Exclusive: Solar trumps wind in early performance

Initial output for recently completed solar projects tends to equal or beat base case forecasts but uncertainties over long-term prospects remain, warns Fitch.

A short but growing track record of renewable project energy production is providing a positive picture of solar power assets’ early performance, according to Fitch.

In a report due to be released later today, a draft of which was seen by Infrastructure Investor, the rating agency will note that electricity output at the recently completed projects it monitored was generally equal or superior to base case forecasts.

Across the photovoltaic (PV) power projects in its portfolio, the agency found that energy output exceeded a 50 percent probability of beating forecasts by an average of 9 percent in the early years of operation. The outperformance stemmed from factors ranging from better-than-expected solar irradiance and plant availability, higher online capacity and lower-than-anticipated losses for grid curtailment, the report will argue.

Fitch also underlined the low resource variability of solar projects, with stable generation levels observed for a meaningful portion of them. These are also deemed to exhibit stable operating performance, with very low incidence of downtime, limited grid curtailment and operating expenses for PV projects largely in line with expectations thanks to fixed-price maintenance contracts.

“The difference in production forecasts for P50 and one-year P90 scenarios averages approximately 7 percent, reflecting relatively low annual generation volatility compared with wind power projects,” the report will say. “Investment-grade projects exceed break-even debt service coverage levels by an average of 32 [basis points] in a one-year P99 scenario.”

Fitch’s positive assessment of solar PV projects contrasts with a note it released last year on wind performance. The latter sector was deemed to more often than not be failing to deliver on expectations, with the agency's analysis of 19 operating wind assets pointing out recurring financial and operational underperformance at a majority of monitored projects.

The agency remains cautious on the long-term prospect for solar assets, with the report stating that the positive short-term outlook “does not eliminate uncertainty of expected performance during a project’s 20–25-year debt tenor.” More years of operating data will be required to fine-tune assumptions about output, expenses, availability, degradation and other long-term financial model variables, the report will note.