According to a recent article published in AMP, solar energy has been booming across the United States, growing by an average annual rate of 49 percent, according to the Solar Energy Industries Association (SEIA), the leading U.S. solar trade organization. But how has the impact of COVID-19 and legislation and incentives affected the renewable energy sector in 2020? Renewable Rayna is here with the answers.
COVID -19 and the Renewable Sector
Having an effect on nearly everything this year, COVID-19 led to an unprecedented reduction in demand for energy for transportation and electricity; by mid‐April energy demand in countries under full lockdown had fallen by 25 percent compared to average consumption in 2019 (International Energy Agency 2020a). This led to a crash in oil prices which declined by 85 percent between January 22, 2020 and April 21, 2020.
Renewable energy generation has been impacted less than the rest of the energy sector due to lower marginal costs of electricity generation. In the United States, for the first time, more electricity was generated from renewables than from coal by June 2020 and the share of renewables is expected to increase from 17 percent in 2019 to 20 percent in 2020 (DOE‐EIA 2020).
For many renewable components and raw materials, in particular for the solar energy sector, most countries, including the U.S., are heavily dependent on other countries. Procuring materials can be taxing during a pandemic with many components of renewable energy systems being manufactured in factories that may have been affected by the virus in multiple parts of the world. According to Michael Henderson, the president of Today’s Power, Inc. (TPI), a leading renewable energy developer in the state of Arkansas, “This has caused longer lead times, but we are lucky to have not seen much of an impact from the pandemic on project timelines and delivery.”
On a separate note, Henderson also commented on employment amid COVID-10 “At the height of the pandemic, we were able to expand our impressive staff by recruiting additional workers when things were quite uncertain for many in the workforce. We intend to continue the growth until 2021.”
Congress passed a $1.4 trillion federal stimulus package alongside a $900 billion COVID-19 relief spending bill to assist Americans suffering because of the pandemic. The renewable energy tax credits, expected to decrease from 26 percent to 22 percent in 2021, have also been expanded by this package. For all solar projects (residential, commercial, industrial, utility-scale) that begin construction in 2021 and 2022, the ITC will now be available at 26 percent for the next two years. In 2023, all markets will fall to a 22 percent tax credit, and the residential market will fall to 0 percent, while the industrial and utility markets will begin to fall to a 10 percent permanent credit starting in 2024.
The news of the extended tax credit is good news for the state of Arkansas who recently passed legislation around net-metering and third party leasing. As explained by Renewable Rayna in previous columns, net metering applications, which allow for individuals to sell excess electricity to utility companies, tell a similar story about the rise of solar power in Arkansas.
In 2020, the Arkansas Public Service Commission (ASPC) passed Order No. 28 which readif there is no demand component on your utility bill, a commercial or residential solar array will qualify for the 1:1 credit to be retained. If the consumer has the demand component on their bill, the 1:1 credit can still be obtained from a commercial solar array if the solar ratio does not exceed 1,000 kW (1 megawatt).If demand component consumers want to install a system that is greater than 1 megawatt (MW) and less than 20 MW, they still earn the 1:1 credit but are also subject to a specific utility grid charge. This charge is set to zero at first.
Third party leasing
Order number 28 followed Act 464, passed in 2019 and enabled those wishing to deploy solar to obtain third-party funding. For non-taxed entities, such as schools, churches, towns and counties, colleges and universities, state agencies, and non-profit organizations, the funding tool is especially vital.
Third party financing, which leads low to no cost investments for renewable energy, and paired with advancements in COVID-10 causing lower attendance in school while virtual learning took place, solar in the Arkansas education sector soared in 2020. Across the state, a surge in education based solar projects took place starting with South Central Service Cooperative, an education services cooperative that serves south Arkansas school districts, announcing their solar project alongside Bearden School District in January of 2020.
Even with the current level of uncertainty due to the COVID-19 pandemic, policymakers should consider promoting cleaner generation technologies, particularly in the electricity sector, where solar is one of the cheapest new-generation options. Due to falling costs and by focusing on monetary value and the relatively quick distribution environmental benefits, a steady increase in the actual implementation of key electrification technologies and scalable technologies such as solar and battery storage has resulted.