Facing trade, tax and economic uncertainties, clean power installations fall in Q2
Energize Weekly, August 3, 2022
Beleaguered by uncertainties over the future of tax subsidies and trade policy, new clean power installations plummeted 55 percent in the second quarter of 2022 compared to the same period in 2021.
Solar installations were down 53 percent compared to second quarter of 2021, while onshore wind installations plunged 78 percent, according to a market report by the industry trade group, American Clean Power Association (ACP).
In the second quarter, a total of 3,188 megawatts (MW) of new clean power capacity was installed. The lowest for a quarter since 2019.
ACP said developers have been hobbled by the continuing uncertainty over the future of federal tax subsidies for clean power and a U.S. Commerce Department investigation into charges the Chinese were evading tariffs on solar panels.
“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,” Heather Zichal, CEO of the trade group, said in a statement. “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.”
Adding to the challenges have been rising commodity prices, COVID pandemic-related delays, supply chain issues and increased operating costs.
The “Inflation Reduction Act of 2022,” the $369-billion climate bill negotiated by Senate Majority Leader Charles Schumer and West Virginia Sen. Jose Manchin, unveiled last week includes new tax credits for carbon-free electricity projects.
The one bright spot for the quarter was energy storage projects, which posted a 13 percent increase in installations the second quarter compared to the same period a year earlier. In a record-setting quarter, 992 MW of battery storage came online, bringing capacity for 2022 to 1,751 MW.
Sixty new projects were brought online in the quarter, representing $4.3 billion in capital investments. This included 41 solar projects, 14 storage projects and five wind projects across 27 states.
Project delays, however, are continuing to mount with developers reporting a total of 19,286 MW of installations facing holdups, including 8,116 MW in the second quarter.
Solar projects are the most prone to delays, as a result of the trade and tariff problems, with almost 21 gigawatts of solar projects currently delayed. Solar accounted for 64 percent of all projects delayed, while wind projects made up 17 percent. Battery storage project delays accounted for the rest.
The drop in installations and the delays are compounded by a slowing in the growth rate for new projects. “The project runway grew by just 4 percent in the first quarter and 3 percent in the second quarter – much slower than the 12 percent average quarterly growth experienced throughout 2021,” the ACP said.
During the second quarter, the industry began construction on 3,964 MW of projects, while 7,000 MW entered advanced development.
The ACP said there are 1,155 projects in the pipeline with a total capacity of 128,889 MW. This includes 40,656 MW under construction and 88,233 MW in advanced development.
Texas continues to lead in development activity with 23,665 MW of projects underway, 18 percent of the total projects in the U.S. pipeline. Texas also boasted the largest project to come online in the second quarter – the 260-MW DeCordova Energy storage project in Granbury.
The other top states for projects include California (13,710 MW), New York (10,809 MW) and Indiana (7,099 MW).
One bright spot was a strong power procurement market, bolstered by commercial and industrial buyers seeking power purchase agreements for clean energy.
Companies announced 8,502 MW of power purchase agreements in the quarter, up 35 percent from the previous quarter and a 27 percent increase from the second quarter of 2021.
The top corporate purchasers for the quarter were Amazon (3,200 MW), Microsoft (615 MW) and Verizon (525 MW).