Solar prices climbed higher in 2021 due to supply chain, other challenges

Published on March 10, 2022 by Dave Kovaleski

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U.S. solar prices climbed higher in 2021 due to supply chain challenges, trade actions, and legislative uncertainty, according to the U.S. Solar Market Insight 2021 Year-in-Review, produced by the Solar Energy Industries Association (SEIA) and Wood Mackenzie.

Specifically, prices increased 18 percent year over year in 2021 for fixed-tilt utility-scale solar projects and 14.2 percent for single axis tracking projects in Q4.

Also, the challenges resulted in roughly one-third of all utility-scale solar capacity scheduled for completion in the fourth quarter of 2021 being delayed by at least a quarter. In addition, about 13 percent of capacity slated for completion in 2022 has either been delayed by a year or more or canceled outright.

Despite the headwinds, demand for solar remains high, the report said. The residential market saw 30 percent year over year growth in 2021, with over 500,000 U.S. homeowners installing solar. This helped the industry reach 23.6 GW of newly installed solar capacity. Further, 17 GW of utility scale capacity was installed in 2021, about 3 GW less than expected due to supply chain constraints, logistics challenges, and trade headwinds.

Among some of the key findings in the report, solar accounted for 3.9 percent of total U.S. electricity generation in 2021. Residential solar installations totaled 4.2 GW in 2021, a 30 percent year-over-year growth. Community solar volumes reached 957 MW, representing 7 percent year-over-year growth. Commercial solar volumes in 2021 were nearly equal to 2020 at 1,435 MW. Project delays from interconnection challenges and supply chain constraints limited growth in both sectors.

“In the face of global supply uncertainty, we must ramp up clean energy production and eliminate our reliance on hostile nations for our energy needs,” SEIA CEO and president Abigail Ross Hopper said. “Policymakers have the answers right in front of them: if we pass a long-term extension of the solar Investment Tax Credit and invest in U.S. manufacturing, solar installations will increase by 66% over the next decade, and our nation will be safer because of it. America’s energy independence relies on our ability to deploy solar, and the opportunity before us has never been more obvious or urgent.”

Wood Mackenzie, a Verisk business, has decreased near-term solar forecasts by 11 gigawatts (GW), or 19 percent over the last six months. This is primarily due to continued supply chain constraints, price increases, and interconnection challenges.

The researchers expect that the residential solar market’s momentum could slow somewhat going forward as policymakers in California and Florida consider new programs that would reduce compensation in their net metering programs.

Further, Wood Makenzie’s 10-year forecast shows that the passage of a long-term extension of the solar Investment Tax Credit (ITC), new manufacturing tax credits, and other clean energy incentives would increase solar installations by 66 percent over the next decade compared to baseline projections.

Without policy action in Congress, Wood Mackenzie says U.S. solar capacity would only reach 39 percent of what’s needed to hit President Biden’s 2035 decarbonization target.

“The supply chain constraints of the last year will hit 2022 installations the hardest, reducing capacity by 7% compared to 2021,” Michelle Davis, principal analyst and lead author of the report, said. “But our forecasts demonstrate long-term growth will overshadow these short-term challenges, especially if federal clean energy incentives are passed. In our ITC extension scenario, installed solar capacity is expected to multiply six times by 2032.”