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]


H1 2019 figures on track for annual growth


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

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019YTD

Capacity

(M

Wdc)

Residential PV Non-Residential PV Utility PV


2019-2021 will feature both ITC phase-down in conjunction with major changes to state-level solar policy and incentives


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.

0

200

400

600

800

1000

1200

1400

1600

2019E 2020E 2021E 2022E 2023E 2024E

Capacity

(M

Wdc)

Total Retrofit New Home Construction


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


Ten-year residential outlook driven by emerging state markets surpassing grid parity in mid-2020s


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


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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1.0

2.0

3.0

4.0

5.0

6.0

Ann

ual C

apacity (

GW

dc)

Base Case


For non-residential PV, recent policy reform and budding community solar programs enable volume stability despite ITC phase-down


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


0%

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35%

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2014 2015 2016 2017 2018

Com

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nity

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r mark

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


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


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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0.5

1.0

1.5

2.0

2.5

3.0

3.5

Ann

ual C

apacity (

GW

dc)

Base Case


Long-term utility PV growth driven by increasing economic competitiveness, corporate procurement, and 100% clean energy goals


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.


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


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


Eight states have increased RPS since 2018. RPS is poised to drive more utility PV in the next five years


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

10.0

15.0

20.0

Ann

ual C

apacity (

GW

dc)

Base case


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

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

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

http://www.woodmac.com/


Where does Washington stand?


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

-

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


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

41

142

5462

6876

90

108 111

130

145

161

-10

10

30

50

70

90

110

130

150

170

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Capacity (

MW

dc)

Residential Non-residential Utility Total

Documents

Research Presentation: U.S. Solar Outlook: The Decade Ahead