As the proliferation of renewable energy continues across Europe, U.S. and several emerging markets, such project initiatives are gradually losing their niche status and becoming more commonplace, according to fresh industry research.
In its first examination of the renewable energy infrastructure space, Fitch Ratings said the sphere is being led by solar energy projects that “consistently outperform” wind power on a global scale.
However, despite their increased acceptance, renewable revenues remain “inherently volatile” since the resource in question is outside of the project’s control, the rating agency added. Nonetheless, asset performance for solar projects has been more consistent even though their track record is shorter.
Fitch Director Andrew Joynt believes solar projects are demonstrating lower operational risk, better generation performance and lower volatility. “Solar projects also tend to meet or exceed initial volume estimates while wind projects more often underperform against expectations.”
Solar projects are also outperforming wind projects from a ratings perspective, he added.
Fitch has upgraded 19% of its rated solar projects compared to 1% for its for wind projects. Additionally, the agency has downgraded 12% of the wind projects. All of the downgrades were down to underperformance compared with expectations.
Volatility of revenue counterparties has driven much of the solar project downgrade activity in recent years, most recently with Pacific Gas & Electric Co.’s (PG&E) plans to file for Chapter 11 bankruptcy stateside and the subsequent ripple effect on U.S. project financings, such as Genesis Solar and Topaz Solar Farms, dependent on PG&E for revenue.
In a public filing earlier this week, PG&E cited at least $7 billion in claims from California’s recent wildfire, which caused 86 deaths and destroyed 14,000 homes, along with over 500 businesses and 4,300 other buildings.
A report by CNN suggests the fire was started when a PG&E power line came in contact with trees. PG&E reported “an outage” on a transmission line in the area where the fire began roughly a quarter of an hour before it started, leading to the claims. However, the company’s demise is unlikely to stunt the growth of the U.S. renewables sector.
Geographically speaking, the majority of wind projects emanate from Latin America with Brazil housing 19 of 41 Fitch-rated wind projects. Conversely, Fitch-rated solar projects are concentrated to a large extent (nine of 16 projects) in the U.S., or the state of California to be exact.
“Over time, however, there are likely to be more solar projects out of Brazil, while offshore wind projects may proliferate in Europe and the U.S.,” Joynt concluded.