What will the U.S. do with a glut of solar modules?

The United States may have imported more solar panels than it knows what to do with. 

• The top line: In the final quarter of 2023, the U.S. imported 15 gigawatts worth of solar panels, a 40% increase compared with the year earlier. There are several reasons for the increase — most notably the fact that importers are trying to take advantage of the Biden administration’s tariff waiver, which will expire in June — but the result is a glut that threatens domestic manufacturing, just as the sector is angling to make a comeback. 
• The market context: In June of 2022, President Joe Biden announced a two-year moratorium on tariffs on crystalline-silicon solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam; the original tariff came as a result of Chinese companies circumventing duties by completing minor processing in Southeast Asia before shipping panels to the U.S. With the expiration of that moratorium fast approaching, research from S&P Global Market Intelligence found that those same four countries are dominating the U.S. supply chain, making up 84% of panel imports in the fourth quarter of 2023. In the latter half of 2024, companies will have under December to install panels imported pre-waiver and avoid being dinged by the duties. 
• The outlook: According to data from the U.S. Census Bureau, as analyzed by both S&P Global Market Intelligence and Wood Mackenzie, the U.S imported a record 54 GW of panels in 2023. In combination with the 6.75 GW of modules made in the U.S last year, Elissa Pierce, a solar supply chain analyst at Wood Mackenzie, said that supply likely far outstrips demand, which WoodMac’s analysis put at nearly 33 GW for 2023.

The impacts of that glut are likely to extend throughout all parts of the U.S. solar market, but Pierce said that residential solar — which had a rough year more broadly in 2023, due in part to the rollout of new net metering rules in California, the country’s largest solar market — is especially experiencing oversupply.

The rush of modules raises the question of if and when they’ll be installed, especially in light of shortages of other key equipment like transformers — and whether that installation will happen in time for importers to escape retroactive tariffs. Even if it doesn’t, though, Pierce said that companies may be betting that importing an excess in these pre-tariff months is worth the risk.  

“We have heard that it might be very difficult for [Customs and Border Protection] to actually enforce these retroactive tariffs, especially due to the scale of imports,” Pierce told Latitude Media. “So it's possible that suppliers are just importing them and expecting that they can get away with not having to pay these retroactive tariffs.”

As supply soars, Pierce said that prices are already dropping: from roughly 36-37 cents per watt for utility-scale modules in the last quarter of 2023, to 27 cents per watt so far in the first quarter of 2024. And prices of rooftop modules from Southeast Asia dropped by roughly the same percent over that period, from 40 cents per watt to 29 cents per watt.

The knock-on effects stateside

This comes as the Biden administration pushes to bring solar manufacturing stateside, offering tax incentives as well as direct support of manufacturing pilot projects. But the domestic supply chain remains nascent. And Adam Wilson, a senior research analyst covering North American renewables markets for S&P Global Commodity Insights, said that this influx of low-priced foreign modules means that it will likely take even more time to catch up.

“I would expect the domestic manufacturing to be in kind of a lull for the near-term period,” he said, “because this glut of panels is really going to not make it economically attractive to just sell into the market at the current rate.”

An analysis by the National Renewable Energy Laboratory’s latest solar industry update found that modules produced domestically in the U.S. “realigned with the trend in global module prices” in the third quarter of 2023, but tend to carry a premium of about 16-17 cents per watt. (The report, released in January, does not include data on 2024 trends so far.)

However, all things are temporary. Wilson said he would expect these market dynamics to begin to change as the tariffs come back into play. In fact, he said, it could be the case that domestic manufacturers are actually benefiting from the current situation in the long-run, because it gives them time to ramp up their production in preparation to take advantage of the tax credits. He anticipates, though, that we’re still roughly two to three years away from a sizable, decisive role for those domestic manufacturers. 

Wilson also said he has his eye on what knock-on effects this influx could have for the storage market. 

“The pairing of battery storage with solar is a particularly attractive asset for developers,” he said. “When you look at areas with already pretty saturated markets for solar development — areas like Arizona, Nevada, California — it's almost become a requirement for new grid-scale solar to be paired with battery storage.” 

After the waiver ends

Pierce said she “definitely” expects to see a decrease in imports later this year, but not just because the tariff waiver is winding down. 

There is also the fact of the Uyghur Forced Labor Prevention Act. The law aims to prevent the import of goods made with forced labor in China’s Xinjiang region, which is a major center of solar module production. 

Roughly two years after its signature, Pierce said enforcement of the law is ramping up. In the early days, Customs and Border Protection targeted tier one importers, i.e. the top five to ten companies that import solar modules to the U.S. By now, those companies have largely already moved their supply chains out of China and have documented their supply chains, she said, and will likely continue business as usual even once the tariff waiver ends. 

But the CBP is now stepping up UFLPA enforcement on tier two companies and other lesser-known suppliers that tend to be more dependent on China; Pierce expects these will “have more of an issue importing” going forward.

(That said, UFLPA also had a hand in the recent influx of imports, she added: “A lot of the suppliers who were detained for a while during UFLPA enforcement have lost some of their market share. And now they're trying to make up market share by importing modules, and selling at these low prices.”)

For now, Pierce is keeping an eye on whether companies are actually able to sell their excess modules. One tier one importer she spoke with, for instance, said they are expecting that demand will meet the huge number of panels they’ve imported and are planning to sell at “very low” prices. But whether that is realistic market-wide is an open question.

“We did expect that there would be an increase in imports before the end of the tariff waiver, but the scale is just not logical,” Pierce said. “We just don't have the demand for all of these modules.”