The quarterly SEIA/Wood Mackenzie Power & Renewables U.S. Solar Market InsightTM report shows the major trends in the U.S. solar industry. Learn more about the U.S. Solar Market Insight Report. Released June 7, 2022. Important note: This edition of the US Solar Market Insight report contains forecast scenarios based on different policy environments, particularly the US Department of Commerce anti-circumvention investigation initiated in late March. After these scenarios were finalized, the Biden administration announced 1) a two-year delay of new AD/CVD tariffs on solar cells and modules imported to the US from Cambodia, Malaysia, Thailand, and Vietnam, and 2) authorization of the Defense production Act in support of domestic solar manufacturing. Given this news, our Base case outlook reflects our current view of industry expectations, with a few gigawatts of upside potential to 2022 installations.
Key Figures In Q1 2022, the US solar market installed 3.9 GWdc of solar capacity, a 24% decrease from Q1 2021 and a 52% decrease from Q4 2021. This represents the weakest quarter for US solar installations in two years. Solar accounted for 50% of all new electricity-generating capacity added to the US grid in the first quarter of 2022. Residential solar had its largest quarter in history with 1.2 GWdc installed, a 30% increase over Q1 2021 and a 5% increase over Q4 2021, demonstrating the robust strength of the residential segment. Quarterly volumes slowed in other segments. Commercial solar installed 317 MWdc, down 11% year-over-year and down 28% quarter-over-quarter. Community solar installed 197 MWdc, up 16% year-over-year and down 59% quarter-over-quarter.
Introduction The US solar industry installed 3.9 gigawatts-direct current (GWdc) of capacity in the first quarter of 2022, a 24% decrease from Q1 2021 and a 52% decrease from Q4 2021. First-quarter volumes came with mixed results across segments. Residential solar had its highest quarter yet as customer demand and sales pipelines continue to grow. However, commercial solar shrank 28% quarter-over-quarter and community solar shrank 59% quarter-over-quarter. Utility-scale solar had its lowest quarter in more than two years, with 2.2 GWdc installed, a 41% contraction from Q1 2021 and a 64% contraction from Q4 2021. This was caused by a combination of typical first quarter slowdowns, policy-driven supply chain challenges, and higher equipment pricing. Overall, solar PV accounted for 50% of all new electricity-generating capacity additions in the first quarter of 2022.
Anti-circumvention investigation throws the solar industry into chaos On March 28th, 2022, the Department of Commerce (DOC) announced it would initiate an anti-circumvention investigation of Chinese anti-dumping and countervailing duties (AD/CVD) for solar cells and modules imported from Cambodia, Malaysia, Thailand, and Vietnam. This investigation (referred to throughout as the anti-circumvention investigation) was initiated by a petition submitted in February 2022 by California-based module manufacturer Auxin Solar. The petition alleges that solar cell and module manufacturers are circumventing existing AD/CVD tariffs that apply to Chinese imports by manufacturing solar cells and modules in the four named countries using raw inputs from China. The existing AD/CVD tariffs that apply to Chinese solar equipment vary widely depending on the manufacturer. These have ranged from the low teens to above 100% for major manufacturers that met the following criteria: 1) existed during the original 2012 investigation, 2) manufactured crystalline silicon cells at that time, and 3) cooperated with the original investigation. If any of these three conditions is not met, a company would be subject to the countrywide rate of approximately 250%. For example, a company that only makes wafers would not have a company-specific rate.
AD/CVD tariffs would reduce demand, but the near-term uncertainty of the investigation is the most damaging For the Low case, Wood Mackenzie assumed an average AD/CVD tariff level of 41% (15% for countervailing duties and 26% for anti-dumping duties). If tariffs are imposed, the final tariff levels will vary between manufacturers. But this broad average assumes, importantly, that new AD/CVD tariffs will be similar to those currently imposed on Chinese imports. This would increase today’s blended average module prices by 30-34% depending on the module technology and market segment. Overall, new AD/CVD tariffs would reduce solar installations from 2022-by 8.5 GWdc, compared to the Base case. But this is on top of the nearly 12 GWdc reduction already factored into our base case from the initiation of the investigation alone. This brings the total potential damage of the anticircumvention investigation to 20.3 GWdc of demand destruction, in addition to increased costs and gigawatts of project delays.
Market segment outlook Residential PV Key figures
- 1,247 MWdc installed in Q1 2022
- Up 30% from Q1 2021
- Up 5% from Q4 2021
The residential solar market added a record 1,247 MWdc of newly installed capacity in Q1 2022. Consumer demand continues to grow in most state markets, with California, Florida, and Texas leading the way in Q1. These top markets also achieved record capacity deployments and accounted for more than 50% of nationwide residential solar installed in Q1. Installers worked through project backlogs and converted record sales volumes into completed installations in Q1. Many players report that rising electric utility rates are catalyzing strong demand and outweighing inflation and system price increases.
Commercial PV Key figures
- 317 MWdc installed in Q1 2022
- Down 11% from Q1 2021, down 28% from Q4 2021
Note on market segmentation: Commercial solar encompasses distributed solar projects with commercial, industrial, agricultural, school, government or nonprofit offtakers, including remotely net-metered projects. This excludes community solar (covered in the following section). Commercial solar volumes shrank quarter-over-quarter and year-over-year in Q1 2022, impacted by continuing supply chain constraints and project delays. While projects spilled over from 2021 to 2022, the first quarter of the year is typically less active for project construction, given that many major markets were in the middle of winter.
U.S. solar PV forecasts Base case forecasts
National solar PV system pricing Note: Wood Mackenzie has updated the reporting methodology for modeled prices to be consistent with the US solar system pricing reports. Therefore, figures shown below may not match those published in earlier editions of the US Solar Market Insight report. Wood Mackenzie employs a bottom-up modeling methodology to capture, track and report national average PV system pricing by segment for systems installed each quarter. The methodology is based on the tracked wholesale pricing of major solar components and data collected from industry interviews. We report a weighted average of standard mono-PERC and high-efficiency modules for all market segments. Wood Mackenzie assumes all product is procured and delivered in the same year as the installation.
In Q1 2022, national system pricing increased across all market segments year-over-year, except in the utility fixed-tilt market. Despite rising component pricing, the rate of overall system cost increases slowed down this quarter compared to Q4 2021. The adoption of high-power class modules and the increasing power density of inverters helped mitigate elevated commodity costs. System pricing increased year-over-year by 6% for residential, 10% for commercial, and 6% for utility single-axis tracking solar but decreased by 2% for fixed-tilt utility projects (which more often use mono perc modules that have come down in price). Most utility-scale solar projects installed today utilize single-axis tracking.
Manufacturing Beginning with the Q2 2022 report, Wood Mackenzie will be including data on US-based module manufacturing facilities. Since the domestic solar supply chain continues to be an important element of policy discussions, this additional granularity is meant to bring additional insight to the industry. This data is included in this Executive Summary and will be available only within the full report beginning next quarter. If you have facility-level data you wish to provide, please reach out to firstname.lastname@example.org. At present, the US has around 11 GWdc of module manufacturing capacity, as shown in the table below. In 2021, announcements of new manufacturing capacity plans across the supply chain became increasingly common as suppliers positioned themselves to take advantage of the potential manufacturing tax credits available in the Solar Energy Manufacturing Act (SEMA). SEMA has not yet been enacted but is part of the reconciliation bill currently under consideration.
About the Report U.S. solar market insight® is a quarterly publication of Wood Mackenzie and the Solar Energy Industries Association (SEIA)®. Each quarter, we collect granular data on the U.S. solar market from nearly 200 utilities, state agencies, installers and manufacturers. This data provides the backbone of this U.S. Solar Market Insight® report, in which we identify and analyze trends in U.S. solar demand, manufacturing and pricing by state and market segment over the next five to ten years. All forecasts are from Wood Mackenzie, Limited; SEIA does not predict future pricing, bid terms, costs, deployment or supply. The report includes all 50 states and Washington, D.C. National totals reported also include Puerto Rico and other U.S. territories. Detailed data and forecasts for 50 states and Washington, D.C. are contained within the full version of the report.