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woodmac.comTrusted Intelligence

Austin Perea, Senior Research AnalystColin Smith, Senior Research Analyst

Impact of Solar Investment Tax Credit Extension

Base case and 10-year ITC Extension Forecasts

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Scope of forecast scenarios

Wood Mackenzie Power & Renewables has developed a ten-year solar adoption

forecast across three solar sub-segments (utility, non-residential, and residential PV)

with two scenarios for the Forecast Period:

» Scenario 1: Forecast with current ITC step-down. This scenario serves as the Base Case for this

study

» Commercial, Utility and Third-Party Residential ITC Step-Down: 26% in 2020, 22% in 2021, 10% in 2022

» Residential Direct Ownership ITC Step-Down: 26% in 2020, 22% in 2021, 0% in 2022

» Scenario 2: ITC extension scenario with 30% ITC to continue to be in effect through 2030.

This report was prepared independently by Wood Mackenzie Power & Renewables for

the Solar Energy Industries Association®.

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National-level base case and ITC extension forecast scenarios: 2020-2030

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Wood Mackenzie forecasts 308 GW of solar installed from 2020-2030 if the ITC is extended at 30% to 2030

The U.S. will install 82 GW more solar under a 30% ITC scenario relative to the base case ITC phase-down representing a 36% increase over base case forecasts

Source: Wood Mackenzie GEM

These charts are purely illustrative

1/1 Chart Example

Chart size – 12.2cm x 25.6cm

Chart texts – Arial, 14pt, R84 G88 B90

Chart colors – WM Theme Colors

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National U.S. solar base-case scenario National U.S. solar ITC-extension scenario

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Under our base case scenario, the U.S. will add more than 227 GW of solar under the scheduled ITC phase-down from 2020-2030

Utility PV will remain the dominant sector driving PV growth due to 100% renewables targets, corporate procurement, and increasing economic competitiveness of solar

Source: Wood Mackenzie GEM

Meanwhile, residential growth will be flat through the mid-2020s under an ITC phase-down due to

steady customer economics and increasing market saturation while waning state-level incentives

constrain commercial solar economics

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With a 30% ITC extension to 2030, the U.S. will add more than 308 GW of solar – a 36% increase over the base case scenario

ITC extension drives extensive utility-scale growth as solar becomes lowest the cost generation resource in many markets

Source: Wood Mackenzie GEM

Meanwhile, distributed solar continues to grow throughout the 2020s as an increasing number of

emerging markets reach grid parity earlier than under the base-case scenario

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Base case and ITC extension forecast scenarios 2020-2030 by market segment

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Utility PV Base Case and ITC Extension

Scenarios: 2020-2030 Coupled with falling prices, an extension

of the ITC leads to greater price

competitiveness for utility-scale solar,

resulting in increased procurement in both

established and emerging markets. Utility

Solar becomes the lowest cost generation

resource in many markets. Additionally,

an ITC extension causes greater

corporate procurement of large-scale

solar, hastens coal retirements, and

increases solar + storage adoption.

Under base case scenario, 33 states will

add more than 1 GW of utility-scale solar

from 2020-2030 compared to 41 states

under an ITC extension. Eight additional

states: ID, KS, MD, MT, NE, ND, WA, WY.

Utility PV Forecast – ITC extension results in 40% higher installation volumes than base case scenario

Base case forecast 155 GW from 2020-2030; ITC extension results in 218 GW, a 62.5 GW increase over base case scenario

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Non-Residential PV Base Case and ITC

Extension Scenarios: 2020-2030 With expected cost declines and

increases in commercial retail electric

rates, by 2030 a majority of states will see

attractive year-one bill savings under an

ITC extension scenario

Community solar will drive 1/3 of non-

residential installation volumes through

early 2020s, though projected forecast

does not explicitly account for successor

programs beyond 2025

Under base case scenario, 14 states will

add more than 500 MW of non-residential

solar from 2020-2030 compared to 21

states under an ITC extension. Seven

additional states: AZ, CT, IA, MI, PA, UT,

VA.

Non-Residential PV Forecast – ITC extension results in 31% higher installation volumes than base case scenario

Base case forecasts 27.1 GW from 2020-2030; ITC extension results in 35.5 GW, an 8.4 GW increase over base case scenario

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Residential PV Base Case and ITC Extension

Scenario: 2020-2030

A 30% ITC extension to 2030 has the

largest impact on low-penetration,

emerging state markets, though existing

major markets (CA, Northeast) will

continue to drive majority of volumes due

to higher electricity rates

However, as retail rates escalate and

system costs decline, emerging state

markets begin to reach grid parity*

beginning in mid-2020s

» The rate at which emerging state markets

achieve grid parity is accelerated by 1-3

years under an ITC extension scenario

Under base case scenario, 19 states will

add over 500 MW of residential solar

compared to 23 states under an ITC

extension. Four additional states: ID, MN,

OH, WA.

Residential PV Forecast – ITC extension results in 24% higher installation volumes than base case scenario

Base-case forecast 44.3 GW from 2020-2030; ITC extension results in 55 GW installed, a 10.6 GW increase over base case scenario

*Grid parity is the point at which residential solar LCOE becomes competitive (i.e. achieves parity) with utility-provided electricity

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Appendix: Forecast methodology, segment definitions, author bios

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Ten-year forecast methodology – distributed and utility PV

Distributed solar forecast will be predicated on a state-by-state assessment of

economic attractiveness, which is contingent on several factors:

» Levelized Cost of Energy ("LCOE") for Solar

» Current and future net metering and bill compensation design

» State-level incentives

» Solar ITC (varies by scenario)

» System cost assumptions

» Retail rate forecast assumptions

» Exogenous factors, such as saturation levels (total addressable market met with solar),

competitive landscape evolution, financing trends, etc. will be considered

» Generation interconnection queue and pipeline assessment, where available

Utility solar forecast will be based on a comprehensive analysis of current utility solar

pipeline, utility integrated resource plans, power market dynamics, and public policy

initiatives. This includes:

» Identification of main economic and policy drivers of utility solar growth within each state

» Identification of barriers to utility solar growth within each market

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Additional notes on forecast models and methodology

Utility solar forecast model assesses current pipeline, state RPS, utility resource

plans, and LCOE and pricing of utility solar to determine long term demand.

Distributed solar projection model compares benchmark LCOE to long-term

forecasted retail rates to assess economic attractiveness on state-by-state basis

» Existing state-level incentive programs assumed to expire by mid-2020s

» NEM reform is assumed once state surpasses 8.5% market penetration at 75% retail credit

» Additional state-wide new-home solar mandate expected by 2025

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Segment definitions

» Utility PV: A utility PV installation is a project in which the offtaker of the power is a utility, a third-

party power supplier, or a commercial/industrial entity. Projects with commercial/industrial entities

as the power offtakers are only considered utility-scale if the projects are front-of-the-meter or not

located on the company’s property. These projects are also referred to as “corporate offsite”

projects. Utility PV projects also include any PV systems installed on a non-residential customer's

property that participates in a feed-in tariff program, in which the system's power is sold to a

utility.

» Non-residential PV: A non-residential PV installation is defined as a project in which the offtaker

of the power is neither a homeowner nor a utility. The spectrum of non-residential offtakers

typically includes commercial, industrial, agricultural, school, government and nonprofit

customers. Community solar is also defined as non-residential as well. Although homeowners and

apartment tenants unable to install solar are the typical subscribers to community solar systems,

the fact that the system has multiple offtakers of power categorizes community solar as non-

residential. Within the segment we distinguish between utility-led and third-party-led community

solar with the following distinctions:

» Residential PV: A residential PV installation is defined as a project in which the offtaker of the

power is a single-family household. Any PV system installed on a homeowner's property that

participates in a feed-in tariff program is considered residential despite the offtaker of the power

being a utility.

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About the authors

Austin Perea – Senior Research Analyst, Wood Mackenzie Power & Renewables

Biography

Austin Perea is a Senior Analyst for Wood Mackenzie Power & Renewables where he

leads up the firm’s distributed solar coverage as the primary author of the U.S. solar

market insight report series.

Prior to joining Wood Mackenzie (formerly GTM Research), Austin worked at The

Boston Consulting Group, where he supported the energy practice as a research

associate. He graduated summa cum laude with a B.A. in economics and political

science and a minor in Middle Eastern studies from the University of New Hampshire.

Austin.Perea@woodmac.com

Biography

Colin Smith is a Senior Analyst at Wood Mackenzie Power & Renewables where he

leads coverage of U.S. utility PV with focus on the competitive landscape and market

fundamentals. Colin joined Wood Mackenzie with the GTM Research team where he

has been since 2015.

Prior to working at Wood Mackenzie, Colin worked for PHOTON Consulting leading

report sales, sales operations, and marketing. Colin also was the sales and operations

lead for Next Step Living, residential solar start-up. Colin holds a Bachelor of Science

with Honours from Queen’s University in Ontario in Sustainability and Biology.

Colin Smith – Senior Research Analyst, Wood Mackenzie Power & Renewables

Colin.Smith@woodmac.com

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