CreditSightsanalysts contend that PJMInterconnection LLC is underestimating the growth of rooftop solarin the Mid-Atlantic region and overestimating electricity demand.

PJMhas significantlyrevised its load forecast model to factor in energy efficiency andbehind-the-meter generation, such as rooftop solar. In its annualLoad Forecast Report released at the end of 2015, PJM projected slow growthin demand over the next 15 years and cut its peak load forecast by 5,781 MW, or3.7%, for 2016.

CreditSightsanalysts said in a July 8 report that they believe "rooftop solar isgrowing at a faster rate" than PJM anticipated, which increases thechances the grid operator will lower its electricity demand growth forecast.

CreditSightssaid it compared PJM's forecast for rooftop solar to actual installation dataprovided by the U.S. Energy Information Administration, finding that rooftopsolar installations in Mid-Atlantic states are "growing at nearly doublethe rate PJM is expecting."

EIAdata shows that actual rooftop solar installations in PJM grew 30% year overyear from April 2015 to April 2016, but PJM's forecast only calls for 17%growth through 2016-2017, before falling to 12% for 2017-2018 and 10% for2018-2019, according to CreditSights. "If the current growthrate of rooftop solar in PJM holds at a 30% rate we could potentially seenegative electric demand growth and/or see it impacting the amount of capacityprocured for the annual capacity market auction," analysts wrote in thereport.

Theanalysts noted that PJM's forecasting methodology assumed that the investmenttax credit would sunset in 2016 and drop to 10%. However, Congress the 30% ITC through2019, which falls gradually to 22% by 2021 and 10% thereafter for commercialsolar. Credits for residential solar also were extended through 2021, but withoutthe 10% credit in 2022 and beyond. "This adds another fiveyears of likely higher rooftop solar growth than PJM's model forecasts and is akey reason why we think the load forecast will be lowered," analysts wrote.

TheCreditSights report also pointed out that solar's popularity is moving from theWest Coast to the East Coast. California-headquartered , the largestrooftop solar developer in the U.S., said at an in December 2015 that itstarget states include Pennsylvania, Maryland, New York, Massachusetts andConnecticut, the report stated.

Inaddition, CreditSights analysts said in March that rooftop solar is ahidden driver behindthe surge in utility mergers and acquisitions.