Solar projects are performing better than wind projects in terms of returns on investments, according to Fitch Ratings’ first global review of the renewables sector. The ratings firm, which has upgraded numerous solar projects, points to solar’s ability to meet performance expectations among its findings.
“Solar projects are demonstrating lower operational risk, better generation performance and lower volatility,” said Fitch Ratings director Andrew Joynt. “Solar projects also tend to meet or exceed initial volume estimates while wind projects more often underperform against expectations.”
As such, the firm has upgraded 19 percent of the solar projects it’s rated, while it’s only upgraded 1 percent of the wind projects it’s rated. The company also downgraded 12 percent of the wind projects it’s rated, citing underperformance compared with a project’s expectations.
In the Global Renewables Performance Review Fitch explained that solar resources are proving more stabile and predictable than wind resources, calling it “the salient factor differentiating these asset types.” It added that rated solar projects have consistently outperformed wind projects.
A major factor in the volatility of revenue for solar projects, it appears, are driven by occurrences at counterparties. For instance, Pacific Gas & Electric (PG&E) announced in January that it plans to file for Chapter 11 bankruptcy in the wake of wildfires in California and its liability for them. Genesis Solar and Topaz Solar Farms were dependent on PG&E for revenue.
Fitch noted that its rating of wind and solar projects were in different locations, however. 19 of 41 wind projects were in Latin America and Brazil, while nine of the 16 solar projects it rated were in the US. Over time, Joynt anticipated there will be more solar projects out of Brazil and more offshore wind projects in Europe and the US.
At this point Fitch found that solar projects tended to meet or exceed initial independent estimates, while wind projects more often underperformed against expectations. “We found 79% of annual observations across solar projects were at or above the original P50 levels, and only 3% were significantly (i.e. more than 10%) below the initial forecasts,” Fitch wrote in the assessment. “Wind, by contrast, doesn’t measure up. Around 85% of wind project observations were below P50 level and 53% were more than 10% below.”