Supply constraints delaying U.S. solar sector's boom from new climate law -market report

© Reuters. FILE PHOTO: An aerial view shows solar panels made by First Solar, during a tour of the Overland Park Solar Array in Toledo, Ohio, U.S., October 5, 2021. Picture taken with a drone. Picture taken October 5, 2021. REUTERS/Dane Rhys/File Photo

(Reuters) - U.S. solar energy project developers will struggle to access equipment supplies for at least the next year, delaying their ability to tap generous new subsidies, because panel imports are being stalled by a new law banning goods from China's Xinjiang region over forced-labor concerns, according to a report published on Thursday.

The quarterly solar market report by industry trade group the Solar Energy Industries Association and research firm Wood Mackenzie projected 40% growth for the industry over the next five years thanks to passage in Congress last month of the Inflation Reduction Act, which provides a decade of subsidies for renewable energy projects.

But installations this year and next will be constrained by tight supplies of solar equipment, the report said. In the second quarter, the market installed 4.6 gigawatts of solar capacity, down 12% from a year earlier.

For the year, solar installations are expected to be 15.7 GW, the lowest level since 2019. Large projects for utilities, the biggest part of the market, are expected to be 8.1 GW.

The U.S. solar industry has faced project delays for the last two years due to pandemic-related supply disruptions, the threat of new U.S. tariffs on panel imports from Asia, and a ban on equipment containing a raw material made by China's Hoshine Silicon Industry Co in Xinjiang over forced-labor allegations.

In June, U.S. Customs and Border Protection began enforcing the Uyghur Forced Labor Prevention Act's (UFLPA) "rebuttable presumption" that all goods from Xinjiang, where Chinese authorities established detention camps for Uyghurs and other Muslim groups, are made with forced labor and banned.

The law "has resulted in multiple detentions" and more stringent documentation of the source of products entering the country, the report said, leading to a 10 GW reduction in the pipeline of utility-scale projects in construction or development this year.

"Developers are pessimistic about their ability to secure modules for the rest of the year," the report said.