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According to a report released Tuesday by the Solar Energy Industries Association and Wood Mackenzie, the solar industry is feeling the effects of rising prices in many sectors.
Prices for each solar segment have increased quarter over quarter and year over year during this period. This is the first time that residential, commercial and utility solar costs have increased simultaneously since the energy consultancy began tracking prices in 2014.
The most significant cost pressure came from a surge in the prices of raw materials, including steel and aluminum. The high shipping costs also played a role. The bulk of these impacts will start showing in 2022, according to the report, as many companies have enough inventory to carry them out until the end of the year.
Overall, the United States added 5.7 gigawatts of solar capacity during the period, a record for second quarter installations. It also marks a 45% jump from 2020 levels as the pandemic rocked the industry.
“The solar industry continues to show strong quarterly growth and demand is high across all segments,” said Michelle Davis, senior solar analyst at Wood Mackenzie. “But the industry now faces many challenges. … Meeting these challenges will be essential to accelerate industry growth and achieve clean energy goals.
A separate report from Rystad Energy, released on Friday, said global solar panel prices rose 16% this year from 2020 levels. Total costs, which include ancillary costs such as labor , are up 12% in 2021. Rystad said this could potentially hurt the demand outlook for the next several years.
In the United States, the industry also faces over-regulation and political uncertainty. In June, U.S. Customs and Border Protection issued a restraint order on Hoshine Silicon Industry’s silica products due to concerns about forced labor in China’s Xinjiang region. Separately, some US-based companies have filed a petition with the Commerce Department asking that tariffs on imported solar products be extended to Malaysia, Vietnam and Thailand, according to SEIA.
All of this comes as lawmakers debate a $ 3.5 trillion spending program that will have significant implications for the solar industry.
“What the industry needs is certain,” said SEIA President and CEO Abigail Ross Hopper. He thinks the most important provision is the extension of the investment tax credit, which has been instrumental in the growth of solar. The ITC, which was expanded in December 2020, was included in the U.S. jobs plan, but was not included in the latest version of the infrastructure bill.
Hopper said supporting domestic manufacturing is another priority for the group of companies, noting that the stimulus around US-based production could ease some of the supply chain constraints facing the solar industry. is currently facing.
Rising costs and a lack of clarity for the industry could hurt President Joe Biden’s ambitious climate goals. According to the Department of Energy, solar energy costs have fallen by more than 70% over the past decade, but further declines are needed for greater adoption.
The department released a plan on Wednesday outlining how solar power could drop from around 3% of electricity production today to 45% by 2050, but that would be nearly impossible without supportive policies. The study noted that the United States installed a record 15 gigawatts of solar power in 2020.
If America’s climate goals are to be met, facilities will need to double each year through 2025, before quadruple from 2020 levels each year between 2025 and 2030.
“This is a critical time for our climate future, but rising prices, supply chain disruptions and a series of business risks threaten our ability to decarbonize the power grid,” Hopper said.