Supply chain problems and rising prices are pinching the U.S. solar industry
Energize Weekly, March 23, 2022
Facing supply chain problems and rising prices, the U.S. solar industry delayed about a third of its utility-scale capacity in the fourth quarter of 2021, and installations are projected to be down in 2022, according to an industry market report.
The 2021 fourth quarter projects were delayed for at least one quarter, and 8 percent of planned capacity for 2022 has been posted to 2023, while another 5 percent has been cancelled, the report by the Solar Energy Industries Association (SEIA) and consultant Wood Mackenzie said.
As supply chains continue to face backlogs and delays, Wood Mackenzie is forecasting that 15 gigawatts (GW) of new solar capacity will come online in 2022, down from 17 GW in 2021.
“Demand is incredible, but the exact timing of projects remains very dynamic because customers are contending with so many moving pieces within their supply chain,” Jason Whitaker, president and CEO of Shoals Technologies Group Inc., a maker of electrical balance systems for solar projects, said on a March 10 earnings call.
As was the case for many industries reliant on imports for key materials, the solar industry, which imports about 90 percent of its panels, faced supply chain problems related to the pandemic.
The situation was compounded by tariffs on solar cells first put in place by the Trump administration and continued by President Joe Biden.
Prices for equipment started rising in the second quarter of 2021 and continued to increase for the rest of the year reaching, 18 percent for fix-tilt projects and 14.2 percent for single-tracking projects in the fourth quarter when compared to 2020.
In 2022, trade issues will continue to affect the solar supply chain, but with less volatility than in late 2021, the market report said.
“In early February, the White House extended Section 201 tariffs on solar cells and modules for four years but doubled the tariff-free solar cell import quota from 2.5 GW to 5 GW and maintained the exclusion for bifacial modules,” the report said. “The decision offered some relief to both module assemblers and project developers.”
Despite the difficulties, a record 5.9 GW of utility-scale solar came online in the fourth quarter of 2021, and for the year, a record 23.6 GW of solar capacity – including residential and community installations – was completed, a 19 percent increase year-over-year.
After years of robust growth and falling solar prices, the supply problems and rising prices have led solar industry groups to call for government action.
The SEIA is calling for a long-term extension of the federal Investment Tax Credit (ITC) for solar, which is scheduled expire in 2024.
“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 percent over the next decade, and our nation will be safer because of it,” SEIA CEO Abigail Ross Hopper said in statement.
Solar manufactures are also backing the Solar Energy Manufacturing Act for America, sponsored by Democratic Georgia Sen. Jon Ossoff, which would provide incentives for developing domestic solar manufacturing capacity.
“The U.S. cannot remain reliant on overseas solar supply chains, nor can we assume those monopolized supply chains will continue to keep prices low,” the Solar Energy Manufacturing for America Coalition said in a letter to President Biden.
Still, the SEIA-Wood Mackenzie report said, “these headwinds are unlikely to outweigh demand for the utility-scale solar segment in the long run. Ongoing efforts to expand federal clean energy support, increasing interest in ESG [environmental, social and corporate governance] investments, and new procurement strategies will allow industry recovery in 2023.”