Unprecedented investments in clean energy and climate change in the Inflation Reduction Act have greatly improved the outlook for the solar industry's growth in the U.S. following a first half to the year dampened by tariff risks and supply chain constraints, according to a new market report.
The Solar Energy Industries Association and Wood Mackenzie published a report that increases their baseline forecast for solar growth over the next five years by 40% in response to the historic law.
The groups expect the U.S. to add 162 GW of new capacity through 2027, a 62 GW boost from a previous estimate. If the projections hold up, installed solar capacity in the U.S. could reach 336 GW at that point.
“This report provides an early look at how the Inflation Reduction Act is going to transform America’s energy economy, and the forecasts show a wave of clean energy and manufacturing investments that will uplift communities nationwide," SEIA CEO Abigail Ross Hopper said.
GO DEEPER: Jose Zayas, EVP of Policy and Programs, American Council on Renewable Energy joined the Factor This! podcast to break down the key components of the historic Inflation Reduction Act, which includes $369 billion dedicated to clean energy and climate change.
The Inflation Reduction Act provided certainty to solar developers with a 10-year extension of the critical Investment Tax Credit. The law also established incentives for domestic production throughout the solar value chain, including polysilicon, cells, modules, inverters, trackers, among other things.
A flurry of announcements has followed the signing of the Inflation Reduction Act into law.
First Solar and Q Cells have announced billion-dollar plans to invest in solar module manufacturing in the U.S.
REC Silicon, which was already restarting polysilicon production its Moses Lake, Washington facility, committed to negotiating a raw material supply agreement with Mississippi Silicon.
SPI Energy Co. said it signed a letter of intent to secure a 1.5 GW solar wafer manufacturing equipment to increase its capacity to 3 GW by 2024.
“I am very grateful to see the bill passed,” as it will boost U.S. manufacturing and create jobs, said Xiaofeng Denton Peng, chairman, and CEO of SPI Energy.
First Solar's module manufacturing facility in Ohio (Courtesy: First Solar) Even with the historic incentives in hand, the solar industry isn't out of the woods.
Installation forecasts for 2022 have dropped to 15.7 GW, the lowest total since 2019, due to the Commerce Department's investigation of the Auxin Solar tariff petition and the Uyghur Forced Labor Prevention Act.
In June, President Joe Biden paused for two years any new tariffs against solar modules imported from Southeast Asia, which were subject to the trade investigation. Weeks later, though, the Uyghur Forced Labor Prevention Act took effect and resulted in the detention of modules believed to have been manufactured in the Xinjiang region of China using forced labor.
SEIA's Hopper said the positive results stemming from the Inflation Reduction Act come with a "responsibility to clearly address concerns over forced labor."
The Uyghur Forced Labor Prevention Act could impact solar module supplies through 2023, the SEIA and Wood Mac report said.
Demand for residential solar, meanwhile, remains strong. The residential solar market has been largely insulated from the trade and supply chain constraints impacting the broader industry over the past two years.
For the fifth consecutive quarter, the U.S. residential solar market set a record for new installations in Q2 2022, completing nearly 180,000 installations.
“The Inflation Reduction Act has given the solar industry the most long-term certainty it has ever had,” said Michelle Davis, principal analyst at Wood Mackenzie and lead author of the report. “Ten years of investment tax credits stands in stark contrast to the one-, two-, or five-year extensions that the industry has experienced in the last decade. It’s not an overstatement to say that the IRA will lead to a new era for the U.S. solar industry.”
