Renewable energy projects are gradually losing their niche status and becoming more commonplace throughout the world with solar consistently outperforming wind on a global scale, according to Fitch Ratings in its inaugural global review of the renewables sector.
Despite their increased acceptance, renewable revenues remain inherently volatile since the resource in question is outside of the project’s control. That said, asset performance for solar projects has been more consistent even though their track record is shorter. ‘Solar projects are demonstrating lower operational risk, better generation performance and lower volatility,’ said Director Andrew Joynt. ‘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. Fitch has upgraded 19% of its rated solar projects compared to 1% for its for wind projects. Additionally, Fitch downgraded 12% of the wind projects all due 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 and subsequent ripple effect to project financings, such as Genesis Solar, LLC and Topaz Solar Farms, LLC, dependent on PG&E for revenue.
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 United States, 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.,’ said Joynt.