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US solar installations tumble in Q3 amid policy uncertainty

U.S. solar photovoltaic installations were down 51% year over year in the third quarter of 2017 due to tight module supply and uncertainty surrounding a pending trade case, GTM Research and the Solar Energy Industries Association, a trade group, said in a market report.

The market was also held back by sluggishness in the residential sector, where companies that have faced headwinds signing up new customers are focusing on profitability over growth, the groups said.

The country installed a total of 2,031 MW last quarter, more than half of which was in the utility market. By segment, utility-scale installations were down 67% year over year at 1,033 MW, residential installations were down 18% at 517 MW and noresidential installations were up 22% at 481 MW. The industry posted record results last year, driven by an expected cut to the investment tax credit.

This year, U.S. solar development has been hamstrung as Chinese module manufacturers hold back supplies for their huge domestic market, analysts say. Additionally, the threat of tariffs or import restrictions on solar cells and panels has limited sales to the U.S. because companies don't know how much to charge, according to Paula Mints, chief analyst at SPV Market Research. An emerging Republican plan to overhaul the tax code has also created uncertainty for project financing.

The third quarter "shows us what happens when policy uncertainty becomes a disruptive factor: prices rise, supplies shift and the market reacts accordingly," Solar Energy Industries Association President and CEO Abigail Ross Hopper said in a news release Dec. 14. "We urge President Trump to reject tariffs and allow solar to continue its amazing growth for the U.S. economy, national security and American families in all 50 states."

Threats ahead

GTM lowered its forecast for 2017 installations by about 5%, to 11,800 MW, to reflect challenges in the residential market and project delays in the utility segment due to the trade case. Approximately 4,000 MW of projects are currently under construction.

Despite the policy uncertainty, the U.S. is expected to remain the world's second-largest solar photovoltaic market in 2018, IHS Markit said Dec. 14. Global demand is expected to reach 108,000 MW next year, approaching the limit of polysilicon manufacturing capacity, the research firm said.

The trade case roiling the solar industry was brought by U.S. manufacturers Suniva Inc. and SolarWorld Americas Inc., which said an unexpected surge of cheap imports in recent years decimated American solar cell and panel makers. The U.S. International Trade Commission in October suggested Trump set tariffs of up to 35% on solar modules. Suniva and SolarWorld Americas want stiffer penalties. The Solar Energy Industries Association opposes tariffs, saying they would hurt demand.

As Republicans in Congress push to rewrite the tax code, the solar industry is threatened by a proposal known as the base erosion and anti-abuse tax, or BEAT, that could reduce the supply of tax equity financing for renewable energy projects. The measure is aimed at limiting the use of cross-border money transfers to lower the tax bills of multinational companies.

With the House and Senate working on a compromise bill, Sen. John Thune, R-S.D., told Bloomberg News that lawmakers "recognize that is a problem created by the BEAT and we are trying to ensure those types of projects aren't adversely affected."

"President Trump's final ruling on Suniva's [trade] case could significantly affect global PV economics in this market," IHS Markit said in a news release. "Planned corporate tax reforms could also significantly weaken investor interest in the sector."