Energize Weekly, March 25, 2020
The solar industry has caught a case of the coronavirus with the symptoms being a supply chain slowdown and a drop in demand for solar projects.
With China manufacturing 70 percent of the world’s solar panels, the emergence of the disease there and the aggressive steps to shut down social interactions including factory work was bound to have an impact on the industry in the U.S. and worldwide.
Bloomberg New Energy Finance (BNEF) has cut its solar demand forecast for 2020 from the 108 gigawatts (GW) to 152 GW range to between 108 GW and 143 GW. This represents a 16 percent decline at the midpoint of the range.
Initially, the concern was over supply chain issues. The Chinese provinces placed under quarantine are home to solar factories operated by key manufacturers including Trina Solar, Hanwha Q Cells and Enphase.
Early this year, some U.S. solar developers were unable to get enough panels for their projects. Invenergy and NextEra Energy are each building utility-scale solar facilities in Wisconsin, and each issued force majeure notices in February warning of project delays.
Manufacturing, however, is now bouncing back.
“The factories – even the ones that shut down temporarily while workers self-isolated after they came back from their Chinese New Year travels – are coming back up,” Jenny Chase, manager of the BNEF solar team, told GTM News. “Companies are confirming they’re back in production.”
Both the NextEra Energy and Invenergy Wisconsin projects are back on track.
The threat now is the fallout from an economic slowdown caused by the virus. “It appears likely that the coronavirus outbreak will be a significant global crisis, triggering an economic slowdown,” BNEF said. “This could make 2020 the first down year for solar capacity addition since at least the 1980s.”
The U.S. market, the second largest in the world after China, which was on pace for a record-setting year in 2020, is already feeling the effects, including a supply chain hangover.
“Customer demand for solar has plummeted and companies are seeing significant construction slowdowns, project cancellations, labor shortages, and a host of logistical problems tied to equipment and delivery delays,” Abigail Ross Hopper, head of the Solar Energy Industries Association (SEIA), said in a statement.
Homeowners may also be holding off decisions about installing rooftop solar, depressing that market, Hopper said.
In 2019, photovoltaic (PV) solar accounted for 40 percent of all new U.S. electric generating capacity, making it the largest new source of installed capacity with 13.3 GW.
The SEIA had projected a 47 percent increase in new PV capacity in 2020, 20 GW, setting another record.
The association, however, has signaled that will likely have to be revised. “We wanted to acknowledge the toll the pandemic is having, and emphasize that projections may need to be revised as the wider effects of the crisis across our interconnected society become clearer,” the SEIA said when it released its forecast.
The American Council on Renewable Energy (ACORE) – which includes the SEIA and the American Wind Energy Association (AWEA) – is seeking aid from Congress.
The federal Production Tax Credit for wind projects (PTC) is slated to be phased out at the end of 2020 and the Investment Tax Credit (ITC) for residential solar projects in 2021, with the credit for commercial projects pared to 10 percent.
Under a “safe harbor” deadline for the PTC, any wind project in which 5 percent of the project’s total capital costs have been expended can qualify for the full PTC credit. The council, which also includes the Energy Storage Association, asked congressional leaders to extend the safe harbor deadline.
It also asked for the ability to directly monetize the credits, which are now used as a tax deduction, and for the creation of a direct-pay tax credit for energy storage.
AWEA estimates that the coronavirus is putting an estimated 25 GW of wind projects, representing $35 billion in investments, at risk.
Solar industry leaders have also floated the idea of extending the full ITC to 2022.
“With over $50 billion in annual investment over each of the past five years, the clean energy sector is one of the nation’s most important economic drivers. But that growth is placed at risk by a range of COVID-19 related impacts,” an ACORE letter to the congressional leadership of both the House and Senate said.
