Though the U.S. solar market has experienced a tumultuous few quarters since the government began considering tariffs on imported solar modules and cells last year, results from the second quarter of 2018 show signs of a turn-around in the market, according to the latest U.S. Solar Market Insight Report from Wood Mackenzie Power & Renewables (previously known as GTM Research) and the Solar Energy Industries Association (SEIA).
For a second consecutive quarter, the residential PV sector was essentially flat on both a year-over-year and quarter-over-quarter basis – an encouraging sign of market stabilization after a year in which the market contracted 15%, according to the report. On the other hand, non-residential PV fell 16% quarter-over-quarter and 8% year-over-year.
Notably, the report says, Q2 represents the first quarter in which it is clear that tariffs have taken a bite out of the solar market. Some previously announced projects were canceled or delayed due to the tariffs, and the U.S. market installed 2.3 GW DC of solar PV, representing a 9% year-over-year decrease and a 7% quarter-over-quarter decrease – despite the fact that module prices fell sharply in Q2 due to lower demand in China.
Looking ahead, though, the report forecasts an acceleration of solar deployment in the second half of 2018 driven by utility-scale projects. According to the report, 8.5 GW of utility PV projects were procured in the first six months of the year, representing the most ever procured in that time frame. This includes 26 projects exceeding 100 MW. Some of these were on hold in 2017 due to uncertainty around the tariffs, the report notes.
“Once lower-than-expected module tariffs were announced in January 2018, developers and utilities began announcing new projects,” Colin Smith, a Wood Mackenzie senior analyst, wrote in the report. “As we move toward 2019, we expect to see continued procurement growth as developers look to secure projects they can bring online before the investment tax credit steps down to 10 percent in 2022.”
The report notes that module prices are at their second-lowest mark in history, even with the addition of a 30% tariff.
“Except for residential PV, U.S. system prices are at their lowest levels ever,” the report says.
As a result of the surge in procurement, Wood Mackenzie Power & Renewables has increased its five-year forecast for utility-scale solar by 1.9 GW. That is still 8% lower than was projected before the tariffs were announced.
“The data shows us that the tariffs have dampened solar’s growth, as previously announced projects were canceled or delayed due to the tariffs,” states Abigail Ross Hopper, SEIA’s president and CEO. “Yet, this report also reveals that the solar industry is simply too strong to be kept down. Procurement numbers show that solar is poised for substantial growth.”
In the residential market, 577 MW was installed in the second quarter, which, again, is essentially flat on both a quarterly and an annual basis. Declines in previous quarters were less a symptom of the tariffs but instead a result of customer acquisition challenges and the scaling-back of several large installers, according to the report, which points to the leveling-out of the market as a sign that customer acquisition challenges may be subsiding. Emerging residential state markets like Florida and Nevada posted large gains in installations and helped the segment rebound.
Community solar continues to see rapid growth: Led by Massachusetts and Minnesota, more than 300 MW of community solar was installed in the first half of the year. The build-out is expected to continue in the second half of the year, the report says.
The report projects a flat 2018 for the solar market as a whole; most of the utility solar being procured today will come online in the 2020 time frame. By then, 28 states in the U.S. are expected to be adding at least 100 MW of solar annually, and 25 states will have more than 1 GW of solar PV – compared with only two states at that capacity in 2010.
More on the report can be found here.