Solar Market Overview

Solar industry pushes forward as supply chain, tari issues loom

Federal policy played a crucial role for the solar industry in the battle against climate change in 2021, although continued pandemic supply chain issues loomed in the background.

The centerpiece of federal solar policy is the Build Back Better Act, which is expected to be voted on by the end of 2021. The $555 billion allocated to the clean energy sector in the bill would fund 10-year extensions of the section 48 and section 25D investment tax credits, direct pay for the commercial ITC, refundability for the residential ITC and a standalone storage ITC.

“The Build Back Better framework contains the most ambitious and transformational clean energy policies we’ve ever seen from Congress," said Abigail Ross Hopper, president and CEO of SEIA, in a statement.

Wood Mackenzie calculated the ITC extension could power a 44% boost in solar deployment, although it wouldn’t drive enough growth to achieve President Joe Biden’s goal of 80% carbon-free electricity by 2030.

“An extension would allow the already strong residential solar market to continue to grow. The direct pay provisions of the proposed extension will be a major win for small and medium nonresidential projects (<1 MW) thanks to the challenges of securing tax equity,” said Bryan White, WoodMac solar researcher.

The Build Back Better bill would also create new credits for domestic solar manufacturing — a necessity for avoiding solar tariff battles in the future. Since the United States currently depends on China for its solar supply chain, much of 2021 was spent anxiously waiting to see how tariffs and duties would affect the cost of solar. At the end of the year, the International Trade Commission recommended extending Section 201 protections on crystalline modules that increased import prices the past few years. In a separate high-stakes module case, the Dept. of Commerce rejected in November 2021 the request by the American Solar Manufacturers Against Chinese Circumvention to impose additional tariffs on Chinese solar panel companies allegedly circumventing antidumping and countervailing (AD/ CV) duties by manufacturing portions of their products in three Southeast Asian countries.

Solar prices rose in all markets in 2021 because of tariff- and pandemicrelated supply chain problems. The prices increased quarter-over-quarter and yearover-year in every market segment for the fi rst time since WoodMac began modeling system price data in 2014.

“The solar industry continues to demonstrate strong quarterly growth, and demand is high across every segment,” said Michelle Davis, principal analyst at Wood Mackenzie, in a press release. “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.”

A Rystad Energy analysis found that more than half of global utility solar projects planned in 2022 are threatened by these supply chain issues. Bloated costs on manufacturing materials and shipping could threaten 50 GW of projects.

“The current bottlenecks are not expected to be relieved within the next 12 months, meaning developers and offtakers will have to decide whether to reduce their margins, delay projects or increase offtake prices to get projects to fi nancial close,” said David Dixon, senior renewables analyst at Rystad Energy, in a statement.

Although plenty of challenges are ahead for the solar + storage industry, there’s also exciting new opportunities to bring manufacturing stateside and give new groups of people access to solar power through community solar and new direct pay tax credits. SPW