Solar panels in the Indian state of Karnataka.
Jonas Gratzer | Light rocket | Getty Images
Cost reduction has been a key driver of solar adoption, but prices have jumped in 2021 due to major economic issues, including supply chain restrictions, that have hit the industry.
Prices rose by 18% in some segments of solar energy last year, according to a report released Thursday by the Solar Energy Association and Wood Mackenzie.
It was the first year that prices rose in all three markets – residential, commercial and utility – since 2014, when Wood Mackenzie began tracking the data.
In addition to supply chain bottlenecks, the sector has also been impacted by trade activities and political uncertainty, the report says.
However, the solar industry has installed a record 23.6 gigawatts of new capacity in 2021, up 19% from 2020. Texas added the most solar power during the year, overtaking California for the first time.
In the residential sector, the number of installations grew by 30% year on year, reaching a new record of over 500,000.
Utilities added 17 gigawatts of new capacity, also a record. But in the end, there were fewer installs than expected. One-third of utility projects due for completion in the fourth quarter have been delayed by at least one quarter. In addition, 13% of projects scheduled for completion this year were delayed by a year and more or canceled entirely.
Price increases on a quarterly and yearly basis first began to appear in the second quarter of 2021 and plagued the industry until the end of the year.
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Analysts say things could get worse before she turns the corner.
“Last year’s supply chain restrictions will hit 2022 installations hardest, cutting capacity by 7% compared to 2021,” said Michelle Davies, chief analyst at Wood Mackenzie and lead author of the report. “But our forecasts show that long-term growth will eclipse these short-term concerns, especially if federal clean energy stimulus is passed.”
Davis said if the investment tax credit is passed, installed solar capacity will increase sixfold by 2032. ITC is a key solar subsidy that was included in President Joe Biden’s Build Back Better plan.
On the other hand, the report says that in the absence of political action, the US will achieve only 39% of what is needed to achieve Biden’s goal of decarbonization by 2035.
The report comes amid a resurgence in energy security talk after Russia’s war with Ukraine. Opinions are divided on the next step, with some saying that oil and gas production should be increased, while others believe that high hydrocarbon prices should accelerate the transition to energy. Still others say that it is necessary to take all of the above in relation to energy sources.
“In the face of global supply uncertainty, we must increase our clean energy production and wean ourselves off our dependence on hostile nations to meet our energy needs,” said SEIA CEO and President Abigail Ross Hopper. “Politicians have the answers right in front of them,” she said, referring to the passage of ITC and investment in manufacturing.
“America’s energy independence depends on our ability to use solar energy, and the opportunity before us has never been more obvious and urgent,” she added.