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Despite the supply and demand challenges that PV faced in 2020,
the US solar market had its largest installation year to date. Over
22 GWdc of PV installations were completed in 2020, with
utility-scale projects representing 77% of that volume. A
renewable-friendly administration, an extended ITC schedule,
increasingly competitive pricing, and a massive late-stage project
pipeline will drive strong growth for the United States in
2021.
IHS Markit forecasts that the united states will install over 20
GWdc of utility-scale PV installations in 2021, making it another
banner year for solar. Notably, the utility-scale segment already
has over 11 GWdc of projects already under construction in 2021.
Other contributing factors to the growth of solar this year is the
transition of coal states to renewable generation in the near-term;
states like Illinois, Virginia, Pennsylvania, and Kentucky have
large PV pipelines in 2021 through 2025. Moreover, continued
corporate procurement for PV generation and aggressive net zero
goals by large utilities across the country will ensure growth will
be maintained for solar in the next five years.
ITC extension's effect on residential and
non-residential installations
On 21 December 2020, both houses of Congress passed a large
COVD-19 and funding bill that included a two-year extension of the
solar Investment Tax Credit (ITC), a one-year extension on wind
production tax credits (PTC), and funding for energy research and
development programs, among other provisions. The extension of the
ITC will likely reshuffle the demand for PV projects from 2022
through 2025 as investors seek to capture the ITC 26 and safe
harbor provisions at a price point that is beneficial to their
returns. Allowing two additional years for the 26% credit will
improve the economics of solar overall as the credit will now be
coupled with a smaller tariff for solar cells and modules, assuming
the tariff is not extended.
For the residential market, homeowners across the country had
been rushing to secure the ITC 26 by installing solar in their
homes in 2020, despite challenges posed by the COVID-19 pandemic.
However, the residential segment is more sensitive to tax credits
than the non-residential segment; the extension will drive an
immediate spike in demand followed by declines that are correlated
to the ITC step-down.
The two-year solar tax credit extension is expected to spur more
demand for residential and commercial systems in several emerging
markets—2021 will be an important year for residential
installers, but demand from consumers from 2022 onwards will taper
off as mature markets reach saturation and net metering and
distributed solar programs continue to be challenged and modified
across the United States.
New markets, continued growth
In 2021, the Midwestern and Southern regions of the United
States will be responsible for 60% of PV installations in the
country. States like Illinois, Ohio, Georgia, Florida, and Texas
will contribute to a large portion of installation volumes in these
regions. Demand for PV in the Midwest is forecast to be primarily
driven by the utility-scale market as utilities seek to comply with
varying levels of renewable energy and emission reduction
goals.
Similarly, in the Southeast, large utilities such as Duke
Energy, Georgia Power, Dominion Energy, and Florida Power &
Light are driving demand for utility-scale PV through cost
competitive, voluntary procurement mechanisms. These utilities,
amongst others, have set aggressive net-zero, renewable energy
generation targets that will require solar PV procurement in the
near term. Moreover, utility partnerships with large corporations
are driving further demand for utility-scale PV.
In the Southwest, IHS Markit forecasts the utility-scale PV
segment will drive demand, with most of the installations
attributed to Texas' massive PV growth that is expected to continue
through 2025. Although utility-scale installations will dominate
the market in Texas, the residential segment also gained momentum
in 2020 and will sustain similar levels in the short-term as
consumers take advantage of the extended ITC and utility incentives
like rebate programs.
New York's ambitious green goals
Historically, the residential and commercial PV segments have
driven most of the demand in the Northeastern region and will
continue to do so. However, due to New York's aggressive
utility-scale goals, the large-scale segment will account for over
half of PV demand in the region. Recently, the State announced 23
utility-scale project that have a combined capacity of 2.2 GW.
Additionally, the New York State Public Service Commission (PSC)
have approved to build a 55-mile transmission line that aims to
enhance reliability and speed the flow of energy from upstate NY to
the lower parts of the state.
New Jersey, Massachusetts, and Maryland will also help drive
most of the PV growth in the Northeast US in 2021. Lawmakers across
the region have been putting forth policies that could help PV
growth, though some have been more successful than others. Earlier
this year, Governor Charlie Baker of Massachusetts vetoed
legislation that required the state to achieve net-zero emissions
by 2050, more recently, the Governor has suggested amendments to
the bill and is awaiting a response from state's Legislature.
Storage capitalizing on PV policies
IHS Markit forecasts that installations of energy storage
capacity in the United Sates will account for over 5 GW in 2021.
The extension of the ITC will likely improve solar-plus-storage
system economics and enable energy storage projects to be
co-located with PV to benefit from a reduced tax burden through
2025.
The Federal Energy Regulatory Commission's (FERC) Order 2222
that was passed in 2020, opens wholesale markets to
behind-the-meter- energy storage, but it may take longer than
expected for this ruling to become a strong market driver. Order
2222 aims to allow distributed energy resources (DERs) to
participate in wholesale power markets by bundling together as a
single bidding entity. Recently, regional transmission
organizations and other stakeholders have requested an extension to
FERC Order 2222 citing too short of a timeline to implement the
ruling.
While the United States will continue to extend its dominance in
the storage market, incentives for storage are still lacking in the
country, with a stand-alone storage tax credit not easily
guaranteed as Democrats control the Senate by a small margin. In
the near-term, the most consequential federal policies benefitting
the energy storage industry will likely be in the form of executive
actions.
