Utility Solar Market Update - Q3 2021
Whitney Voute, 23 November 2021
Q3 2021 UTILITY-SCALE SOLAR MARKET UPDATE1
Almost 4.2GWDC of US utility-scale PV was installed in the second quarter of 2021, making this the strongest Q2 on record in terms of capacity installations. The previous record of 2.9GWDC installed was in Q2 2020, indicating the strong growth over the last 12 months. Almost half of the installations in Q2 2021 came from Texas (1.7GWDC), followed by Florida accounting 14% of installations at 0.5GWDC. The key drivers for this growth over the quarter were increased corporate and utility procurement as well as coal retirements. The 4.2GWDC of solar represents:
- a 48% increase compared to Q2 2020;
- a 252% increase compared to Q2 five years prior; and
- the largest second quarter for US utility-scale PV ever recorded.
Figure 1: US utility-scale PV capacity installed by quarter
Over the course of Q2 2021, 9.3GWDC of contracts were signed, pushing the US utility-scale PV contracted pipeline to a record high of 85GWDC. According to Wood Mackenzie, 89% of utility-scale PV within the pipeline have a PPA contracted, with 29% of the PPAs contracted with corporate offtakers. Renewable energy procurement is expected to be accelerated by large C&I buyers (who focus on fulfilling their energy and renewable energy credit requirements), evolving ESG goals and corporate reporting requirements.
The US utility-scale PV pipeline remains robust with 19.4GWDC of projects currently under construction. Of this, 10.2GWDC is expected to come online throughout the remainder of 2021, to bring the total expected installations for 2021 to be over 19 GWDC. Utility-scale solar PV’s double digit annual growth is expected to continue to 2023, as developers continue to build out their pipelines that were accrued at the 26% ITC rate. Even as the ITC drops to 10% in 2024, the market is still expecting at least 20GWDC installed each year due to the increasing demand for clean energy coupled with the decreasing cost of solar. Wood Mackenzie forecasts that between 2021 and 2026 more than 130 GWDC of utility-scale solar will be installed, as seen in the figure below.
Figure 2: US utility-scale PV capacity installed and forecasted by year
The Bipartisan Infrastructure Bill passed in November 2021, including approximately $65billion in transmission investments aimed at increasing the ability of the grid to handle large volumes of renewables. The Democrats aim to include further clean energy policies in a second bill, Build Back Better, which is likely to be voted on later in November following costing from the Congressional Budget Office. These could include Investment and Production Tax Credit (ITC & PTC) extensions, the introduction of standalone storage ITC, further clean energy requirements, and direct pay provisions for the ITC. The White House has emphasized how critical such policies are for reaching President Biden’s climate targets.