The US House of Representatives passed an amendment to extend the solar Investment Tax Credit (ITC) on December 16. The extension, which is part of a tax and spending package, is now being moved to the Senate for consideration and is very likely to win final approval. The tax credit rate under the ITC was originally to be scaled back from 30% to 10% at the end of 2016. Under the amendment, ITC will be extended to 2022, during which the rate will be reduced gradually and subsidies given will vary according to the installation schedules of each photovoltaic (PV) system. This amendment will be effective on the date of issuance.
The PV demand in the US market will return to a normal level with the ITC extension, according to Patrick Lin, analyst for EnergyTrend. The future development of the global PV market will also differ from the earlier projection that was based on the massive reduction of ITC. Taking the amendment into the account, EnergyTrend believes that the US market will not see the initially anticipated installation rush in 2016, followed by a sharp demand decline that will also drag down the global PV market in 2017. EnergyTrend therefore has lowered the installed capacity forecast in the US for 2016 from 11.5GW to 9GW.
Additionally, the extension of the ITC will stabilize the US market in 2016. The country's overall demand will not swing wildly and instead will be continuously sustained by large PV power plants and commercial PV systems over the following years. Consequently, the global PV market will not suffer a serious demand slowdown during 2017. In response to Congress passing amendment, makers of PV products will most likely to evaluate their plans to rapidly expand capacity as the installation rush in the US will not appear. On the whole, the capacity expansion efforts across the PV segment in 2016 will be less aggressive than originally projected, so the threat of severe oversupply in 2017 has been averted for now. The supply-demand situation in the global PV market for the next five years is expected to become healthier and more balanced.
With the installation rush not taking place, the overheated market will start cool down as well. According to EnergyTrend analyst Corrine Lin, the ITC extension will have a heavy impact on certain China PV exporters. Trina and Canadian Solar, which respectively sold 50% and 30% of their products to the US in the third quarter, will be the first major China PV firms to experience the cooldown. These makers will have to find other markets and channels to consume their enormous capacities.
As for the Taiwan PV makers, they have had difficulties fulfilling the flood of incoming orders since the fourth quarter of 2015 because the US and China were both preparing for their respective installation rush. However, the tight supply situation will start to moderate in 2016 as demand returns to normal in the US with the extension of the ITC. The next peak season for the Taiwan companies will move to the period between January-April, when China will have its installation rush due to subsidy reduction by mid-2016. Cell prices, which are now seeing larger-than-normal increases, will face strong downward pressure in the late second quarter of 2016. Additionally, Taiwan makers have relied too much on orders from first-tier China PV firms recently. With US demand anticipated to fall in 2016, the major China makers are now more hesitant to place their cell orders. Hence, the amount of orders going to Taiwan companies will become less certain in the near future.
Article translated by Alex Wolfgram
