2022 US Solar Market Less Than Expected, IRA Will Be A Long-term Incentive
The United States installed 4.6GW of solar energy in the third quarter of 2022, down 17% year on year. Utility, C&I, and Community solar all declined quarter by quarter. The solar industry is also waiting on guidance from the US Department of Treasury on how to qualify for the various tax credits and adders within the Inflation Reduction Act (IRA), together with trade barriers, utility solar projects have been delayed and the installation has declined significantly.
As of the end of September, new PV capacity in the US reached 13.1GW, including 7.33GW of utility-scale PV, 0.99GW of C&I PV, 4.17GW of residential PV. According to Wood Mackenzie's forecast, utility-scale solar installations will increase by 10.3GW in 2022, down 40% year-on-year, and we expect the total annual addition will reach 18GW. Although the US market this year is not as expected, but we believe that from 2023 onwards, the new policy will be long-term favorable to the development of the US PV market, mainly due to the recently announced "Inflation Reduction Act" (IRA) for the ten-year investment tax credit (ITC) extension. The credit ratio from the current stage of 26% to 30%, the proportional withdrawal in three years after 10 years. IRA has included standalone energy storage expansion for the first time, releasing more application scenarios for household storage.
Shipping costs have fallen from their highs in December 2021 as port congestion eases, particularly at the ports of Los Angeles and Long Beach, which are key to cross-Pacific shipping of solar modules and batteries from Asia. We expect the shipping price to return to pre-pandemic levels in 2023. The supply chain prices fell rapidly in the second half of this year, especially the upstream raw material prices. We expect the supply chain pressure will be eased in 2023. The US solar market will return to growth after 2022. Projects that were delayed this year will resume construction in 2023, and the impact of IRAs will begin to show by 2024. Based on Wood Mackenzie’s forecast, the US solar market is expected to experience an average annual growth of 21% for all segments during 2023-2027.