariffs so that new module procurement for future projects can be priced even more competitively. On the other hand, there’s pressure to ensure that forthcoming projects meet Investment Tax Credit (ITC) eligibility before it begins to step down. It’s a delicate balance that has independent power producers and solar developers—Coronal included—crunching the numbers to offer utilities and other partners the most-competitive economics they can.

Jamie Evans is executive vice president of Coronal Energy.

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