The US this year will add a record 32GW of new solar capacity on a direct-current basis versus 20.2GW in 2022 led by utility PV, although the industry still faces supply chain constraints, high prices for imported equipment, and stagnating near-term pipeline additions, according to a new report by Solar Energy Industries Association (SEIA) and Wood Mackenzie.
"This will be a welcome return to growth," the national trade body and analyst group said in Solar Market Insight Q3 2023, noting this year's improved outlook is "predominately driven by the utility-scale segment."
Utility PV will see more than 20GW of additions in 2023, up from 11.8GW last year, which was the weakest result since 2019.
Solar accounted for 45% of all new electricity-generating capacity added to the US grid in the first half of 2023.
Segment installations totaled 3.3GW in April through June, building on a record-setting first quarter and strong fourth quarter 2022, an indication that developers are recovering from supply chain hurdles that plagued the sector here last year.
As generous long-term tax incentives in the Inflation Reduction Act (IRA), last year's landmark climate law, take hold, Woodmac expects total US operating solar capacity to grow from 153GW today to 375GW by 2028.
This will include 172GW more utility PV capacity, even as developers face growing NIMBYism, high interconnection times and costs, and low labour availability.
“The United States is now a dominant player in the global clean energy economy, and states like Florida, Texas, Ohio, and Georgia are at the forefront of this job growth and economic prosperity,” said SEIA CEO Abigail Ross Hopper.
About 80% of solar modules installed here each year across all industry segments are sourced from Cambodia, Malaysia, Thailand, and Vietnam. Imports from all origins that include Germany and India more than doubled in the first half to 24.4GW versus 11.4GW a year earlier.
The report said utility PV developers are receiving inventory with more than 40% of all shipments of electronics --cells and modules - having been released after detention by US Customs and Border Protection (CBP) through enforcement of the the Uyghur Forced Labour Protection Act (UFLPA).
The law, which took effect in June 2022, addresses alleged human rights abuses in China’s Xinjiang region, a major supply source for polysilicon, cells, and other critical components in solar panels.
CBP began using so-called withhold-release orders (WROs) to detain products thought to contain polysilicon from Xinjiang. It later began asking for documentation that quartzite, a key ingredient of polysilicon, was not mined in the region.
While the presumption that any product using inputs from Xinjiang benefited from forced labor is rebuttable, the process for providing the proper evidence to comply with the law can take months.
"Despite increasing shipment releases indicating a more stabalised UFLPA situation, there is no indication that products containing Chinese non-Xinjiang polysilicon are entering the US," said the report, adding it is unclear when they will. China is the dominant global supplier of polysilicon for solar products.
Still, developers are "adapting their supply chains" in an increasing effort to source solar products domestically and from Chinese-branded manufacturers in Southeast Asia who are complying with US trade laws.
Those found skirting US tariffs on Chinese cells and modules face duties as high as 254% starting 6 June 2024, unless the importer here can meet criteria for an exemption.
"The ULFPA continues to be the most limiting factor for utility-scale solar buildout, but on balance, we expect there will be sufficient supply to serve the market by 2025," said the report, noting that the law combined with future tariffs will result in "more expensive solar equipment for the US market, at least in the near-term.”
A surge of new domestic manufacturing investments are expected to improve supply conditions over the next few years. If these factory announcements materialise, the report found that by 2026 US solar module manufacturing output will be “ten times greater than it is today.”
The report cautions that full benefits from IRA have yet to materialise, noting it has yet to drive more solar projects through final stages of development, "causing pipeline growth to stagnate."
It underscored that this plateauing isn't' due to lack of interest in project development but rather challenges including high interest rates, elevated hardware and labour costs, and increased local opposition to clean energy projects.
"But the uncertainty around qualifying and claiming IRA benefits is exacerbating this," the report said. "Critical guidance from the Department of Treasury has helped address some questions but has left others unanswered."
Michelle Davis, head of global solar at WoodMac, said: “In the year since its passage, the IRA has undoubtedly caused a wave of optimism across the solar industry. Announcements for domestic module manufacturing have exploded, promising more stable solar module supply in the future.”
“Now the challenge becomes implementation – the industry is waiting for clarity on several IRA provisions before moving forward with solar investments.”
SEIA and WoodMac reported earlier this year that solar installation was surging in the US as the industry began to see supply chain relief. More recently, SEIA reported that solar and energy storage industries combined added some $100bn in activity to the US economy on the back of IRA incentives.
