Supply issues, price hikes knocked solar projections off track ─ but an ITC extension bumps outlook by 66 percent

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As usual, ball is in your court.

We all know the short-term solar woes. Solar prices in the U.S. increased as much as 18% due to supply chain challenges, trade actions, and legislative uncertainty, which has delayed and derailed major projects. According to the U.S. Solar Market Insight 2021 Year-in-Review, from the Solar Energy Industries Association (SEIA) and Wood Mackenzie:

  • A third of all utility-scale solar capacity scheduled for completion in Q4 2021 was delayed by at least a quarter and
  • 13% of capacity slated for completion in 2022 has either been delayed by a year or more or canceled outright
  • Over the last 6 months, Wood Mackenzie has decreased near-term solar forecasts by 11 gigawatts (GW), or 19%.

Not great stats, but the long-term forecast is the one to worry about. Wood Mackenzie projects that U.S. solar capacity would only reach 39% of what’s needed to hit President Biden’s 2035 decarbonization target at the moment.

And yet that could all change with one simple federal action: a 10-year extension of the solar investment tax credit (ITC).

“The supply chain constraints of the last year will hit 2022 installations the hardest, reducing capacity by 7% compared to 2021, but our forecasts demonstrate long-term growth will overshadow these short-term challenges, especially if federal clean energy incentives are passed,” said Michelle Davis, principal analyst and lead author of the report. “

New 10-year forecasts from Wood Mackenzie show that passing a long-term extension of the solar Investment Tax Credit (ITC), new manufacturing tax credits, and other clean energy incentives would increase solar installations by 66% over the next decade compared to baseline projections.

“In our ITC extension scenario, installed solar capacity is expected to multiply six times by 2032,” Davis says.

In addition, to help protect against future global supply chain problems, if the manufacturing tax credits move forward, the industry could unlock nearly 20 GW of new domestic solar manufacturing capacity.

Under an ITC extension scenario, 10-year forecasts for the residential, non-residential (commercial and community solar), and utility-scale solar sectors would increase by 20%, 15%, and 86%, respectively. Solar capacity additions by 2030 would exceed 70 GW annually under this scenario.

Solar sector snapshot from the report

  • Solar accounted for 3.9% of total U.S. electricity generation in 2021.
  • Residential solar installations totaled 4.2 GW, a 30% year-over-year growth.
  • Community solar volumes reached 957 MW, representing 7% year-over-year growth
  • Commercial solar volumes in 2021 were nearly equal to 2020 at 1,435 MW.
  • 17 GW of utility scale capacity were installed in 2021, about 3 GW less than expected.

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