The second quarter of 2017 was another strong quarter for the U.S. solar market, as revealed in GTM Research and Solar Energy Industries Association’s (SEIA) U.S. Solar Market Insight report, which reports that the market grew 8% year-over-year with 2.4 GW-DC installed.
This was led by the utility-scale sector, which represented 58% of new capacity, and where GTM Research reports that contractors were still building projects originally slated to come online by the end of 2016, in time for a step-down of the Investment Tax Credit which never came due to an extension.
The nation’s commercial and industrial (C&I) sector also showed strong growth, with GTM Research estimating a 31% increase over a year prior in the “non-residential” sector, a catch-all that includes government and non-profit installations with C&I.
As these two sectors are growing, the geography of solar is also shifting and broadening across the nation. While the national market was once dominated by California, the Southwest and the Northeast, during Q2 Texas began to deliver on its long-awaited promise, and showed up as the second-largest state market with 378 MW installed.
New regions such as the Midwest and the Deep South are also opening up. During Q2 Minnesota came in as the 5th-largest market on the back of a community solar boom, and the unlikely states of Mississippi and Michigan placed in #9 and #11 respectively.
Trouble in residential solar
However, all was not roses in this quarter’s report. The residential solar market fell 8% from levels in the second quarter of 2016, as the second quarter of year-over-year decline. And while in Q1 some of the blame could be put on the very heavy rains in California, Q2 numbers verify that there are deeper problems.
GTM Research notes the difficulties that installers are having with customers acquisition with the exhaustion of first-adopter demographics in leading states, as well as the pull-back of national installers Tesla and Vivint. The bankruptcy of Sungevity, the nation’s fourth-largest installer, certainly did not help either.
However, there are also policy issues, as the Net Metering 2.0 policy adopted in California and subsequent mandatory time of use rates make for more complicated calculations of payback times.
The year-over-year decline in residential solar is particularly troubling given that the market is becoming ever more geographically diverse, with states like Utah and Florida joining the top residential solar markets.
But by far the biggest concern facing the U.S. solar market is the Section 201 investigation currently underway at the U.S. International Trade Commission. While the impact on installation volumes will likely not be felt for several quarters, GTM Research and Bloomberg New Energy Finance both note a delay in signing of new contracts until the case is concluded, and both have warned that if trade action is imposed many deals will fall through.
Already the impact can be seen in module prices, which rose slightly during Q2 to $0.39 per watt, the first increase in nearly three years. And while overall system costs still fell during Q2, this may not be the case in Q3. Module prices have increased further since July, as contractors and installers hoard imported modules to avoid potential tariffs.
If the trade remedies proposed by Suniva are approved, this could increase prices much more. And while the full effects are hard to predict, in June GTM Research forecast that the proposed remedies would cut the overall U.S. market in half over the next five years, with utility-scale solar being particularly hard hit.
But despite all of these challenges, the U.S. solar market is still roaring ahead, at least for the next few quarters. GTM Research reports that over 5 GW of utility-scale solar is currently under construction, with another 16.9 GW of projects holding contracts.
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