US Q1 solar installation surge to record as industry begins to see supply chain relief

The US solar industry in the first quarter installed a record 6.1GW of capacity on a direct-current basis including a new 3.8GW high for utility-scale as supply chain challenges eased, enabling completion of some delayed projects, according to a new report by Wood Mackenzie (WoodMac) and Solar Energy Industries Association (SEIA).

“This has taken time, but US Customs and Border Protection (CBP) is releasing increasingly more volumes of detained module shipments that meet the requirements for polysilicon sourcing,” said the report.

CBP has issued guidance documentation for importers that has helped modules using North American and European polysilicon move through customs more quickly.

“Though inventory levels are improving, the utility-scale industry still faces supply chain constraints. Despite increasing shipment releases indicating a more stabilized UFLPA situation, there is no indication that products containing Chinese non-Xinjiang polysilicon are entering the US,” said the report.

The law addresses alleged human rights abuses in China’s Xinjiang region, a major global supply source for polysilicon, cells, and other critical components in solar panels. China has repeatedly denied allegations of forced labour.

Installations of utility-scale solar, the biggest US market segment, were up 66% versus first quarter 2022 as greater module availability at project sites allowed work to conclude. Although component and panel prices have stabalised, they remain high compared to a year ago, according to the report.

Solar accounted for a record 54% of new US electricity-generating capacity additions in the first quarter, up from 46% in January through March 2022. Natural gas was second (24%), then win (17%), and other technologies (5%).

Florida was the leading solar market in the period with 1.46GW installed, almost as much as the 1.9GW brought online in calendar year 2022. California and Texas were second and third with 951MW and 765MW, respectively.

The Inflation Reduction Act (IRA) that took effect last August has stoked US solar demand and a flurry of new manufacturing announcements here.

Domestic module capacity will surge from less than 9GW today to more than 60GW by 2026. At least 16GW of module manufacturing facilities are under construction as of 31 March, according to the consultancy. It also forecasts US cell manufacturing capacity to increase from zero this year to 20GW by 2026.

The Department of Treasury this spring issued additional guidance on three of the tax credit adders for the investment and production tax credits: low-to-moderate income adder for projects under 5MW on an alternating current basis, and those for energy communities and domestic content.

The guidance outlined solar project application procedures, capacity allocation criteria, and expanded definitions for eligibility. It answered several key outstanding questions, but the industry will have to wait for more guidance later this year to clarify others.

“As the Inflation Reduction Act begins to flex its muscle and drive demand, the U.S. solar and storage industry is eagerly awaiting further guidance on some of the most impactful pieces of the law,” said Abigail Ross Hopper, CEO of SEIA.

“Timely, specific, and workable implementation guidance from the administration will have a major impact on our success in both the near and long-term,” she added.

WoodMac cautions that rules for the domestic content adder credit are complex and given the absence of crystalline silicon cell manufacturing capacity here, it could take a few years before the credit can be widely used.

Even with cells, there will also need to be sufficient domestic manufacturing capacity of multiple other components such as encapsulants, glass, frames, and junction boxes for developers to meet the requirements.

Looking ahead, WoodMac expects strong near-term growth for the industry, despite supply chain limitations and other challenges such as greater local opposition to projects, high interconnection times and costs, and low labour availability.

It forecasts 29GW of new capacity this year versus 21GW in 2022. From 2024 to 2028, the industry will add 236GW, or 47.2GW/yr, to an installed base of 142GW at the end of last year.

President Joe Biden’s administration forecasts that utility solar will be the dominant clean energy technology by 2035, the target he set for the electric grid to be carbon free.