Industry observers report 2019 as a record year for utility-scale solar contracts, with the market increase driven by economic competitiveness, state-level policies requiring electric utilities to increase the amount of renewable energy delivered to customers, and increased demand from corporate offtakers. Last year, 10 states raised their renewable portfolio standards goals, which created renewable energy project development opportunities.
Because of this, the utility-scale solar industry is expected to weather the COVID-19 impacts, but not without potential project delays and negative impacts from macro-economic forces. Here are some impacts to consider:
- Potential Closing of U.S. Ports – The United States so far has not seen a mass closure of its ports due to COVID-19 or shelter-in-place restrictions. However, certain port terminals have closed due to the presence of infected employees. These closures have been temporary, so far. Any mass or lengthy closure could have an impact on delivery times of equipment.
- Photovoltaic (PV) Component Delays – While late-stage projects are not as likely to be impacted, as most equipment supply is confirmed, developers managing early-stage projects could see equipment delays if component availability is limited by COVID-19 impact on global product manufacturing and supply-chain delivery.
- Travel to Project Sites – Limited travel nationwide may impact site visits by key stakeholders seeking to ensure timely construction of projects.
- Construction Site Closure – The Cybersecurity and Infrastructure Security Agency of the Department of Homeland Security released a list of “Essential Critical Infrastructure Workers,” which included energy as essential. Under this federal guideline, utility-scale solar construction is able to move forward. However, delays could occur if an on-site COVID-19 infection causes a shutdown. In this event, here are considerations for employers addressing the COVID-19 outbreak.
- Lower Demand for Electricity – Due to shutdowns in various sectors of the global economy, the demand for electricity in the United States for 2020 is expected to be lower than anticipated. Multiple independent system operators have reported reductions in load compared to historical averages, as well as changes in load demand throughout the day. The New York Independent System Operator reported a decrease of about 4 percent compared to what is typical for early spring, while PJM reported that demand has fallen about 5 percent below a typical evening peak.
- Permitting and Local Government Delays – Many local governments and other permitting agencies have instructed their employees to work from home. This transition, coupled with the impact of employees missing work due to COVID-19 infection, may delay permitting activities.
Careful consideration needs to be given to the points above, but the underlying reasons and economics for doing these projects and the state requirement timelines still offer compelling motivation for going forward with these transactions.
McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.