U.S.

SOLAR OUTLOOK UNDER SECTION 201

The Trade Case's Impact on U.S. Solar Demand

Cory Honeyman, Associate Director of U.S. Solar, GTM

Research
MJ Shiao, Head of Americas Research, GTM Research
Benjamin Gallagher, Analyst, GTM Research

June 2017
 Contents

CONTENTS
Executive Summary ........................................................................................................................ 4
1. Introduction .............................................................................................................................. 6
1.1. Origins of a Solar Trade Dispute 6
1.2. Uncertainties Abound in Assessing Section 201 Impacts 6
1.3. The Petitions Effect on System Pricing Error! Bookmark not defined.
2. Impact Analysis by Segment ...................................................... Error! Bookmark not defined.
2.1. Residential Solar Outlook Error! Bookmark not defined.
2.2. Non-Residential Solar Outlook Error! Bookmark not defined.
2.3. Utility Solar Outlook Error! Bookmark not defined.
2.4. Conclusion: National Level Takeaways 8

U.S. Solar Outlook Under Section 201 June 2017 2

 Introduction

Ownership Rights

All reports are owned by Greentech Media protected by United States Copyright and international
copyright/intellectual property laws under applicable treaties and/or conventions. User agrees not
to export any report into a country that does not have copyright/intellectual property laws that
will protect Greentech Medias rights therein.

Grant of License Rights

Greentech Media hereby grants user a personal, non-exclusive, non-refundable, non-transferable

license to use the report for research purposes only pursuant to the terms and conditions of this
agreement. Greentech Media retains exclusive and sole ownership of each report disseminated
under this agreement. User agrees not to permit any unauthorized use, reproduction, distribution,
publication or electronic transmission of any report or the information/forecasts therein without
the express written permission of Greentech Media. Users purchasing this report may make a
report available to other persons from their organization at the specific physical site covered by
the agreement, but are prohibited from distributing the report to people outside the organization,
or to other sites within the organization.

Disclaimer of Warranty and Liability

Greentech Media has used its best efforts in collecting and preparing each report.

Greentech Media, its employees, affiliates, agents, and licensors do not warrant the accuracy,
completeness, correctness, non-infringement, merchantability, or fitness for a particular purpose
of any reports covered by this agreement. Greentech Media, its employees, affiliates, agents, or
licensors shall not be liable to user or any third party for losses or injury caused in whole or part by
our negligence or contingencies beyond Greentech medias control in compiling, preparing or
disseminating any report or for any decision made or action taken by user or any third party in
reliance on such information or for any consequential, special, indirect or similar damages, even if
Greentech media was advised of the possibility of the same. User agrees that the liability of
Greentech Media, its employees, affiliates, agents and licensors, if any, arising out of any kind of
legal claim (whether in contract, tort or otherwise) in connection with its goods/services under this
agreement shall not exceed the amount you paid to Greentech Media for use of the report in
question.

U.S. Solar Outlook Under Section 201 June 2017 3

 Introduction

EXECUTIVE SUMMARY
Sunivas Section 201 of the Trade Act of 1974 petition to the International Trade Commission
(hereafter referred to as Section 201) could send shockwaves through the U.S. solar industry. In
this report, GTM Research quantifies the impacts of two simple scenarios that might unfold:
If Sunivas suggested remedy of a $0.78/Wdc minimum crystalline silicon PV module price is
accepted, U.S. solar demand would be reduced by 50% cumulatively over the next five years.
If the minimum price is added to Sunivas proposed $0.40/Wdc tariff on imported crystalline
PV cells, U.S. demand would be reduced by 66% cumulatively over the next five years.

In this brief, we explore the drivers behind each segments forecasted downturns below our base-
case projections. These forecast scenarios analyze impacts on residential solar economics vs. grid
prices, as well as the sensitivity of specific procurement types for commercial, industrial and utility-
scale solar to increased module prices.

Figure 1.1 2018 U.S. Solar Base-Case Installation Forecast by Segment

10.0 Residential PV Non-Residential PV Utility PV

by Year 1 Bill Impact by Project Type by Procurement Driver
9.0

8.0 Most Senstive Markets Most Sensitive Markets Most Sensitive Markets

7.0 6.5 GW
Installations (GWdc)

6.0

5.0

4.0
2.9 GW
3.0

2.0 1.7 GW

1.0

0.0

Source: GTM Research

U.S. Solar Outlook Under Section 201 June 2017 4

 Introduction

Key Findings: Section 201 Scenario Analyses

Between 2018 and 2022, total U.S. solar installations would fall from 72.5 GWdc cumulatively to just
36.4 GWdc under a $0.78/Wdc year one minimum module price, or to 25 GWdc under a $1.18/Wdc year
one minimum price, representing a $0.40/Wdc cell tariff on top of a $0.78/Wdc minimum module price.
Utility PV is expected to see the largest downward revisions to its base-case forecast. A majority of
utility PV procurement now hinges on solar being cost-competitive with natural gas alternatives, with
nearly three-fourths of the utility PV pipeline procured outside renewable portfolio standards. Under
both tariff scenarios, most of that is at risk of cancelation unless PPA prices are renegotiated.
Residential PV is the least sensitive segment to the introduction of tariffs. On one hand, the number of
state markets at grid parity in 2021 would fall from 43 to 35 in the minimum module price only scenario
(43 to 26 with the cell tariff added to the minimum price). However, the top six states, which drive a
majority of the base-case outlook, would continue to offer more than 10% annual net savings.
Challenging rate structures that limit savings for large C&I, plus financing risks for community solar, are
the primary drivers behind non-residential PV experiencing a larger downturn than residential PV.
Top-tier module suppliers are sold out through the end of the year, as developers and installers
contract imported modules ahead of a potential November ruling. Two-thirds of this supply will go to
utility PV buyers that have better pipeline visibility, larger volumes and tighter project economics.

Figure 1.2 U.S. PV Installation Forecast: Base-Case Outlook vs. Tariff Scenarios
20.0

18.0 17.3
16.2
Annual Total PV Installations (GWdc)

16.0 15.0 15.0

14.0 13.1
12.6
12.0 11.1 -43%

9.8
10.0 -54%
7.5 -43% -53% -55% 7.5
8.0 6.7
6.2 6.3 6.1
6.0 4.8 -61%
3.4 6.7
4.0 -57% -70%
-69% -70%
4.8 4.9
2.0 4.1 4.4

0.0
2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E

Base Case Minimum Module Price Minimum Module Price + Cell Tariff

Source: GTM Research

U.S. Solar Outlook Under Section 201 June 2017 5

 Introduction

1. INTRODUCTION
1.1. Origins of a Solar Trade Dispute
Uncertainty looms over the U.S. solar outlook due to a new trade dispute targeting global
manufacturers of crystalline silicon PV modules and cells. On the morning of April 26, 2017,
domestic module and cell manufacturer Suniva filed a petition to the U.S. International Trade
Commission (ITC) under Section 201 of the Trade Act of 1974. One month later, the U.S. ITC
announced that it would consider Sunivas petition, which could result in remedies to safeguard
against foreign-manufactured crystalline silicon photovoltaic products.

The U.S. ITC will make a determination of injury by Sept. 22, 2017, and if it finds injury (or threat of
injury), it will recommend remedies by Nov. 13, 2017. President Trump could then accept, modify
or choose not to implement the ITCs recommended relief measures.

Sunivas Petition in a Nutshell

Suniva is requesting relief against imports from all geographic sources, which could result in import
tariffs, volume limitations or other measures.

Requests include, but are not limited to, a minimum price on crystalline silicon PV modules (initially
$0.78/Wdc) and a tariff on cells (initially $0.40/Wdc).

These requirements would step down annually for three additional years. The tariff on imported cells
would step down to $0.37/Wdc, $0.34/Wdc and then $0.33/Wdc, while the minimum module price
would step down to $0.72/Wdc, $0.69/Wdc and then $0.68/Wdc.

1.2. Uncertainties Abound in Assessing Section 201 Impacts

Before proceeding with any impact analysis to system pricing and solar deployment, we would be
irresponsible if we didnt first outline all the procedural uncertainties and unknowns that could
remedy this analysis meaningless. A detailed outline of the Section 201 process can be found in
GTM Researchs recent note, Is the U.S. About to Enter a New Solar Trade Dispute? To summarize,
these are the current risks to taking Sunivas minimum price and cell tariff suggestions as inputs:
The ITC may not find serious injury. The ITC is currently in the investigatory period and still
must determine whether imports have caused or threatened serious injury to domestic
crystalline cell PV manufacturing. While some trade lawyers have assessed the likelihood as
having a >50% chance, theres still a chance that a finding of no injury could occur.
Remedies can (and likely will) differ from Sunivas suggestion. Even if injury is found, the
commissioners are free to suggest their own remedies, which may not align with Sunivas
suggestions. Co-petitioner SolarWorld may also suggest unique remedies, which the ITC can

U.S. Solar Outlook Under Section 201 June 2017 6

 Introduction

similarly consider or discard. And ultimately, the Trump White House decides if and what
remedies are levied, adding further uncertainty to an already hazy determination process.
Sunivas suggested remedies could imply an initial floor price of $1.18/Wdc, not $0.78/Wdc.
Trade lawyers are divided on whether Sunivas request would imply a minimum price for
imported modules of $0.78/Wdc, inclusive or exclusive of the $0.40/Wdc tariffs on imported
cells. If the tariffs and minimum prices are additive, imported tariffs would come in at
$1.18/Wdc in year 1, $1.09/Wdc in year 2, $1.08/Wdc in year 3 and $1.02/Wdc in year 4.
A negotiation and subsequent withdrawal of the petition is still possible. While SolarWorlds
entrance as a co-petitioner muddies the waters for negotiation or buyout of Suniva, the
parties could still come to an agreement that satisfies all parties ahead of potential
implementation of safeguards.
The U.S. International Trade Commission could propose or President Trump could decide to
extend the tariffs beyond four years. By default, remedies imposed under a Section 201
petition last four years. But if the tariffs are approved, the World Trade Organization could
rule that they are in violation of international commitments and law. In turn, if other
countries threaten to or actually impose new tariffs or other retaliatory measures on the U.S.,
its possible that the tariffs are withdrawn ahead of schedule.
In our scenario-based forecasts, however, we assume the tariffs last four years, but are
not extended in 2022. On one hand, 2022 would benefit from pent-up demand and an
abrupt uptick in the number of economically attractive states for distributed and utility
PV. However, we also expect substantial attrition of developers and installers serving the
market between 2018 and 2021, plus a much smaller base for the market to build upon
thereafter. In turn, our scenario-based forecasts account for a less mature market and
customer base in 2022, resulting in reductions to that years base-case forecast as well.
Top-tier module suppliers are sold out through the end of the year, as developers and
installers contract imported modules ahead of a potential November ruling. Two-thirds of this
supply (approximately 1.3 GWdc) will go to utility PV buyers that have better pipeline visibility,
larger volumes and tighter project economics.
In the utility PV segment, the 2018 base-case outlook is primarily based on capacity that
has already secured a PPA. But more than 50% of that pipeline comes from projects that
landed PPAs in H2 2016 onward, after module prices had already crashed. Given that,
the majority of the 2018 utility PV base-case outlook is at risk of cancelation, unless PPA
prices are renegotiated.
If tariffs are approved, its possible (but unlikely) that multiple Tier 1 cell manufacturers enter
the U.S. market to support downstream demand. If any Tier 1 cell suppliers set up gigawatt-
level facilities in the U.S., it would increase the floor on domestic, tariff-free supply to
support the market outlook. However, it can take anywhere between 12 and 18 months to
secure permits to set up a new facility. On top of that, there are only a handful of
manufacturers that have the brand and sales channel in the U.S. to justify setting up a

U.S. Solar Outlook Under Section 201 June 2017 7

 Introduction

gigawatt-level facility, let alone manufacture in the U.S. with minimum margins. Realistically,
we would not see any Tier 1 module suppliers set up shop in the U.S. market before 2019.
More importantly, we do not expect global module players to set up sufficient U.S.-based
volume amid the global oversupply environment.

Conclusion: National Level Takeaways

Between 2018 and 2022, U.S. utility PV is expected to be the most sensitive to new tariffs,
followed by non-residential PV and then residential PV.

Over the next several years, residential PV can still rely on California and the other major Northeast
state markets to remain above the tipping point under both tariff scenarios. Meanwhile, the non-
residential PV segment is likely to be more sensitive to new tariffs than residential PV, given that
40% to 50% of the base-case outlook depends on large C&I customers with challenging rate
structures, plus the nascent community solar segment that is riddled with project development
and financing risks.

Meanwhile, longer development cycles and tighter project economics are expected to result in
utility PV procuring twice as much capacity from tariff-free module imports than from distributed
PV procurers in H2 2017.

However, the next four years of utility PV procurement is expected to remain primarily driven by
demand outside RPS obligations. In fact, 74% of the current pipeline is already driven by
procurement outside RPS obligations, most of which comes from PURPA and voluntary
procurement. Those drivers are either exclusively (e.g., PURPA) or primarily (e.g., voluntary)
enabled by solars cost-competitiveness with natural-gas alternatives. Given that, a larger number
of state markets for utility PV than for distributed PV are at risk of seeing deployment erased
altogether under either tariff scenario.

U.S. Solar Outlook Under Section 201 June 2017 8

 Introduction

Figure 1.1 2018-2022: Base-Case Capacity Additions and Downward Revisions by Tariff Scenario
80,000 72,543

60,000
43,107
40,000
Capacity (MWdc)

18,609
20,000
10,826

-34% -39% -55%

-51% -4,204 -5,927
-20,000 -6,330
-9,424
-59%
-40,000 -25,623 -75%
-50%
-32,211
-36,157
-66%
-60,000 -47,562
Residential Commercial Utility Total
Base Case MW Additions Minimum Module Price (MW Reduction)
Minimum Module Price + Cell Tariff (MW Reduction)
Source: GTM Research

U.S. Solar Outlook Under Section 201 June 2017 9

 Introduction

U.S. SOLAR OUTLOOK UNDER SECTION 201

The Trade Case's Impact on U.S. Solar Demand

Cory Honeyman, Associate Director of U.S. Solar, GTM Research

MJ Shiao, Head of Americas Research, GTM Research
Benjamin Gallagher, Analyst, GTM Research

Interested in other reports that we offer, please visit

www.gtmresearch.com

U.S. Solar Outlook Under Section 201

June 2017
June 2017 10