Although the U.S. installed a commendable total of over 2 GW of solar photovoltaics (PV) in the third quarter of 2017 (Q3’17), the industry has been experiencing higher prices across all market segments and major policy uncertainty, according to the latest U.S. Solar Market Insight report from GTM Research and the Solar Energy Industries Association (SEIA).
The report says prices rose due to a tight global supply of modules and uncertainty around the Section 201 trade case now being weighed at the White House. As previously reported, the U.S. International Trade Commission voted to impose trade remedies on foreign-manufactured cells and modules, though it has recommended levels well below what co-petitioners Suniva and SolarWorld Americas initially requested. President Donald Trump now has until Jan. 26 to decide the outcome of the case.
In all, 2,031 MW of PV were installed in the U.S. in Q3’17, the eighth consecutive quarter in which the domestic solar industry added more than 2 GW. However, the report says the capacity additions represent a 51% drop year-over-year and the lowest quarterly growth seen since 2015. The cumulative year-to-date comparison puts the industry down 22% compared to this point last year – which is in line with the expected 21% decline for all of 2016 vs. all of 2017, the report notes.
GTM Research forecasts that 11.8 GW of new PV installations will come online in 2017, down 22% from a record-breaking 2016. The report says the forecast has been adjusted downward from 12.4 GW in the previous quarter to reflect continued challenges in the residential market and a push-back in utility-scale completion timelines due to uncertainties surrounding the trade case.
“The solar industry is a resilient bunch, but this quarter shows us what happens when policy uncertainty becomes a disruptive factor: prices rise, supplies shift and the market reacts accordingly,” says Abigail Ross Hopper, SEIA’s president and CEO. “We urge President Trump to reject tariffs and allow solar to continue its amazing growth for the U.S. economy, national security and American families in all 50 states.”
Nonetheless, the report offers some encouraging news.
Utility-scale projects accounted for 51% of the quarter’s installed capacity, but the report says the non-residential market was the standout. The non-residential segment grew 22% year-over-year, installing 481 MW in Q3’17. Non-residential consists of commercial and industrial businesses that install solar, nonprofits, and community solar programs.
The report also says California, Massachusetts and New York all posted strong quarters, while Minnesota had its largest quarter ever due to its robust community solar program. Nationwide, community solar capacity is on track to grow by more than 50% year-over-year.
The utility-scale segment was led by Nevada, North Carolina and Texas. In fact, the report says Texas installed more solar in Q3’17 than the state installed in the entirety of 2015. Meanwhile, emerging markets in the Southeast, including Florida, Mississippi, and South Carolina all had strong quarters and are forecast to install more solar in 2017 than any year previously.
The report says 4 GW of utility-scale PV projects are currently under construction across the nation, and GTM Research forecasts an additional 3.9 GW will come online by the end of the year. This would make 2017 the second-largest year ever for solar installations, behind only the record-shattering 2016.
Despite more than half of U.S states now being at grid parity – meaning the levelized cost of energy is below electricity bill savings in year one of system life – the report says the U.S. residential segment posted its lowest solar installation total since the first quarter of 2015.
The report attributes the slowdown to two key factors: persistent nationwide customer- acquisition challenges and a pivot by major solar installers that are pursuing profitable sales channels over growth. This has been particularly acute in mature markets that account for the majority of installation volumes.
Several markets, however, experienced record quarters for the residential solar segment. These include New Mexico, Virginia, Idaho, and Washington, D.C. Meanwhile, emerging markets, such as Florida and Pennsylvania, are expected to surpass 50 MW of residential capacity for the first time ever this year.
“The year 2017 has been unconventional for solar in the sense that utility and residential PV, which have historically been the market’s major growth segments, are actually expected to decline in 2017,” says GTM Research Solar Analyst Austin Perea. “For utility PV, this is largely a function of comparing the record-breaking [investment tax credit] demand pull-in effect of 2016 to more modest build-out in 2017, while significant customer-acquisition issues remain a challenge for residential solar. Conversely, non-residential solar, the smallest and most historically beleaguered sector, is expected to grow in 2017 in large part due to robust community solar build-out and regulatory demand pull-in across major state markets.”
Looking forward to 2018 and beyond, the report says both Section 201 remedies and corporate tax reform present considerable downside risk to the industry’s base-case forecasts. At present, though, neither issue will be incorporated into GTM Research’s existing outlook until President Trump issues a formal decision on Section 201 trade remedies and the U.S. Congress votes on corporate tax reform legislation.
Other key findings of the report include the following:
- Through the first three quarters of 2017, 25% of all new electric generating capacity brought online in the U.S. has come from solar, ranking second over that time period only to natural gas;
- Voluntary procurement continues to be the primary driver of new utility PV procurement, accounting for 57% of new procurement through Q3’17;
- Q3’17 saw price increases across all market segments for the first time since this report series’ inception, stemming from increases in module costs due to a global shortage of Tier 1 module supply and the Section 201 petition; and
- Total installed U.S. solar PV capacity is expected to double over the next five years. By 2022, nearly 15 GW of solar PV capacity will be installed annually.
Charts courtesy of the GTM Research/SEIA U.S. Solar Market Insight report