The U.S. utility-scale solar segment is still feeling the impact of Section 201 tariffs nearly a year after the Trump administration announced them, according to a Thursday report from Wood Mackenzie Power & Renewables and the Solar Energy Industries Association (SEIA).
Quarterly utility-scale installations hit a three-year low in Q3, according to analysts, dropping below 1 gigawatt for the first time since 2015. Though the impact of tariffs has been limited compared to the industry’s worst fears, the contraction indicates developers are still dealing with the uncertainty that preceded the tariff announcement. In total 678 megawatts of utility-scale solar came online in Q3.
But analysts say utility-scale procurement has still “exploded” in 2018, with 11.2 gigawatts of projects announced, 3.1 gigawatts installed and 3.5 gigawatts forecasted for Q4.
“The low Q3 is more a symptom of this hiccup in the marketplace than a real indication that installation volumes are declining,” said Colin Smith, a senior solar analyst at WoodMac. “We’re still expecting a very large Q4.”
Justin Baca, SEIA’s vice president of markets and research, said Q3 represents the lull between projects built using pre-tariff, imported modules and the post-tariff certainty when developers again started acquiring panels with the new policy in place.
Questions around how tariffs might impact that market pushed some projects slated to come online in Q3 2018 into Q4 or Q1 2019. But looking into the end of the year, WoodMac analysts forecast that 3.5 gigawatts of solar will come online in Q4 2018. That makes the last quarter of the year the largest since Q4 2016, which cumulatively was a record year for solar installations.
Colin Smith, a senior solar analyst at WoodMac, said procurements in Q3 also show that the utility-scale segment is rebounding.
“We did, however, see utility PV procurement outpace installations fourfold in Q3, showing that despite the tariffs causing project delays, there is substantial growth ahead for the U.S. utility PV sector,” he said in a statement.
Over 4 gigawatts of projects are now under construction.
“The point in the report about the utility-scale pipeline growing...is really indicative of the strength coming out of last year,” said Baca. “We had the disruption of the tariffs, but now people are able to focus with some level of certainty and find contracts. As long as we have certainty, we’re able to build off of the declining overall costs.”
Despite the continued challenges tied to tariffs, other areas of the solar market also seem to be stabilizing.
Growth in the residential market was flat year-over-year and quarter-over-quarter, after a 15 percent contraction in 2017.
Overall, WoodMac forecasts “virtually flat growth” in 2018, with installations growing 2.3 percent. For the solar market, that indicates a maturing industry.
According to Baca, recovery from a year of tariff-related questions undoubtedly constrained growth that had been climbing steadily. But he said fluctuations year-over-year are less noteworthy than a long-term trajectory of growth. Solar advocates also point to other encouraging areas of the industry — like the growth of community solar in several states or residential expanding to new markets — as positive signs.
“[Two percent] is certainly small by solar industry standards for annual growth, but if you look at other well-established industries, 2 to 5 percent growth per year is pretty decent,” said Baca. “You can’t expect to see year-over-year growth at 50 percent for very long. It’s not practical.”
A free executive summary of the report is available here.