By Sam Wilkinson, senior research manager, Solar & Energy Storage, IHS Markit

Highlights

• Sunivas petition to International Trade Commission under section 201 creates great uncertainty among investors, installers and suppliers
• Petition poses a severe threat to the deployment of PV in the United States through 2021, as well as to the global PV supply chain
• Case has immediate impact that obscures outlook for module prices in the U.S. with module suppliers now unable to provide future price guarantees to clients
• Worst-case scenario of a full implementation of the measures proposed: IHS Markit estimates U.S. PV demand would shrink 60 percent for period 2018 - 2021 compared to current forecast, as market would be constrained by global thin film capacity and the relatively small amount of manufacturing capacity within the United States.
Our Analysis
Suniva petition puts United States PV demand at risk and shakes up global supply chain, setting utility-scale PV costs back 2-3 years
Sunivas petition to the International Trade Commission under section 201 has created great uncertainty among investors, installers and suppliers. The petition poses a severe threat to the deployment of PV in the United States through 2021, as well as to the global PV supply chain. Irrespective of the outcome, the case has the immediate impact that it obscures the outlook for module prices in the U.S., with module suppliers now unable to provide any future price guarantees to clients. Non-U.S. manufacturers of c-Si cells and modules do not know what prices they can offer beyond 2017. At the same time, thin film manufacturers will be tuning their prices to reflect the potentially higher demand for their products. The price uncertainty blocks the contracting process for new PV projects in the U.S. as developers are unable to commit to bid prices.
The outcome of the 201 investigation remains highly uncertain. There is a likelihood that this request gains traction within the U.S. federal government because of its seemingly close alignment with the current administrations view on foreign competition for manufacturing. A closer look will reveal that the measures proposed by the petition would significantly reduce the labor force employed in the development, construction, and operations of PV systems, in exchange for the promise of more domestic manufacturing jobs.
In the worst-case scenario of a full implementation of the measures proposed by Suniva, IHS Markit estimates that PV demand in the U.S. would shrink by 60 percent for the period 2018 - 2021 compared to its current forecast, as the market would be constrained by the relatively small amount of manufacturing within its borders. The number of economically attractive state markets for utility-scale PV using c-Si modules in 2018 would likely fall from 43 to 32 markets. This would effectively take the market back to attractiveness levels seen in 2015 and 2016.
As domestic cell manufacturing and thin film products are excluded from the petition, suppliers such as First Solar and Tesla/Panasonic would benefit from the proposed measures. These suppliers would stand to benefit significantly in the U.S. PV market, and capture significant market share in their respective segments. The lack of competition would also enable these suppliers to capture more margin.
A slump in the U.S. could throw the rest of the world into an oversupply situation. Further price declines could accelerate demand in other price sensitive PV markets, or potentially open up emerging markets, however this additional demand could only partially offset the reduction of demand in the U.S. A projected slump in the U.S. also could impact future PV policy in China, as the government would seek to protect its industry.
The very recent insolvency of Germanys Solarworld adds further complexity to this situation. Although it is not known whether the bankruptcy of the struggling German solar manufacturer, which had led the charge on the initial implementation of import tariffs on Chinese solar products into the U.S., will also mean the same fate for its U.S. subsidiary. The U.S. subsidiary represents a meaningful proportion of the available PV cell and module cell capacity within the U.S., so this could mean a reduction in the amount of capacity available that would not be subject to the import tariffs, or a potential acquisition target for a company that is now looking to manufacture there.

IHS Markit Technology Solar Research

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