Even with Biden’s two-year tariff pause, WoodMac still expects solar markets to be down this year and next
Research group Wood Mackenzie has released an updated US solar forecast after the Biden administration issued an Executive Order (EO) announcing a two-year delay on AD/CVD rates by the Department of Commerce. WoodMac had forecast a 6.3 GW reduction in 2022 installations based on the uncertainty surrounding the anti-circumvention investigation launched by the DOC in March. While the two-year tariff break is expected to bring some relief to the solar industry, WoodMac said the impact will vary across segments.
Most (about 85%) large-scale US projects rely on imported modules from the four countries mentioned in the anti-circumvention survey. When the investigation began, module manufacturers have greatly reduced production in Southeast Asia as most of their supply goes to the United States. The EO prompted some major manufacturers to restart that production.
Some suppliers expect to ship modules to the United States as early as the end of the third quarter. While the EO has brought some certainty on the issue of new AD/CVD tariffs, the industry now faces uncertainty over the implementation of the Uyghur Forced Labor Protection Act (UFLPA). Enforcement of this new law could severely restrict module imports to the United States.
On the demand side, developers have indicated that tax equity investors still view the potential rate implementation as a risk — despite the two-year hiatus. Since financing solar projects is still considered high risk until the DOC announces a final decision, developers will continue to see high capital costs and high barriers to entry, WoodMac said.
The effect of the study was exponential. Weeks of inactivity have resulted in months of delays. EPC companies have already started reallocating machinery and personnel to non-energy projects, leading to an exacerbated labor shortage for short-term projects. Since a large number of projects have already been pushed to 2023 or beyond, there is little chance of renegotiation until 2022. Given the possible availability of modules and renegotiations of contracts, WoodMac estimates 30 to 40% of the capacity has been postponed to 2023 and materialize earlier in 2024.
Taking all these factors into account, WoodMac expects a modest 1.5 GW (17%) increase in utility-scale solar in 2022, but higher upside potential of 3 GW (18%) in 2023.
As with utility-scale solar, most of the commercial supply of solar modules (approximately 80%) comes from the four Southeast Asian countries subject to the AD/CVD investigation. The EO helps developers secure modules for the rest of the year. Some of these modules may end up in projects in 2022, but it’s more likely that the modules that ship the rest of the year will be part of projects that come online in 2023.
As a result, WoodMac predicts a modest increase in 2022 (about 100 MW) and more increase for installations in 2023 (about 500 MW) as delayed projects come online.
The biggest impact of the EO on residential solar will be in changes in the competitive landscape. Prior to the EO, WoodMac predicted that smaller local installers with no established relationships with equipment suppliers would find it difficult to obtain equipment during the uncertainty of the AD/CVD investigation. The demand from these installers would be met by larger installers. As residential solar demand remains strong, WoodMac expected only very small effects from the study, which would be more than offset by the recent slowdowns in net energy metering in California (NO) 3.0 continue.
That’s why the EO doesn’t change WoodMac’s view on residential solar installations. But it does mean that smaller local installers will do better in the coming months.
news item from Sylvia Leyva Martinez, senior analyst, utility-scale solar in North America; and Michelle Davis, principal analyst, solar; from Wood Mackenzie