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Report: New solar installs declined 30% in 2017, but growth to resume

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Report: New solar installs declined 30% in 2017, but growth to resume

Bucking past trends, the U.S. solar industry saw a 30% decline in installations in 2017, down from a peak of 15,128 MWdc in 2016, according to an industry report.

The largest share of the 10,608 MWdc of new solar came from large utility-scale projects, which formed 6,234 MWdc, according to the "U.S. Solar Market Insight" report issued March 15 by the Solar Energy Industries Association and GTM Research, a division of consulting firm Wood Mackenzie. In 2016, utility-scale projects alone made up 10,760 MWdc.

The decline was at least in part expected.

"We always assumed there was going to be a bit of a decline" in 2017 and 2018 after companies rushed to build projects ahead of an expected cut to the investment tax credit at the end of 2016, said Solar Energy Industries Association Vice President of Federal Affairs Chris Mansour on March 14 at a policy forum.

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Though utility-scale projects and residential installations declined for the first time since 2010, nonresidential installs from commercial and community solar projects saw a 28% increase from 2016 to 2017, according to the report.

New builds of nonresidential projects amounted to 2,147 MWdc in 2017, up from 1,682 MWdc in 2016.

Developers in California rushed to install projects to be grandfathered into "more favorable, solar-friendly" time-of-use rates, which typically signal customers to use power during off-peak periods, the report said. New York also saw a rush of projects aimed at taking advantage of remote net metering rules. A build-out of community solar by Xcel Energy Inc. in Minnesota, meanwhile, lifted the state to have the most capacity out of all other states. Of the 768 MW of cumulative capacity installed across the U.S., Minnesota accounted for 37%. Massachusetts followed with 177 MW of cumulative capacity.

Other states are not far behind. "We expect community solar to diversify geographically in 2018, with Maryland and New York to be key growth markets for the sub-segment beginning this year," said Austin Perea, GTM Research senior solar analyst and a lead author of the report.

Some utility-scale projects were delayed because of uncertainty created in 2017 from possible tariffs on imported solar panels. On Jan. 22, President Donald Trump announced a 30% tariff on imports of solar cells and modules. The tariffs decline by 5 percentage points each year to hit 15% by 2021 and expire thereafter unless extended by the president.

The tariffs led to a spike in demand for panels in the fourth quarter of 2017 and global tightness in module supply. Average module prices were 48 cents per watt in the fourth quarter of 2017, up from 45 cents per watt in the prior quarter and 42 cents per watt the year before.

Utility-scale installations also fell because of uncertainties around possible modifications to a 40-year-old federal law, the Public Utility Regulatory Policies Act, requiring utilities to purchase power from renewable projects and co-generation facilities. Interconnection challenges were also a factor, the report authors said.

Residential installations fell 16% year over year with 2,227 MWdc installed, because of customer acquisition challenges and weakness in California and northeast markets. California, which accounted for nearly 40% of the residential market, accounted for half the decline. A contraction across New York, Maryland and New Jersey also contributed to the drop.

Forecasts

GTM Research said it expects the level of annual installations to hold flat from 2017 to 2018, but predicted growth to resume in 2019 climbing to 11,774 MWdc.

The solar tariffs could push some projects to get installed later as the tariffs shrink through 2021. This expectation contributed to a 13% cut in GTM Research base forecasts for new solar installs from 2018 to 2022. By 2023, GTM projects roughly 15,000 MWdc of new installs.