The country’s utility-scale solar landscape continues its tenacious transformation, fueled by technological advancements, evolving regulatory environments, and the increasing demand for renewable energy. As we delve into the outlook for 2024, it’s evident that the industry is at a pivotal juncture, facing both challenges and opportunities that will shape its trajectory and the country’s decarbonization efforts in the coming years.
Start-of-the-Year Utility Solar Snapshot
The latest Short-Term Energy Outlook (STEO) from the U.S. Energy Information Administration (EIA) underscores the remarkable journey of solar photovoltaic (PV) generation, which has made it the country’s fastest-growing source of electricity. With 23 GW of new solar generating capacity added in 2023, representing a 33% increase from the previous year, the industry is poised for even more substantial growth in 2024, with an anticipated 37 GW coming online, marking a 39% increase from 2023. Additionally, 9 GW of new battery storage capacity came online in 2023, double the total compared to the end of 2022.
1. Tax Equity, Regulatory Environment, and Policies Impacting Utility-Scale Solar
The availability of tax equity within the broader context of evolving regulatory environments and policies supporting renewable energy will be a significant factor this year for utility-scale solar project developers, owners, and Independent Power Producers (IPPs).
As a capital-intensive industry, utility-scale solar is particularly susceptible to rising interest rates, which have caused many project owners — as well as many investors — to reassess financial models and project viability. At the same time, industry analysts estimate that tax equity, a critical funding source for utility-scale solar projects, will need to more than double its current $20 billion annual market to meet the IRA’s goals.
2. Transmission Delays and Overcoming Supply Chain Disruptions
Urgent decarbonization goals of businesses and governments continue to drive demand for solar projects. But the complex interconnection process and multi-year queue lengths reflect the industry's struggle to keep pace with the surging demand for solar energy and will require more streamlined regulatory frameworks.
The consequences of supply chain disruptions caused by the global pandemic have compounded the interconnection challenges by creating other backlogs, with high-voltage breaker and transformer procurement taking anywhere from 50 to 150 weeks.
Meanwhile, a decline in Tier 2 modules due to detainment risks has caused a scramble for Tier 1 modules, which are not typically in stock domestically for utility-scale needs and often require several quarters of procurement runway. The concern over the duty-free wafer, cell, and module supply is intensified by geopolitical tensions affecting global supply chains.
The industry's emphasis on ULFPA-clear modules highlights the growing importance of strict adherence to ethical raw material sourcing, diversified supply chains, and traceability to mitigate importation risks. Utility-scale solar project developers and EPCs can avoid this procurement uncertainty by choosing a reliable PV module supplier.
3. The Release of Final Guidance Inflation Reduction Act (IRA)
In Nov. 2023, the U.S. Department of the Treasury released the Final Guidance on the IRA’s Investment Tax Credit (ITC) and Production Tax Credit (PTC), a major boon for the utility-scale solar sector for 2024.
Most of the industry has eagerly awaited the final tax guidance since only around 10% of IRA grant funding has been released. The tax credits have been extended until the end of the decade and expanded to cover utility-scale, long-duration battery energy storage — two key factors that will give developers and EPCs the clarity and confidence to accelerate solar and storage installations.
The introduction of provisions for transferability and direct pay of the tax credits should help offset some of the challenges with tax equity availability in funding utility-scale solar projects.
4. Solar Workforce Development, Apprenticeships, and Prevailing Wage Requirements
The solar industry as a whole faces a notable shortage of skilled installers, highlighting the necessity for robust national-level workforce planning, training programs, and development strategies to sustain the sector's growth and meet the demand for skilled professionals. Partnerships between industry stakeholders, educational institutions, and government bodies can facilitate the development of effective training programs that align with industry needs and evolving technological advancements.
Against that backdrop, developers and EPCs must also navigate the new ratio, labor hours, and participation ratios outlined in the IRA’s apprenticeship requirements and prevailing wage requirements in 2024. The aim is for these new requirements to help strengthen the collective skill set of the industry’s workforce. It’s important to note that the requirements may impact various aspects of a project's budget since developers and EPCs must maintain meticulous records to demonstrate adherence to the provisions and receive tax credits. This may contribute to higher indirect project costs, influencing overall project economics and financial feasibility and potentially leading to higher power purchase agreement (PPA) price requirements.
5. Manufacturing & Technology Trends Impacting Utility-Scale Solar Development
The utility-scale solar industry is witnessing a technological shift with a strong emphasis on efficiently handling large-format modules (LFMs) in the field. This trend aligns with PV innovations that optimize energy production, like larger 210mm cell dimensions and higher string counts with higher power outputs. EPCs are actively exploring innovative approaches to capitalize on the potential efficiency gains from deploying LFMs. When combining LFMs like Trina Solar’s 700W Vertex or the 610W Vertex N with higher string counts, EPCs and developers can lower the levelized cost of electricity (LCOE) to further maximize project value.
6. The Growing Importance of Community Engagement In Solar Development
In 2024, community engagement and education are pivotal for large-scale solar project development, especially in regions experiencing resistance or opposition. Not-In-My-Backyard (NIMBY) objections combined with the spread of misinformation about solar power have led to a significant nationwide increase in local laws, ordinances, and policies opposing solar initiatives, with at least 228 local restrictions across 35 states, including 59 new ones adopted since March 2022.
Community engagement efforts must address these misconceptions, emphasizing the positive impact of renewables on the environment, economy, and community well-being. Collaborative efforts involving industry players, local governments, and advocacy groups are crucial to fostering a supportive environment. Timely and targeted educational campaigns can dispel myths, build trust, and garner community support for sustainable solar projects.
7. What’s on the Horizon for the Utility-Scale Solar Industry?
Despite the current challenges, the utility-scale solar industry is poised for significant transformation, growth, and opportunities over the next five years.
On the one hand, the country’s electricity usage has risen sharply in recent years, propelled by overall economic growth, increasing electric vehicle (EV) popularity and availability, and emerging trends in building and infrastructure electrification. On the other hand, ambitious private and government decarbonization goals continue contributing to the demand for more renewable energy.
The manufacturing boom is developing more resilient clean energy supply chains nationwide, which should help greatly alleviate procurement challenges. For example, 2024 will see Trina Solar begin production at its new 1.5-million-square-foot facility in Wilmer, Texas. The state-of-the-art industrial complex will have 5GW of annual module capacity to meet the growing and urgent domestic demand for reliable renewable energy.
The emergence of more 500MW-1GW farms reflects the industry's shift towards economies of scale and the enhanced capabilities of EPC firms. Technological advancements and increased experience in managing large-scale projects contribute to the feasibility of such expansive solar farms. The trend also signifies the industry's maturation, focusing on efficiency, cost-effectiveness, and long-term project sustainability.
The evolution of energy storage technologies and grid integration strategies further differentiate the solar landscape, contributing to a more resilient and adaptable utility-scale solar industry. Virtual Power Plants (VPPs) will continue to gain prominence as a way to address solar intermittency, especially as battery energy storage deployments become more commonly integrated into installations. In addition to addressing intermittency issues, VPPs with energy storage offer potential new revenue streams by allowing systems to sell excess energy back to the grid and participate in peak demand programs and other ancillary market services.
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