Solar prices are up across all markets due to supply chain constraints, threat of new tariffs
There is much to celebrate in the U.S. solar industry, but there is also a concern that there will be more bad news, according to the latest.US Solar Market Insight” report released today by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, a Verisk company.
Solar additions accounted for 56% of all new electrical capacity additions in the US in the first half of 2021, and the industry officially surpassed 3 million solar installations in the second quarter, driven by a strong recovery in the residential sector after it was hit by the COVID-19 pandemic. Q2 2021 saw the addition of 5.7 GWDC of solar capacity, up 5 GW installed in Q1.
But supply chain constraints are driving price increases in every solar market segment. This is the first time solar prices in any market segment have risen quarter-over-quarter and year-over-year since Wood Mackenzie began modeling system price data in 2014. year after year. Many solar developers have enough inventory for projects in 2021, but will start to see price increases in 2022, the report said.
“This is a critical moment for our climate future, but price hikes, supply chain disruptions and a range of trade risks threaten our ability to decarbonise the power grid,” said SEIA president and CEO Abigail Ross Hopper. “If we want to boost domestic production and harness enough solar power to tackle the climate crisis, we need to see action from our federal leaders.”
In addition to recent enforcement actions related to metallurgical grade silicon in Xinjiang, two new tariff requests have been filed: one requesting an extension of the Section 201 indemnity tariffs on imported solar cells and panels, and a second requesting an extension of the Section 201 indemnity tariffs on imported solar cells and panels. Ministry of Commerce review on Chinese silicon solar panel manufacturers operating in Southeast Asian countries. Taken together, these measures could significantly exacerbate supply chain constraints and raise the prices of the solar system.
“The solar industry continues to show strong quarterly growth and demand is strong in every segment,” said Michelle Davis, chief analyst at Wood Mackenzie and lead author of the report. “But the industry now faces multiple challenges, from high equipment prices to complex interconnection processes. Addressing these challenges will be critical to expanding industry growth and meeting clean energy targets.”
New forecasts from Wood Mackenzie show that the US will add an average of just over 29 GW of new annual solar capacity by 2026. But this is far less than the pace of implementation needed to meet President Biden’s 2035 clean energy goals. To achieve these goals, the solar industry will need to install more than 80 GW of solar energy annually from 2022 to 2035.
The solar industry will continue to set annual installation records until the solar investment tax credit is fully phased out in 2024. The sector’s growth is expected to level off in 2025 and 2026. Wood Mackenzie’s Outlook.
Additional insight from the report:
- Residential solar was up 2% from the first quarter of 2021, but up 46% from the second quarter of 2020, when installations were hardest hit by the Covid-19 pandemic. With 974 MWDC installed, volumes were comparable to the fourth quarter of 2020.
- Community solar up 16% from Q2 2020 at 177 MWDC installed, and commercial solar was up 31% from the same quarter last year at 354 MWDC installed.
- Utility-scale solar set a new record for installations in the second quarter of 4.2 GWDC. Texas, Arizona and Florida accounted for nearly 3 GW of the quarter’s total.
- A total of 9.3 GWDC of new utility-scale solar purchase agreements were signed in the second quarter of 2021, bringing contracted utility-scale pipeline to nearly 85 GWDC.
See the full report on seia.org/smi.