After another year of trade policy turmoil, the US solar industry is hoping for supply chain relief in 2023. Our expectations for the industry shifted throughout the year as the anticircumvention investigation was initiated in March, President Biden paused potential anticircumvention tariffs in June, and the Uyghur Forced Labor Prevention Act (UFLPA) resulted in hundreds of equipment detentions in the second half of the year. Between all of this and the historic passage of the Inflation Reduction Act (IRA) in August, 2022 was one of the most volatile policy years in industry history.
It is expected a robust return to growth in 2023. While there is still uncertainty around the CBP’s requirements to release detained equipment under the UFLPA, some manufacturers have had small releases in the last several months. (For more details and context on this issue, see the US Solar Market Insight Q4 2022 report.) It will likely take several more months, and the timing is far from certain, but it is expected shipments to accelerate in the second half of the year. This will help 2023 installations grow 41% over 2022 to 28.4 GWdc, assuming no further disruptions.
Alternative scenarios help to benchmark current market uncertainty
In addition to current supply chain constraints, the US solar industry faces several nearterm uncertainties. To help characterize the potential impacts of those uncertainties, Wood Mackenzie has created two alternative forecast scenarios for the first time. These two scenarios – a Bull case and a Bear case to accompany the standard Base case – will help the industry benchmark industry impacts based on various outcomes.
First, the alternative scenarios consider various outcomes related to the future supply/demand balance of PV modules. This will be heavily impacted by new anticircumvention tariffs that could go into effect by June 2024, pending a final decision by the Department of Commerce. These new tariffs could apply to some suppliers shipping cells and modules from the four Southeast Asian countries named in the investigation –the region where the US solar industry currently sources most of its PV module imports. The industry is already working to diversify supply chains, but new tariffs will create immense pressure to procure non-tariffed supply.
The availability of domestically-produced equipment will also impact this supply/demand balance. The Bull case generally assumes more availability of non-tariffed supply as well as a more optimistic view on how much, and how quickly, domestic manufacturing capacity comes online and supplies the US market. The Bear case assumes a less favorable supply environment.
Second, the alternative scenarios consider various outcomes related to the anticipated guidance from the US Department of Treasury on qualifying for tax credits and associated adders. Some Treasury guidance has already been published (on prevailing wage and apprenticeship requirements, as well as the low-income communities bonus creditprogram). But given that much more guidance is yet to be published, it’s too early to tell how the various adders will impact solar installations. The Bull case considers more favorable guidance where a higher proportion of projects can utilize the adders. The Bear case generally assumes the opposite.
Lastly, there are several other factors incorporated into the alternative scenarios, some of which are sector specific. For utility-scale solar, labor availability and tax equity availability are considered across the scenarios as important factors for that segment’s growth. For distributed solar, trends in retail rates that impact project economics vary between the scenarios. More details on the assumptions for each segment can be found within the full report.
The Bull case puts cumulative US solar installations 10% higher than the Base case and the Bear case puts cumulative installations 11% lower through 2027 – about 20 GWdc in either direction. Put another way, depending on what assumptions become reality, there is roughly 20 GWdc of upside or downside risk for the US solar industry over the next five years.
Source: Wood Mackenzie