Solar costs are experiencing an upward trend due to growing prices in raw materials and global supply chain bottlenecks, which experts warn will have a significant impact on the solar market next year and in achieving Paris Agreement climate goals.
Solar costs are rising for the first time in years in the US due to rising prices of raw materials and global supply chains bottlenecks, which could undermine efforts to transition towards renewable energy as well as President Biden’s ambitious clean energy plan.
Prices rose in every solar market, including residential, commercial and utility-scale, in the second quarter, according to a report released by Wood Mackenzie and the Solar Energy Industries Association. This marks the first time solar costs have risen since they’ve begun tracking in 2014.
The increase in solar costs can be attributed to a jump in prices for raw materials, such as steel and aluminium, as well as elevated shipping costs. Both of these factors have experienced a hike during the pandemic, which were exacerbated due to travel restrictions worldwide. Many companies have said to have sufficient inventory to last them for 2021 projects, the pressures of rising solar costs will start to hit next year.
In the separate report published by the Rystad, has found global prices for solar panels are also experiencing an upward trend, and have climbed 16% compared to 2020’s rates. Overall costs of production including labour, have also gone up by 12%. The report warns that this will have a huge negative impact on solar demands.
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“The solar industry must increase capacity and continue to fight cost escalation to meet climate change goals,” Rystad said in the report. “This will be a challenging task, however, as manufacturers now see their utilisation plummet due to rising costs and COVID-19 – a turn of events that could discourage the investments needed to expand capacity.”
These worrying reports come days after the Biden Administration published a blueprint outlining the transition towards clean energy, and demonstrating solar energy has the potential to power 40% of the country’s electricity by 2035 and 45% by 2050. As part of his clean energy plan, President Biden has pledged to achieve 80% renewable energy in the US by 2030, and to halve carbon emissions by 2050.
Globally, solar power capacity rose by 22% in 2020 and installations have experienced a boom over the last decade, forcing many coal and natural-gas plants to close. Within the US, the nation added a record 5.7 gigawatts of solar capacity in the second quarter of this year alone – a 45% increase compared to the same period in 2020. However, this could all change with rising solar costs.