American Clean Power’s (ACP) Clean Power Quarterly Market Report Q2 2022 shows the rate of clean energy deployment slowed substantially in the second quarter as policy headwinds, economic factors facing the industry and trade issues have impacted project development and increased the backlog of new project delays.
The industry saw a 55% drop in project installation compared to the same time in 2021. 3,188 MW was installed in the second quarter. This makes the second quarter the most difficult quarter for clean energy capacity expansions since the third of 2019.
“We have been warning about the storm of policy and economic headwinds the clean power industry is facing, and this is a step in the wrong direction,” says ACP CEO Heather Zichal. “Congressional inaction and uncertainty on long-term tax policy, tariff and trade restrictions, and transmission constraints all impact the demand for clean energy at a time when we need to be rapidly scaling up development. Our member companies are ready to make the investment decisions necessary for building America’s clean energy economy, but the current business and policy environment is slowing the rate of deployment.”
Other market headwinds that impact the rate and pace of development include increased operating costs, delayed COVID pandemics, commodity prices, and supply chain issues.
With a 13% increase of installations, energy storage was the only technology that saw growth. The number of solar installations fell 53% in the same quarter 2021. Concerningly onshore wind installations were 78% less than in the same time period last years.
In the second quarter of 2018, 60 new projects were brought online by project developers. This represents $4.3 billion in capital investment. The industry added 3,188MW of new capacity to 41 solar projects, 14 storage project and 5 wind farms across 27 states. The year’s total installations are now 9,795MW, compared with more than 13,000MW of projects launched in the first six months of 2021.
The total operating clean power capacity in the country is now over 211 GW – enough to power 58 million homes in America. Broken down by technology, the operating clean power capability is comprised of 139.143 MW land-based wind; 65.749 MW solar; 42 MW offshore wind; and 6,471MW/16,792MWh of battery storage capacity.
The industry continues to face many challenges that will impact project development. Despite the current record-breaking amount of clean power capacity being built, the industry’s growth rate is slowing. The project runway grew by just 4% in the first quarter and 3% in the second quarter – much slower than the 12% average quarterly growth experienced throughout 2021.
The industry began construction on 3,964MW of projects during the second quarter. 7,000 MW were in advanced development. 1,155 projects are in the pipeline with a total of 128,889MW. This includes 40,656MW currently under construction and 88.233MW in advanced development.
More than 32.4 GW of clean energy projects have been delayed or not yet reached commercial operation since the 2021 end. That’s enough energy to power 6.5 million homes and support 110,000 jobs, and it represents $45 million in investment – much of which flows to local communities.
Solar projects are the most prone to delays, with nearly 21 GW of solar projects currently delayed – much of which is a direct result of misguided trade actions. 64% of all projects that are delayed are due to solar. In the first quarter 2022, wind accounts for 17% of all delays. Battery storage accounts for 21%.
This was compounded in part by project delays in the second quarter, which saw more than 7GW of deferred projects. A further 8 GW of clean electricity, which was due to be online in the second half of the year, was also delayed.
Despite regulatory headwinds solar is still the most dominant technology in the pipeline. It accounts for 57% of all clean energy capacity currently in development. Land-based wind makes up 18%, while offshore wind makes up 14%. Storage accounts for the remaining 11%.
The second quarter also saw a decline from the prior quarter in terms of projects starting construction or entering advanced stages of development – a key indicator for additional challenges throughout the remainder of the year.
Without Congress’s intervention, the prospects of these projects moving from development into constructed deployment are uncertain.
Texas is the state with the highest level of development activity. It has 23,665 MW under construction, which represents 18%. California (13.710 MW), New York (10.809 MW), Indiana (7.099 MW), Virginia (6.456 MW) are all other top states for project development.
The 260 MW DeCordova Energy Storage Project in Granbury, Texas is one of the largest projects that will be online in the second quarter. Vistra Corp. owns the facility, which is made up of more than 3,000 lithium-ion module batteries.
RWE’s Hickory Park Solar + Storage was the largest hybrid project to come online this quarter. The project is located in Georgia and includes 196 MW solar capacity and 40/80 MWh battery storage.
Avangrid developed and owned the 201 MW Golden Hills Wind Project, which was the largest wind project ever to go online. Vestas and GE Renewables wind towers were used in this Oregon project.
The report’s bright spot is the increase in clean power procurement. Procurement activity picked up during the quarter as companies announced 8,502 MW of new power purchase agreements (PPAs) – a 35% increase from the previous quarter, and a 27% increase from the second quarter of 2021.
Solar is still the preferred technology for new PPAs. It was responsible for 71% of all PPA announcements during the second quarter and 78% for the entire year.
Commercial and Industrial (C&I) buyers accounted for 5,654 MW of new PPAs this quarter, a notable 71% increase from the previous quarter. In the second quarter, Amazon (3,200 MW), Microsoft (615MW), and Verizon (525MW) were the top corporate purchasers.
There was a decline of utility PPA announcements, with 1,095MW of contracted capacity reported. Despite the drop in utility PPA announcements, it continues to be a seller’s market for renewable energy. As utilities look to decarbonize their electricity mix and corporations strive to achieve their sustainability goals, the demand for renewable energy continues to rise.
CenterPoint Energy (335MW), South Carolina Public Service Authority (205MW) and CMS Energy (175MW) were the top utility PPAs this quarter.
You can read the entire report here.