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.