In early April, Wood Mackenzie’s solar team reduced the outlook for U.S. commercial solar in 2020 by half due to the coronavirus pandemic.
The downgrade represents approximately 1 gigawatt of lost demand over the next two years. (For context, 14.4 gigawatts of commercial solar had been installed in the United States through the end of 2019.)
But how has this impacted the competitive landscape?
The biggest shift for commercial solar in recent years has been the move toward virtual power-purchase agreements, or “corporate offtake” with utility-scale solar projects, according to a new WoodMac report on the U.S. commercial solar landscape.
Increasingly, businesses have been “going solar” by signing virtual PPAs or through community solar subscriptions. Last year was the first year when offsite projects — corporate offtake and community solar — served more commercial solar demand than onsite projects.
While the coronavirus pandemic will certainly slow the rate of new corporate offtake agreements, these options have fundamentally changed how commercial solar customers are procuring renewable energy.
Another significant shift — the growing share of third-party-owned commercial solar — will likely get a boost from the coronavirus pandemic.
Third-party ownership continued to increase in 2019, to 56 percent from 53 percent in 2018. Given that larger (1+ megawatt) commercial solar projects will be more resilient in the face of the pandemic and that those projects are overwhelmingly third-party owned, this trend is expected to continue into 2020.
WoodMac also expects the next few years to bring some consolidation to the commercial solar industry. The industry is highly fragmented, with most installers deploying less than 5 megawatts of capacity, or roughly 20 projects, each year. Smaller, less-capitalized developers will struggle with only half that volume.
Only 3 percent of installers had annual volumes over 10 megawatts, but that segment of larger installers accounted for nearly half of installed capacity in 2019. These larger installers will be better positioned to buy out projects or entire development platforms as demand reduction shocks the commercial solar industry.
Michelle Davis is a senior solar analyst at Wood Mackenzie and author of the recent U.S. Commercial Solar Competitive Landscape Update research insight. This research provides an overview of the competitive landscape for commercial solar in the U.S., including key trends shaping development, ownership and financing.