U.S. solar installations to set a record in 2023 despite tariff, supply chain, and funding uncertainties
Energize Weekly, September 27, 2023
Solar installations in the U.S. are poised to reach a record 32 gigawatts (GW) of new capacity in 2023, a 52 percent increase over last year, even as the sector faces uncertainties about tariffs, federal incentives, and supply chains, according to a market report.
The quarterly report by consultant Wood Mackenzie and the Solar Energy Industries Association (SEIA) projects that 20 GW will be installed in the second half of 2023 – a record for a six-month stretch.
Solar made up 45 percent of all new electricity-generating capacity added to the U.S. grid in the first half of the year, and the report’s five-year outlook puts average annual growth for installations at 15 percent.
This comes even as the industry faces a host of challenges including supply chain problems, uncertainty over the incentive programs in the federal Inflation Reduction Act (IRA) and tariffs on Chinese and Southeast Asian solar imports.
“Multiple factors are causing pipeline stagnation,” the report said. “They include high interest rates, elevated hardware and labor costs, and increased local opposition to clean energy projects.”
The IRA contains a package of tax credits and incentives for solar development from building new solar-panel factories to installing new solar arrays, but the Internal Revenue Service has been slow to roll out the guidance for accessing the programs.
“Implementation of the IRA, which was enacted just over a year ago, has been slow and complicated,” the report said. “But the long-term policy certainty provided by the legislation continues to drive our expectations for double-digit growth in the solar industry.”
Still, even with better access to the credits, the pipeline issues may pinch the program, the report said, noting that in major commercial solar markets where the IRA is expected to increase development of projects less than 5 megawatts (MW) – Maine, Massachusetts, New Jersey, and New York – pipelines have either shrunk or remained flat recently.
Solar developers have also had to adjust their supply chains to deal with tariffs on Chinese imports and the Uyghur Forced Labor Prevention Act (UFLPA), which bans panels and modules that even use polysilicon from Xinjiang Uyghur Autonomous Region.
“Demonstrating compliance with the UFLPA for Chinese polysilicon from outside Xinjiang (the region of China that the UFLPA targets) has proven challenging,” the report said. Nevertheless, the installation volumes being posted this year shows that developers are adapting their supply chains.
In 2024, the sector will face another round of tariffs on solar cells and modules from Southeast Asia, designed to thwart Chinese solar panels and components being routed through a third country.
While manufacturers and developers will be stockpiling modules prior to the new tariffs and seeking out non-tariff supplies, the report said, “the clear consequence of these events is more expensive solar equipment for the U.S. market, at least in the near-term.”
In the second quarter, 5.6 GW of capacity was installed, a 20 percent year-over-year increase, bolstered by a record 607 MW installed in California due to swell in demand ahead of the switch from net metering to the less favorable net billing regime for solar.
Although California has consistently been the national leader for solar installations, for the first half of 2023, Florida claimed the top spot with 2.5 GW of installations compared to 1.6 MW for California.
Utility-scale installations continued to represent the lion’s share of growth, with 3.3 GW in the second quarter, a 22 percent increase compared with the same quarter in 2022. Wood Mackenzie is projecting a total of 23 GW of utility scale solar for the year.
“There is a cumulative total of 153 gigawatts direct current (GWdc) of solar capacity installed through the first half of 2023, and we expect this figure to grow to 375 GWdc by the end of 2028,” the report said. “Even with the current challenges facing this market, the solar industry is looking at many years of sustained, strong growth.”
