New U.S. Solar Panel Installations Set to Crater Thanks to Inflation, Supply Chain Issues

Solar panel installations are set to decrease in 2022 off of major supply chain issues and rising prices caused by inflation, according to an industry report.

New utility or large-scale industrial solar installations are expected to experience a decline of 14% year-over-year in 2022, the report published Thursday by the Solar Energy Industries Association (SEIA) and Wood Mackenzie showed. Utility-scale solar projects saw an average price increase of 18% over the last year.

While industrial solar production increased in 2021 — companies installed 17 gigawatts of capacity — the industry still installed 3 gigawatts fewer than expected, according to the report. The projection miss was thanks to supply chain issues and price fluctuations which led to project delays and cancellations that are expected to continue into 2022.

“The supply chain constraints of the last year will hit 2022 installations the hardest, reducing capacity by 7% compared to 2021,” Michelle Davis, principal analyst at Wood Mackenzie and lead author of the report, said in a statement.

Wood Mackenzie lowered its near-term solar forecast by 11 gigawatts, a 19%. (RELATED: LG Abandons Solar Panel Business Amid Supply Chain Issues, High Costs)

But Davis added that the report forecasted long-term growth for the solar industry — up to 500% by 2032— if Congress approved an extension to the Investment Tax Credit (ITC) for solar. SEIA CEO and President Abigail Ross Hopper echoed the need for government support to the solar industry in future legislation.

“In the face of global supply uncertainty, we must ramp up clean energy production and eliminate our reliance on hostile nations for our energy needs,” Hopper said.

“Policymakers have the answers right in front of them: if we pass a long-term extension of the solar Investment Tax Credit and invest in U.S. manufacturing, solar installations will increase by 66% over the next decade, and our nation will be safer because of it,” she continued. “America’s energy independence relies on our ability to deploy solar, and the opportunity before us has never been more obvious or urgent.”

Over the next decade the residential, non-residential and utility-scale solar sectors would increase by 20%, 15% and 86% respectively if a long-term solar ITC extension was passed, the report concluded.

Without an extension, though, U.S. solar capacity wouldn’t even reach 40% of President Joe Biden’s 2035 target, according to Wood Mackenzie’s estimates. In April 2021, Biden announced the goal of achieving full decarbonization of the U.S. power grid by 2035.

The White House has worked to push greater solar installations over the last 14 months, approving several projects that could power more than 274,000 homes. Biden also scrapped restrictive levies on foreign solar imports placed by the Trump administration, opening the door for more reliance on cheaper Chinese panels.

“Today’s decision recognizes the importance of this innovative technology in helping to improve power output and lower costs in the utility-scale segment,” Hopper said at the time.

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