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WoodMac says “Oops,” solar will be much higher than our forecast

To us forecasters should forecast, not count the number of deals developers are working on. So that assumes you make an intelligent assessment of what will happen on the near horizon, and include it in any forecast.

What Wood Mackenzie is clearly used to doing is asking everyone how they are doing, and the size of their pipeline, then confirming that in wider conversations and printing it as a forecast. It isn’t one.

So this week when Wood Mackenzie upped its solar forecast for the US, it is because some stuff that we not in any prior pipeline, suddenly has to be counter, because now it is.

We could not issue a forecast with this statement “Unexpectedly rapid growth in solar markets like Florida and Texas is driving up expectations for US solar installations” because that would beg the question, why was it unexpected if you are a forecaster. It now says that 13 GW of capacity additions will happen in 2019.

If you take simple Irena (International Renewable Energy Agency) statistics, you get the US installing 11.4 GW in 2016, 8.3 GW in 2017 and 8.3 GW in 2018. And all we are doing is completing the next line in the series. You have to ask, what has changed? And there are three key elements. Firstly the 30% level of the US tax incentive for solar ends at the end of 2019, and falls to at first 26%, then 22% and then falls off a cliff. It could be extended, but so far it has not been.

Secondly new Bifacial panels, if installed correctly, with the right trackers may increase yield by 50% compared to stationary Perc panels, but if not on trackers that yield increase is between 10% and 25%, depending on the height of the panel and the color and tone of the background under the panels and its reflectivity. If you average this out, it comes to 17.5% increase in total throughput.

Thirdly there are President Trump’s tariffs, which have not touched the imports, since they are so much cheaper than they were, and also because those tariffs do not apply to bifacial panels.

So faced with a last chance to get 30% tax incentive, and the first chance to install bifacials with 17.5% higher energy yields, how many developers would not accelerate any deals in their pipeline that can be closed. It would be sure to mean that 2019 outperforms the past year, by more than the difference between the best recent year and 2018, so by more than 3 GW. Let’s say 4.5 GW, and hey presto you are forecasting 8.4 + 4.5 GW = 12.9 GW in the first place. Do you see what we mean by the difference between forecasting and future deal sampling?

Anyway Wood MacKenzie has 2018 up at 10.6 GW, way ahead of the amount reported by Irena, and it says this is a rise of 25% compared to that to make this the second best year. The even more worrying thing is that the report is done in conjunction with the Solar Energy Industries Association (SEIA), who should have known all this. Anyway it means that WoodMac has increased its forecast for 2019 utility-scale installations by 1.2 GW, and also added a further 5.1 GW during the 2019-24 period.

If you think about it, the political environment around solar in the US is particularly fraught. It has a president that seems not to mind solar, but hates wind energy, but it has even died in the wool coal lovers like Duke Energy, starting to install solar – because it is so compelling on price.

The unexpected deals for WoodMac included NextEra Energy’s Florida Power & Light beginning the construction on 10 new solar plants totaling more than 700 MW, as gas-fired generation in Florida finally begins to suffer. Much the same is happening in Texas it tells us.

The explanation that WoodMac gives is “as costs fall and developers move to take advantage of the investment tax credit phasedown.”

Even with only 26% ITC next year we can see that also being a bumper year for solar in the US, and as more and more solutions and fixes can be applied to grids to support more intermittent energy, and as solar begins to pitch alongside batteries, for greater dispatchability, the benefits in the wholesale market suddenly look great, and there will be less and less curtailment of solar. Fix the issues around DER and a consistent personal discount for home owners, and you have another set of bumper years.

The natural improvement in the performance of bifacial and the ability to understand it and get more and more out of it in operational design, will means that what you lose in ITC, you gain in energy output.

If the US is also having a bumper year in batteries, then US developers will become more experienced in installing them together and prices on batteries will continue to fall as volumes mount. Non-Lithium Ion options will begin to make headway and large scale storage processes like pumped storage, molten salt, liquid air, and simply heating rocks, will all start to make further headway. Grid scale batteries, home batteries and microgrid batteries will begin to work together in a layered hierarchy too. Solar will also overtake Wind as the cheapest form of intermittent energy, possibly as early as 2022/3 and with US Wind ITC plummeting faster than solar, money will switch from one to the other. After that Perovskite solar may be with us, cheap as chips.

Outside of the US, where almost no-one doubts the sanity of fighting greenhouse gasses, the economic argument for solar and wind will accelerate them, so that in a few years, all records will be smashed, simply because we need to ship that amount to avoid global warming. We think that 2019 is merely the beginning of this, and that 2020, 2021 and 2022, should all be records, up at the 16 to 17 GW of electrical power.

It is true that by then WoodMac will witness bigger and bigger pipelines and can once again forecast from the informed developer point of view. But it will still be surprised in each of the following two years we suspect.

WoodMac says the US installed 2.7 GW in Q1, the market’s largest first quarter to date and that Solar accounted for 51% of all new US power generating capacity.

WoodMac also forecasts residential growth of up to 20% up to 2021 baed on new home solar incentives in various states.

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