The Wood Mackenzie/SEIA US Solar Market Insight Q1 report reveals that the two-year suspension of new solar tariffs is just the start. Passing new clean energy legislation could increase US solar installations by 66% over the next decade.
From pv magazine USA
The U.S. solar industry has recorded its lowest quarter of installations since the start of the COVID-19 pandemic, according to the U.S. Solar Market Insight report published by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. In Q1 2022, price increases and supply chain constraints continued to dampen the solar market, with the industry installing 24% less solar capacity than in Q1 2021.
However, the tide turned yesterday when the Biden administration announced a 24-month tariff exemption on solar modules made in Cambodia, Malaysia, Thailand and Vietnam. Without this action, massive project delays and cancellations would have continued through 2022, jeopardizing President Biden’s climate goals.
Since the Department of Commerce (DOC) announced in March that it would act on a petition filed by Auxin Solar and launch an anti-dumping investigation into Chinese companies working in Cambodia, Malaysia, Thailand and Vietnam, manufacturers of solar modules have halted shipments to the United States. , causing an industry-wide shortage of mods. According to the US Solar Market Insight Q1 report, these supply constraints are expected to ease as manufacturers increase shipments to the US in the coming months.
“The solar industry faces multiple challenges that are slowing clean energy progress in the United States, but this week’s action from the Biden administration provides a jolt of certainty companies need to move forward. projects and create jobs,” said Abigail Ross Hopper, President and CEO of SEIA. “President Biden has taken clear note of how industry downturns are hampering network resilience. By acting decisively, this administration is breathing new life into the clean energy sector, while positioning the United States as a global leader in solar manufacturing.
The effects of the DOC investigation have taken their toll on what was once a booming industry, with 2022 guidance halved due to ongoing supply chain challenges and anti-circumvention investigation .
“The White House executive’s action brings relief to the U.S. solar industry, which has been mired in uncertainty over the Commerce Department’s anti-circumvention investigation launched in late March following a a petition filed by Auxin Solar, a national module manufacturer,” said Michelle Davis, principal analyst at Wood Mackenzie.“Despite this, this announcement should create around 2-3GW of upside potential for Wood Mackenzie’s base scenario outlook for 2022, assuming the global market returns to normal.” Davis added.
Almost every sector of industry has been affected, but the greatest pain has been felt in the utilities sector. Utility-scale solar set an annual installation record in 2021 at nearly 17 GWdc; however, final installations in 2021 were lower than expected due to the many challenges facing the industry. Solar power in the United States suffered its largest decline in the first quarter of 2022 and saw its lowest quarter of installations since 2019. Several gigawatts of projects pushed back their online dates from 2021 to 2022 or later . It also had the lowest number of new projects added to the pipeline since 2017.
The commercial solar market was down 28% quarter over quarter, while the community solar market was down 59% quarter over quarter. Project delays due to interconnection issues and supply chain constraints have limited growth in both sectors.
The bright spot for the U.S. solar industry was the residential sector, where installations totaled 4.2 GWdp in 2021, setting an annual record and surpassing more than 500,000 projects installed in a year for the first time.
Residential solar also has a bright future. Wood Mackenzie predicts 13% growth for residential solar in 2022, although analysts note that NEM 3.0 in California and the ITC expiration have a big impact on the base-case outlook from 2023. California volumes are expected to drop 45% in the first full year of NEM 3.0, and Wood Mac predicts a 2% market contraction in 2023. The market will grow everywhere but California by 18% over the same period. An ITC extension would paint an even rosier picture, with residential rising to 13 GWdc, or 21%, from 2023 to 2032.
The 24-month rate extension provides certainty at a time when it is needed most, and it buys time for the implementation of clean energy industrial policies such as long-term tax credits and manufacturing incentives. Certainty around the investment tax credit (ITC) would be a major catalyst for the industry, increasing plant capacity by 66% over the next decade, according to the Q1 Insight report.
An overall increase of 66% represents an increase of 20% for residential, 15% for non-residential (commercial and community solar) and 86% for utility solar. Total solar installed in the United States under this scenario by 2032 would be almost 700 GWdc compared to 464 GWdc in the base case.
For this Year in Review report, Wood Mackenzie has published a 10-year outlook for each segment. Overall, the solar industry is expected to more than triple, from 120 GWdc installed today to 464 GWdc by 2032. While this is good news, it is well below what is needed to meet the Biden administration’s clean energy goals.
The Build Back Better (BBB) Act is unlikely to pass; however, there are opportunities for many of the clean energy provisions included in the BBB Act to be adopted into final legislation. The Wood Mac/SEIA report concludes that enacting an extension of the Investment Tax Credit (ITC) and other clean energy provisions would be a significant catalyst for the solar market, increasing installations by 66 % over the next decade compared to the baseline scenario.
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