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Solar projects outperform wind for 3rd straight year despite pandemic: Fitch

Highlights

Wind projects underperformed against expectations

Solar has lower operational risk, volatility than wind

Solar expected to exceed wind additions in 2021

New York — Solar projects exceeded initial estimates and outperformed wind projects around the world for the third straight year with the global pandemic having little effect on the sector so far, according to a new report from Fitch Ratings.

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Electricity production from solar projects tended to meet or exceed initial independent estimates, while wind projects more often underperformed against expectations, according to Fitch's analysis of renewable energy projects released March 15.

"This underperformance is the leading cause of ratings volatility among wind projects," the Fitch report said. "For solar projects, volume risk had no negative impact on ratings."

Fitch compared actual production data from Fitch-rated renewable projects against the initial P50 forecasts and found 73% of annual observations across solar projects were within 5% or better of the original P50 levels and only 6% was significantly below the initial forecasts. In contrast, only 24% of wind project observations were within 5% or better of the original P50 levels and nearly one third was more than 15% below.

One way to quantify the economic risk associated with resource variability is to calculate exceedance probabilities representing the amount of energy expected to be produced by a plant, often called P50, according to the National Renewable Energy Laboratory.

"Wind project underperformance is often attributed to overestimation of power production due to the greater technical challenge in forecasting relative to solar projects," the report said. "For some projects, equipment issues reduced availability and production."

In contrast, solar projects benefited from better than expected solar irradiance and plant availability, the report said.

"The track record of solar projects is shorter, but they clearly demonstrate lower operational risk, better generation performance and lower volatility than wind projects," according to Fitch.

The growth in wind installations in North America is flattening while solar installation is growing, said Manan Ahuja of S&P Global Platts Analytics.

"The increase in solar [versus wind] is a result of recent cost declines in solar along with ability to capture higher priced hours with greater frequency," Ahuja said.

Generally, renewable capacity factors for both wind and solar have been increasing over the years, Ahuja said. While technological changes have been driving capacity factors upwards, curtailment at high renewable penetrations and incremental siting having poorer natural resource impacts capacity factors negatively.

Despite the flattening of capacity factors, renewable installations are likely to continue to grow due to declining costs, extension of tax credits till 2026 with possible future extensions, and state policies such as increasing RPS targets and also possibility of a national level Clean Energy Standard, Ahuja said.

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