News

Tariffs Hit Hard in Q3: What Impact Did This Have on Solar Market?

By admin,

The new 2018 U.S. solar tariff which was signed on January 23, 2018 by the Trump Administration levies a 30% tariff on all solar imports to the United States for the next four years. Although developers and contractors tried to secure models in the past few months before the tariffs hit, Q3 2018 is where the impacts of the new 30% tariff have been seen, according to a SEIA and Woods and Mackenzie report. Let’s take a deeper look at the impact this has had on the solar market.

Solar Installation

Solar installation during Q3 fell 15% year-over-year to 1.7 GWdc (gigawatt direct current). The utility-scale sector saw the biggest impact from the tariffs, where installations fell to 678 MW (megawatt). Most predict that the market at the end of 2018 will remain relatively flat in comparison to 2017.

“Developers originally planning to bring projects online in Q3 2018 were forced to push out completion dates to Q4 2018 or Q1 2019 due to uncertainty around tariffs,” said Colin Smith, Senior Analyst at Wood Mackenzie. “We did, however, see utility PV procurement outpace installations fourfold in Q3, showing that despite the tariffs causing project delays, there is substantial growth ahead for the U.S. utility PV sector.”

Residential Installation

Although the utility-scale sector experienced a decrease in installations, residential solar was up 11% year-over-year, with an increase in California’s solar market. This didn’t happen right away, the tariff first caused the cost of solar sold to American homeowners to spike, and the cost of solar is 5.6% higher now than it would have been.

What’s to Come?

“If not for the tariffs, the U.S. solar market would undoubtedly look better today than it does now,” said Abigail Ross Hopper, SEIA’s president and CEO. “However, as this report shows, this is a resilient industry that cannot be kept down for long.” Wood Mackenzie expects many of the delayed projects to come back online by the end of the year. Due to the new 2018 solar tariff, there has been a negative impact on the solar energy market, but the report also shows that the solar industry is resilient and it will make a comeback in the new year.

Across all other markets, solar is competing with lower-cost fuel sources such as wind and natural gas. This means with the increase in solar costs and the competitive marketplace, homeowners, utilities and businesses might be more likely to choose an alternative to their power generation.

How Intersect Can Help

Interested in investing in a new solar power project in the new year? Intersect Energy is an on-site energy company that can provide you with turn-key energy solutions. We have experience when it comes to alternative energy on-site energy generation, we know the process. Contact us today so we can help you get started on your next solar power investment. Don’t forget to stay up to date with all the latest news in the renewable energy industry by following us on LinkedIn.

Investors and Sources of Capital are Fighting for Solar Power

By admin,

Although solar power is often thought of as a bespoke investment, recent trends are causing investors and sources of capital to fight for limited supplies of feasible solar power projects. What has led investors to battle for solar power? The Distributed Energy System experts at Intersect Energy have outlined the three reasons why so many are now fighting over solar power projects.

Increases in Tax Equity Markets

Despite the many tax reforms that have recently occurred, the market for tax equity has significantly increased since 2016. In fact, Michelle Davis, a senior analyst at Wood Mackenzie Renewables & Power, stated that: “There’s 40% more tax equity investors since 2016, margins for debt are compressing, and residual value is making up 50%+ of utility solar required returns”. Because of this, the solar power investment landscape is evolving and tax equity investors, lenders and sponsors are being impacted.

More Competition Means More Willingness to Invest

As solar power becomes increasingly popular, investors are beginning to broaden the types of projects in which they are willing to invest. Although the heavy hitters are still only targeting projects that are $25 million or more, small projects that are significantly less than that number are now being considered by more and more investors. However, there is currently more demand for projects than there is projects available for purchase.

Solar Power Success is Leading to Evolving Deal Structures

The P50 and P90 ratings (the levels of generation forecasted to exceed 50% or 90%) are showing high confidence in the success of solar power construction. This has led to a change when it comes to solar power purchasing structures, as project sponsors have more capital available to distribute among development. Also, less cash is being required for a down payment, making the investment less of a risk for investors.

Interested in investing in a solar power project, but not sure how to find opportunities? As a Distributed Energy System developer, Intersect Energy has the expertise and services you need to find solar power opportunities and capital. Contact us today so we can help you get started with your solar power investment and make sure you keep up with the latest news in the world of renewable energy by following us on LinkedIn!

Structural Changes for Trade Relationship Between US and China Being Discussed? What This Means for Solar?

By admin,

Xi and Trump have agreed to a 90 day ceasefire on future tariffs in order to discuss significant structural changes to the trading relationship between the US and China. Currently, there is a 30% tariff on any imported solar panels, which equates to approximately $0.09/watt of an installation. For utility scale solar, this would be approximately 10% of the total installation cost of a solar project. This will significantly impact the solar industry’s ability to grow and doesn’t make  clear sense given the number of jobs created from solar development in the United States.

Solar Manufacturing Capacity by the Numbers

The solar industry has two primary parts in order to produce electricity from the sun. The first is the actual PV panels, or photovoltaic panels. These panels capture the sun’s energy and convert it into electricity. These panels are almost exclusively made in China, with only a small amount (about 4% market share) being made in the United States. This can be seen in the current manufacturing capacity by country, with China being the single largest producer by a large margin. There are economic reasons why this is the case, primarily a labor cost issue, that will continue to create this imbalance.

 

Figure 1: 2017 Solar Photovoltaic Manufacturing Capacity

 

 

 

 

 

 

 

 

 

 

 

 

*Chart from statista.com*

The Emphasis on Electrical Inverters

The other part that makes solar panels produce power are the electrical inverters. These inverters take the direct current (DC) output from the solar and invert it to Alternating Current (AC) output to the Grid. These inverters are a significant cost to every solar project and they are also technically difficult to make. The largest factor here is that the inverters die faster than the panels and thus need to be replaced more often. Paying slightly more for inverters makes sense upfront when you can have a product that lasts longer. Due to the complexity of this equipment, the industry generally buys these inverters from either the United States or Germany. There is a large emphasis in the United States for this due to the technical difficulty and electrical architectures being developed and manufactured here. China has recently opened several inverter companies, but they have not had a lot of success breaking into the developed world’s market due to concerns over their equipment’s longevity.

So essentially today, the solar industry has a natural economic equilibrium where China sells the PV panels to the world due to their low cost of labor and the United States/Germany sell the inverters to the world due to the complexity and intellectual prowess required to manufacture. Because PV panels last about 20 years and Inverters last about 7 years, the $0.10/watt inverter price becomes $0.30/watt price over the lifetime of the project, which equals the PV panel cost per project. The solar industry needs China’s cheaper panels to continue to expand, whereas the solar industry needs the technically superior US inverters to continue to expand. It is a very simple quid pro quo situation that the existing tariffs are impacting dramatically. Higher tariffs will accelerate China opening up inverter manufacturers and beginning to gain the intellectual abilities needed to manufacture these difficult pieces of equipment. Without the tariffs, we believe the US will continue to be a major manufacture of inverters for the foreseeable future.

In conclusion, the best outcome for the United States (jobs, domestic energy, reduction of carbon emissions, etc.), as the Trump Administration and Congress work with China on trade negotiations, will be not to increase and actually remove existing tariffs on solar equipment.