Tariffs cloud the forecast for solar

Source: Benjamin Storrow, E&E News reporter • Posted: Monday, December 17, 2018

Solar installations slumped 20 percent in the third quarter of 2018, the Solar Energy Industries Association (SEIA) said yesterday, revealing the punishing impact of President Trump’s tariffs on imported panels.

The news highlighted the crosscurrents affecting the industry. Installation costs continue to fall, and utility-scale projects no longer need a subsidy to compete with traditional forms of electricity generation.

Yet U.S. solar firms saw third-quarter installations fall to 1.7 gigawatts, a decrease of 20 percent from the second quarter and down 15 percent from the same time last year. The decline tracks with concerns about Trump’s 30 percent levy on imported panels in January.

The impact could be seen in utility-scale installations, which make up the biggest share of the U.S. solar market. The 678 megawatts installed by power companies marked the first time since 2015 that utility-scale installations dipped below 1 GW.

“Solar growth has been on an exponential track since 2009, so to see it slow is not encouraging,” said Mike O’Boyle, electricity policy manager at Energy Innovation, a think tank that advocates for a transition to clean energy. “But I don’t see it as something indicative of a larger trend yet. I think we would have to see a consistent slowing to say the market is deteriorating.”

Indeed, American solar installations are expected to seesaw in the coming months.

SEIA said it expects to see 3.5 GW of capacity brought online in the last three months of 2018, the largest quarterly total since the fourth quarter of 2016. But utility-scale installations are projected to flatline in 2019.

Many analysts said they expect developers to start projects next year, when they can capture a 30 percent investment tax credit, while pushing off completion dates until 2020, when tariffs on imported panels fall to 25 percent.

“The true economics of utility-scale solar continue to improve, but the tariffs are artificially inflating what would otherwise be very low pricing for solar farms, and new construction is suffering as a result,” said Matthew McGovern, CEO of Cypress Creek Renewables, the country’s largest utility-scale developer.

A Chinese decision to cut subsidies for domestic solar projects has helped lower panel prices globally, offsetting the impact of American tariffs. Component and installation costs are also falling.

Lazard, an asset management firm, estimates that utility-scale solar prices have decreased 88 percent over the last nine years, making large-scale photovoltaic projects competitive with coal.

State policies also provide a potential bright spot for the industry in the coming year. South Carolina is considering legislation that could give the industry a boost.

In Michigan, one utility has pledged to install 5,000 MW of new capacity by 2030. Michigan today has nearly 150 MW of installed solar capacity.

The residential market in California figures to benefit from a rule requiring new homes to install solar panels, while installations in Massachusetts are likely to rise after the rollout of a stronger solar program.

“All the elements … for a positive future for solar are in place,” said Dan Whitten, SEIA vice president of communications. “It would not surprise me if we outperformed projections for the next five years.”