More than halfway through a tumultuous year, many planned U.S. solar energy industry projects are in a state of suspended animation of sorts, slowed by sticky trade issues but buoyed by prospects for a growing domestic component industry.
The Solar Energy Industry Association (SEIA) finds that installed solar capacity for the first quarter of 2022 was 25% below the first quarter of 2021, but that solar PV nevertheless accounted for 50% of all new electricity-generating capacity additions in the first quarter of 2022. See the Figure, taken from SEIA's U.S. Solar Market Insight Report, released June 7, 2022.
SEIA puts the blame on price increases and supply chain issues exacerbated by a U.S. Department of Commerce investigation into allegations by a U.S. supplier that important Southeast Asian module suppliers are parties to a scheme allowing Chinese suppliers to circumvent tariffs placed on products coming from that country. Imports from Cambodia, Malaysia, Thailand, and Vietnam slowed to a crawl after the investigation began in March, stalling projects in progress and on the drawing board.
Counteracting that, the newly passed Inflation Reduction Act has provisions to fund more solar projects and a long-term build-up of a domestic solar module industry. Plus, the Biden Administration is invoking the Defense Production Act as a tool for directing more federal government solar installation dollars to domestic suppliers.
Concurrently, the administration announced a two-year suspension of tariffs on some imported solar modules and cells, notably from suppliers in the Southeast Asian countries the Commerce Department is investigating. That investigation continues, however, muddying the outlook on whether those suppliers will ultimately be permanently slapped with duties, potentially raising the costs for U.S. solar projects. The Commerce Department had planned to issue its preliminary determination in early August, but it has been pushed back to November. As long as that is hanging over the industry’s head, and despite the administration’s two-year suspension, SEIA says, in a statement issued to EC&M, that progress on U.S. solar installations could suffer.
“Regardless of timing of the preliminary determination, on the substance, this is a deeply flawed case and there is more than enough evidence for a negative determination,” says John Smirnow, SEIA’s vice president of market strategy and general counsel. “We hope that when the Commerce Department looks at the facts, it will see that solar cell processing in these four countries is significant work and that this petition falls well short of the threshold for circumvention. A finding otherwise would stall clean energy progress, run counter to the facts, and undercut the policy certainty delivered by the Inflation Reduction Act.”
While more costly overseas components could complicate efforts to build out U.S. solar energy, installations have been picking up and the outlook for project growth over the long term is bullish. Electrical contractors appear to be seeing more promise; more among EC&M’s annual survey of Top 50 contractors have recently been putting solar and other renewable energy projects on their list of their hottest markets. While SEIA (working through its research partner Wood Mackenzie) sees a possible slowdown through 2023 due to supply issues, it puts average annual solar capacity growth at 6% from 2022 through 2032.
“Challenges like supply chain constraints and policy changes will undoubtedly persist as the solar industry grows,” Michelle Davis, Wood MacKenzie solar analyst says in a note announcing SEIA’s recent US Solar Market Insight 2021 Year in Review. “But high demand, cost competitiveness, and growth momentum have ensured that solar is the next decade’s generation capacity of choice.”
