Solar

Biden’s solar goals threatened by supply chain, trade issues
Biden’s solar goals threatened by supply chain, trade issues
Brian Lawson and Kenesaw Burwell work on panels that the Energy Department is using to leverage a Power Purchase Agreement with Sun Edison and Xcel Energy. (Courtesy: Science in HD/Unslash)

Despite annual record-breaking installations, supply chain constraints and trade issues are driving price increases across every solar market segment, according to new analysis.

A report released Tuesday by the Solar Energy Industries Association (SEIA) and Wood Mackenzie found that solar prices increased quarter-over-quarter and year-over-year for the first time since Wood Mackenzie began modeling solar market prices in 2014.

“This is a critical moment for our climate future but price increases, supply chain disruptions and a series of trade risks are threatening our ability to decarbonize the electric grid,” said SEIA president and CEO Abigail Ross Hopper. “If we want to incentivize domestic manufacturing and drive enough solar deployment to tackle the climate crisis, we must see action from our federal leaders.”

The U.S. installed 5.7 gigawatts of solar PV in Q2 2021 to reach a total capacity of 108.7 GW, enough to power 18.9 million homes, according to the report. Q2 2021 installations represented a 45% year-over-year increase and the largest Q2 on record.

Still, solar prices have increased and are likely to continue trending higher through next year because of supply chain constraints and trade issues, the report authors said. The most significant price increases are being seen with input costs, like steel and aluminum, and elevated freight costs.

“The solar industry continues to demonstrate strong quarterly growth, and demand is high across every segment,” said Michelle Davis, principal analyst at Wood Mackenzie and lead author of the report. “But the industry is now bumping up against multiple challenges, from elevated equipment prices to complex interconnection processes. Addressing these challenges will be critical to expanding the industry’s growth and meeting clean energy targets.”

Wood Mackenzie forecasts an annual average of 29 GW of solar capacity additions through 2026, far short of the pace needed to reach President Biden's goal of solar representing 45% of the U.S. electricity supply by 2050. Average annual solar capacity additions must reach 80 GW from 2022 through 2035 to meet the goal.

Solar developers are rushing to take advantage of the Investment Tax Credit before it phases down under current law. Fully-funded extensions of the ITC and Production Tax Credit are included in the $1.5 trillion budget reconciliation bill being considered by Congress.

Trade issues threaten Biden's solar target

Ben Catt, CEO of Pine Gate Renewables, a North Carolina utility-scale solar developer with a portfolio just under 1 GW, commended the Biden administration for taking steps to extend incentives for renewable energy. But he added that, without improvements to the supply chain and trade landscape, the administration will fall short of its solar capacity goals.

Catt said significant swings in build costs have led the renewable energy developer to slow certain initiatives.

"The biggest challenge that comes with a lot of these trade policy fights is just the uncertainty that we have as developers in what that means for our business model and how we're going to advance what we're doing," Catt said. "Those things are incredibly difficult for us to plan our business around."

The U.S. government's enforcement of the Withhold Release Order (WRO) on metallurgical-grade silicon (MGS) from companies with facilities in China's Xinjiang region, as well as the possible extension of the Section 201 tariffs on imported solar modules, have added to the uncertainty. Additional tariffs could come, too, from the Antidumping and Countervailing Duties (AD/CVD) case involving companies from Malaysia, Thailand, and Vietnam.

"When you start to put tariffs on top of these things that aren't really all that effective when it comes to incentivizing domestic manufacturing," Catt said of the Section 201 tariffs, "those tariffs are getting stacked on top of the build costs and then that gets passed on to those competitive processes where we're selling energy.

"So, ultimately, the cost of those tariffs is largely getting worn by ratepayers," he said.

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