As solar developers braced for potentially retroactive tariffs on solar module imports, the U.S. solar market notched its worst quarter for installations since 2020.
The commercial solar market saw 28% quarter-over-quarter declines, while the community solar market was off by 59% quarter-over-quarter.
In contrast, the residential solar market saw record-setting growth as customer demand and sales pipelines grew. The performance data were reported by Wood Mackenzie and the Solar Energy Industries Association (SEIA) in a quarterly report.
The report said that utility-scale solar had its lowest quarter since the third quarter of 2019, with 2,173 MWdc installed. That was a 41% decrease from the first quarter of 2021 and a 64% decrease from the fourth quarter. The report blamed supply chain constraints and shipment delays that it said were made worse by trade policy disruptions in the second half of 2021.
According to Wood Mackenzie’s project pipeline data, 17.6 GWdc of projects in development have been delayed by at least a year and 450 MW of projects were canceled outright. New procurement for utility-scale solar was 2.4 GWdc in the first quarter, its lowest level since 2017, and below the 2021 quarterly average of 6.7 GWdc.
On June 6, President Joe Biden announced a two-year pause on new solar tariffs and invoked the Defense Production Act to spur domestic manufacturing of modules, to the joy of developers and industry advocates.
But in the months prior to the executive order, a Department of Commerce investigation that solar modules imported from four Southeast Asian countries were skirting federal trade duties against China, and the potential for tariffs of 50-200% to be retroactive to April 1, 2022, hobbled development activity.
Subscribe today to the all-new Factor This! podcast from Renewable Energy World. This podcast is designed specifically for the solar industry and is available wherever you get your podcasts.
Listen to the most recent episode on building out the U.S. solar supply chain, featuring interviews with Rhone Resch, Martin Pochtaruk, and Michael Parr.
As a result of price increases and supply chain constraints, the U.S. solar market installed 24% less capacity in Q1 2022 than in Q1 2021, according to the market report.
Utility-scale solar development was hardest hit by the Commerce inquiry, the report said. The first quarter of 2022 marked the lowest quarter for installations since 2019 and the lowest number of new projects added to the pipeline since 2017.
The commercial solar market saw 28% quarter-over-quarter declines, while the community solar market shrank by 59% quarter-over-quarter. In contrast, the residential solar market saw record-setting first-quarter growth as customer demand and sales pipelines continued to increase.
Bright outlookWood Mackenzie said it increased residential solar expectations for 2022. It said a delay in California's net metering revision process is expected to allow that state's market to record a full year of deployments under current, more favorable rates. The upward revisions in California's residential solar outlook more than offset nationwide downward revisions. As a result, Wood Mackenzie said it expects a 14% year-over-year growth in 2022 in its nationwide residential base case. The firm's high case would add 6.3 GWdc (23%) of additional deployment for 2022-2027, compared to the base case.
The analyst firm also said that while earlier in the year it expected modest growth in commercial solar in 2022 (6%), current expectations include a 14% decline this year compared to 2021.
Community solar installations during the first quarter were "significantly lower" quarter-over-quarter due to what the market report said was the typical drop in first quarter installations. Even so, installations were up 16% year-over-year. The report said that after a record-setting 2021, community solar installations in 2022 are expected to contract due to uncertainty around the anti-circumvention investigation, interconnection issues, and long timelines for new community solar policy and rulemaking.
The U.S. installed 3.9 gigawatts (GWdc) of solar PV capacity in the first quarter to reach 125.4 GWdc of total installed capacity. Residential solar had its largest quarter in history with 1.2 GWdc installed, a 30% increase year-over-year.
The president's June 6 order on potential future tariffs brought "relief" to the industry, said Michelle Davis, Wood Mackenzie's principal analyst, and added 2-3 GW to Wood Mackenzie's 2022 base outlook for the U.S. solar market.
Trade disputeSan Jose, Calif.-based Auxin Solar filed a trade petition in February that alleged solar manufacturers in Cambodia, Thailand, Vietnam, and Malaysia were being used to circumvent U.S. trade duties against China. Commerce took up the case in March, a process that Secretary Gina Raimando said was required by federal statute.
Industry advocates said the investigation alone, even in the absence of additional tariffs, would decimate the U.S. solar market.
The market report said that roughly 80% of all solar module supply to the US comes from these four countries. And much of the domestic module industry relies on solar cells from these same countries. Since late March/early April, "most manufacturers have halted shipments to the US, given the unknown tariff risk," the report said.
SEIA, along with the American Clean Power Association and other industry advocates, launched a $5 million campaign against the investigation, while accusing the Biden administration of "empty rhetoric" toward clean energy and climate goals.
Auxin Solar, meanwhile, was accused of being a "bad actor" out to game U.S. trade laws for its own good. CEO Mamun Rashid said he filed the petition on his own, without outside help, because solar imports posed a direct threat to his business.
In response to President Biden's pause on new tariffs and boost for domestic manufacturing, Rashid called the order "potentially illegal."
Read more: Who is Auxin Solar? An exclusive interview with the CEO behind the bitter solar tariff fight
The U.S. solar industry received a lifeline from President Biden. Now, the industry has 24 months to ramp up a domestic supply chain or face the potential for similar trade cases down the road. Plus, the Commerce investigation of the Auxin Solar petition will continue and could result in additional tariffs against imports.
A recent report from the Ultra Low-Carbon Solar Alliance found that Chinese producers hold 83% of global capacity for polysilicon production, 96% for wafers, 79% for cells, and 70% for modules.
Developing a domestic supply chain is paramount to the evolution of the U.S. solar market, according to Rhone Resch, who led SEIA from 2004-16 as its CEO. Resch was featured on the third installment of a four-part Factor This! series on the Auxin Solar tariff petition.
"From my perspective, I think it's absolutely critical that we do focus on bringing (solar) manufacturing back to the United States." He said the U.S. can successfully compete with Chinese suppliers "as long as the right mechanisms are put in place."
Industry advocates, like Resch, are now urging Congress to quickly approve incentives for domestic manufacturing that are included in the Solar Energy Manufacturing for America Act (SEMA Act).
Manufacturing capacityThe Wood Mackenzie-SEIA quarterly market report said that the U.S. has around 11 GWdc of module manufacturing capacity. It said that announcements of new manufacturing capacity plans across the supply chain became increasingly common as suppliers positioned themselves to take advantage of the potential manufacturing tax credits proposed in SEMA.
It said that "only a few" of the announced projects have come to fruition. Heliene, Silfab, and First Solar opened new module manufacturing facilities in 2021. The report said that all other suppliers’ announced capacity expansion plans hinge upon the passage of SEMA.
The bill from Sen. Jon Ossoff (D-GA) would create tax incentives of 11 cents/watt for integrated modules, 4 c/w for cells, $12/sq. m. of wafer, and $3/kg of polysilicon. Production of non-integrated solar modules would receive 7 c/w. Production of solar trackers and inverters would also receive credits.
Resch estimated ramping up domestic manufacturing to meet U.S. demand for solar modules would take about two years -- the exact length of the pause on new tariffs granted by President Biden.
