U.S. solar industry will grow 25% less than expected in 2022, report finds

Rows of solar panels on the Toms River Solar Farm, which was built on an EPA Superfund site in Toms River, New Jersey, USA on May 26, 2021.

Dane Rhys | Reuters

According to a report released Tuesday by the Solar Energy Industries Association and Wood Mackenzie, the U.S. solar industry will grow 25% less than previously projected in 2022 due to supply chain constraints and rising raw material costs.

The quarterly update showed that prices continue to rise as the industry grapples with the same cost pressures that affect all areas of the economy. In addition, trade uncertainty has also weighed on the solar industry.

During the third quarter, costs increased for the second consecutive quarter in the utility, commercial and residential solar segments. In the utility and commercial segments, year-over-year price increases have been the highest since Wood Mackenzie started tracking the data in 2014.

Large projects are particularly sensitive to these price increases. Costs were down 12% between Q1 2019 and Q1 2021, but with the recent rise in the price of materials like steel, the declines in costs of the past two years have now been undone.

In addition to general supply chain problems, solar supplies were interrupted for months after an anonymous group filed a petition with the US Department of Commerce calling for tariffs to be extended to Thailand, Malaysia and Vietnam. The petition was rejected in November.

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Nonetheless, installed capacity in the US rose 33% year-on-year to 5.4 gigawatts, which is the most expansion since the start of the three-month period between July and September. According to the Public Power Association, the USA has a total generation capacity of around 1,200 gigawatts.

The number of solar panels in residential buildings exceeded 1 GW in the third quarter, with more than 130,000 systems installed in a single quarter for the first time.

Utility-Scale also set a record with 3.8 GW installed during the quarter. However, not all solar segments recorded growth in the reporting period. Commercial and municipal solar systems declined 10% and 21%, respectively, quarterly due to connectivity issues and equipment delivery delays.

While the industry is expected to grow less than previously projected in 2022, the adoption of the Build Back Better plan could boost growth with an eye to the future.

“The US solar market has never seen so many contrasting dynamics,” said Michelle Davis, principal analyst at Wood Mackenzie. “On the one hand, the restrictions in the supply chain are escalating further and endanger gigawatt projects. On the other hand, the Build Back Better Act would be an important market stimulus for this industry and create long-term security for further growth.”

Should the bill go into effect, Wood Mackenzie predicts that the US will install an additional 43.5 GW of solar capacity above baseline between 2022 and 2026.

“This would increase the accumulated solar capacity in the United States to over 300 gigawatts, three times the amount of solar energy used today,” the report said.

The bill provides for an extension of the investment tax credit, which has contributed significantly to the growth of the US solar industry.

https://www.cnbc.com/2021/12/14/us-solar-industry-will-grow-25percent-less-than-expected-in-2022-report-finds.html