What happens when a business consistently tells Wall Street it is going to construct a specific amount of capital improvements each year but consistently misses? And what happens when any type of owner organization must react quickly to changes in regulations by replacing a significant amount of its asset base but can’t?
The recent decision by the United States International Trade Commission, in which the commission found that cheap imported solar panels and modules have harmed domestic panel manufacturers, is creating a good deal of uncertainty about the future of the solar market in the US. Our team at Continuum Advisory Group completed some research on the Utility Scale Solar business this summer for a client. Despite a recent slowdown in Utility Scale Solar projects in 2017, there is a large amount of work in the pipeline. As shown in this data from the Solar Energy Industries Association, the current pipeline of Utility Scale Solar is greater than the current amount of Utility Scale Solar installed.
It also appears that Utility Scale Solar Projects are no longer primarily driven by RPS mandates. Many new projects in the pipeline are now viewed as a hedge against long-term rises in natural gas prices made possible by the rapid fall in PV prices. According to GTM research, if the ITC accepted Suniva’s tariff remedy, the price on modules would match 2012 levels for imported Chinese modules and put average system costs at 2015 levels. In turn, while GTM Research expects 36 states to be at grid parity for rooftop solar at the end of 2017 under current conditions, 11 would fall out of grid parity if Suniva’s proposal were approved.
Prior to this ITC decision the solar business was poised for a period of rapid growth in late 2018 and beyond. The ITC is scheduled to provide recommendations to the president on potential tariffs on November 13th and then the administration will have 60 days to make a decision. This situation should be watched as it is likely to have a major impact on all participants in the solar industry, including utilities and the contractors that serve them.