The anticircumvention investigation launched by the Division of Commerce in late March wreaked havoc on the photo voltaic trade. The uncertainty it precipitated led to a 6.3-GW discount to the 2022 base case outlook in our newest quarterly report.
On 6 June, the Biden administration issued an Government Order (EO) saying a two-year delay of latest anti-dumping and countervailing duties (AD/CVD) on photo voltaic cells and modules imported from the nations named within the investigation – Cambodia, Malaysia, Thailand and Vietnam. Whereas this motion is anticipated to carry some reduction to the photo voltaic trade, the affect will fluctuate throughout segments. And a few important questions are but to be answered.
UFLPA, new boundaries to entry and EPC constraints will restrict the utility-scale photo voltaic upside
Round 85% of US utility-scale initiatives depend on imported modules from the 4 named nations. When the investigation began, module producers closely diminished manufacturing in Southeast Asia, as most of their provide is directed to the US. The EO led some main producers to restart that manufacturing.
Some suppliers count on to ship modules to the US as early as the top of Q3. Whereas the EO has introduced some certainty to the query of latest AD/CVD tariffs, the trade now faces uncertainty across the implementation of the Uyghur Pressured Labor Safety Act (UFLPA). Enforcement of this new legislation might severely constrain module imports to the US. The true affect might be decided when the trade might want to course of and interpret additional steering supplied by the Pressured Labor Enforcement Process Drive (FLETF).
On the demand aspect, builders have expressed that tax fairness buyers nonetheless view the potential tariff implementation as a danger – regardless of the two-year pause.
Since photo voltaic undertaking financing will nonetheless be thought of high-risk till the DOC broadcasts a ultimate dedication, builders will proceed to see excessive prices of capital and excessive boundaries to entry.
The impact of the investigation was exponential. Weeks of inactivity have resulted in months of delays. Engineering, procurement and development (EPC) corporations have already began reallocating equipment and personnel to non-energy initiatives, leading to exacerbated labor shortages for near-term initiatives. Since a excessive quantity of initiatives has already been pushed to 2023 or later, there’s a low chance that many might be renegotiated to 2022. Contemplating potential module availability and contract renegotiations, we estimate 30-40% of the capability delayed to 2023-2024 will materialize sooner.
All these elements thought of, we count on a modest upside of 1.5 GW (17%) to utility-scale photo voltaic in 2022, however larger upside potential of three GW (18%) in 2023.
Potential upside to US utility-scale photo voltaic PV forecast, 2022-2024
Non-residential US photo voltaic upside will happen primarily in 2023
Just like utility-scale photo voltaic, most business photo voltaic module provide (about 80%) comes from the 4 Southeast Asian nations topic to the AD/CVD investigation. The EO will assist builders safe modules all through the remainder of the 12 months. A few of these modules may make it into initiatives in 2022, but it surely’s extra probably that these shipped through the the rest of the 12 months might be a part of initiatives coming on-line in 2023.
Because of this, we count on some modest upside in 2022 (roughly 100 MW) and extra upside to installations in 2023 (round 500 MW), as delayed initiatives come on-line.
Potential upside to US non-residential photo voltaic PV forecast, 2022-2024
Impacts to US residential photo voltaic will manifest within the aggressive panorama
The most important affect of the EO on residential photo voltaic might be in adjustments to the aggressive panorama. Previous to the EO, we predicted that smaller native installers with out established gear vendor relationships would discover it tough to get gear through the AD/CVD investigation uncertainty. Demand from these installers can be fulfilled by bigger installers.
Since residential photo voltaic demand continues to be robust, we anticipated solely very minor impacts from the investigation, which might be greater than outweighed by current delays to California’s web vitality metering (NEM) 3.0 continuing.
Due to this fact, the EO doesn’t change our view on residential photo voltaic installations. Nevertheless it does imply that smaller native installers ought to fare higher within the subsequent few months.
The outlook for US photo voltaic: many unanswered questions stay
Whereas the Biden administration’s current announcement was welcome reduction to the trade, a number of unanswered questions will decide future photo voltaic deployments. Three stand out:
- Might the EO be topic to authorized challenges?
For the EO to have authorized standing, the Administration might want to argue that the US photo voltaic market was in an “emergency” state of affairs. Many within the trade suppose this is applicable, but it surely stays an open query.
- How will the UFLPA enforcement affect imports within the US?
The precise mechanisms for implementing the UFLPA will dictate its affect – a lot hangs on the precise particulars.
- How will a optimistic preliminary ruling affect the photo voltaic market?
If the AD/CVD investigation has a optimistic ruling in late August, the trade might be in an odd place. Builders will need to protected harbor modules with out tariffs, however provide is already constrained. Moreover, the ultimate AD/CVD tariffs will differ by firm and alter from 12 months to 12 months. It will probably lead to larger module pricing to account for these dangers.
We might be monitoring these trade occasions intently as they evolve all through the summer season.
Authored by Sylvia Leyva-Martinez, Senior Analyst, North America Utility-scale Photo voltaic, and Michelle Davis, Principal Analyst, Photo voltaic at Wooden Mackenzie