Utility Solar and Energy Storage Market Update
Victor Phan, 24 May 2022
Q1 2022 UTILITY-SCALE SOLAR MARKET UPDATE1
2021 was a record-breaking year for the US utility-scale solar market, with almost 17GWDC installed over the course of the year, up 19% from the previous record set in 2020 of 14.2GWDC and more than double the of installations from two years prior in 2019. The demand for solar remained high throughout the year with 5.9GWDC installed in Q4 2021. The 5.9GWDC of projects that came online represents:
- a 7.2% decrease compared to Q4 2020;
- a 12.4% increase compared to Q4 five years prior; and
- the second highest Q4 for US utility-scale PV recorded.
Figure 1: US utility-scale PV capacity installed by quarter
Over the course of Q4 2021, 4.6GWDC of new contracts were signed, bringing the total pipeline by the end of the year to 80.2GWDC. However, despite the large project pipeline, supply chain uncertainty and volatile commodity prices caused delays in project completions over the quarter. One-third of the capacity that was expected to come online was delayed by at least another quarter. Given the delays experienced over the quarter, Wood Mackenzie has revised their 2022 outlook for utility-scale solar installations to approximately 15GWDC, as seen in the figure below.
Figure 2: US utility-scale PV capacity installed and forecasted by year
Wood Mackenzie have noted that these headwinds in 2022 are unlikely to outweigh demand for utility scale solar in the long run given ongoing efforts to expand federal and state level clean energy support, rising interest in ESG investments and new procurement strategies.
An example of the statewide support is North Carolina’s clean energy efforts. North Carolina was the first state in the Southeast to adopt a Renewable Energy and Energy Efficiency Portfolio Standard (REPS) which recently expired in 2021 (REPS target of 12.5% of electricity to come from renewable sources by 2021). As of 2020, 16% of electricity generated in North Carolina came from renewable sources, surpassing the initial target by 28%. North Carolina has since signed a new law to close some of the state’s coal-powered sources to replace with renewable sources and mandating carbon neutrality by 2050.
The primary driver of procurement within the US utility-scale solar industry remains voluntary procurement. Of the total 28.8GWDC of solar procured in 2021 7.6GWDC came from corporate buyers, as companies seek to decarbonise their business practices. As many companies continue to announce increasingly ambitious ESG goals, renewable energy procurement demand is expected to remain robust. Wood Mackenzie forecasts that the strong market interest, coupled with the cost competitiveness of utility-scale solar buildouts, leads utility-scale solar to be the most attractive renewable technology after 2024 from an levelised cost of energy (LCOE) perspective.
The renewables industry continues to face uncertainties around the progress of the Build Back Better (BBB) plan as well as the clean energy provisions within the legislation. However, despite the setbacks, indications from key players are that renewable energy initiatives are likely to move forward. Wood Mackenzie continues to hold the position that the standalone storage ITC and solar ITC extension provisions will be passed in some form in 2022.
Under the current policy environment, utility solar is expected to continue to grow in the double digits, adding a total of 123GWDC by 2027 and 244GWDC by 2032. If federal clean energy incentives are passed, including the proposed extensions and modifications to tax credits, the utility solar industry is forecasted to install an additional 210GWDC by 2032 for a total of 454GWDC between 2022 and 2032.
Q1 2022 ENERGY STORAGE MARKET UPDATE2
Over the course of 2021, approximately 10.6GWh of US energy storage was installed, almost tripling the 2020 installations (3.6GWh). In Q4 2021, a record breaking 4.8GWh of energy storage was installed in the US up 34% from the previous record set in Q3 2021. 4.3GWh of the 4.8GWh of installations came from the commercial (grid-scale/front-of-the-meter) market. Similar to the US utility-scale solar market, the US energy storage market faced supply chain challenges with over 2GW of grid-scale capacity expected to be installed in Q4 2021 delayed to Q1 2022. However, despite these project delays, projects are still being built at record setting pace.
In Q4 2021, the commercial storage market doubled the installations on a GWh basis compared to the corresponding quarter in 2020, which was primarily bolstered by standalone and hybrid retrofits in California coming online. Although California remains the largest market for commercial storage, retaining 54% of the total storage market in 2021, Wood Mackenzie forecasts this to decrease to 14% in 2026 as other states continue to ramp up their storage installations (primarily TX, NY, NV and AZ). In January, New York increased their state’s energy storage target from 3GW to 6GW by 2030, despite already having the largest state level storage target within the US over the past decade.
2022 is forecast to be a strong year and is expected to double the amount of installations in 2021. Looking forward, 2023 will represent a further 84% increase above 2022 installation levels. By 2026 the US energy storage market is expected to surpass 38.2GWh in annual installations, with annual capacity expectations from 2024 stabilising around the forecast 2023 level.
Figure 3: US annual energy storage market outlook (MWh), 2012-2026