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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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The U.S. Is Set To Break Another Solar Record Despite Rising Costs

New solar power capacity additions in the United States are on track to book a record year despite supply chain disruptions that have seen price spikes that have effectively put an end to the cheap solar narrative. In the second quarter alone, new solar installations rose 45 percent on the year at a total 5.7 GW of installed capacity in both residential and utility-scale installations, energy consultancy Wood Mackenzie said in a joint report with the Solar Energy Industries Association. But this record has been marred by rising prices across the industry.

According to Wood Mac, price increases resulting from supply chain disruptions amid the pandemic have affected utility-scale solar installations more strongly than residential installations in what is the first solar cost increase in at least seven years. Data from the study shows turnkey prices for solar installations are currently at levels last seen in 2016. 

The data also shows something else that may potentially be more worrying. The price decline in solar has smoothened out since 2019, suggesting the space for further significant cost reductions may be limited.

This would have important implications for the Biden administration’s energy agenda, which bets heavily on solar. In fact, a study from the Energy Department has suggested the U.S. could generate as much as 45 percent of its electricity from solar farms.

“The study illuminates the fact that solar, our cheapest and fastest-growing source of clean energy, could produce enough electricity to power all of the homes in the U.S. by 2035 and employ as many as 1.5 million people in the process,” Energy Secretary Jennifer Granholm said in comments on the study. “Achieving this bright future requires a massive and equitable deployment of renewable energy and strong decarbonization policies.”

Related: The Major Problem With EVs No One Is Talking About

Indeed, this would require a massive deployment of solar power—some 1,050 to 1,570 GW of solar power, or even 1,600, per the Energy Department’s study. This is more than the total U.S. generation capacity right now and will be an increase of a staggering 1,450 percent from current capacity, according to one energy technology and policy researcher from the University of Texas.

According to Joshua D. Rhodes, who spoke to The Conversation, boosting U.S. solar capacity from the current 103 GW to more than 1,000 GW is possible, but it will not be easy. A megawatt of solar capacity needs some 8 acres. Based on this, the DoE’s target capacity would require a land area of between 10.2 and 11.5 million acres or, says Rhodes, Massachusetts, and New Jersey, taken together.

There is already nascent opposition to utility-scale solar projects from conservation activists and other groups. The WSJ earlier this year reported on one such case involving the Battle Born solar project, which will cover—literally—14 square miles, which is the size of 7,000 football fields, rendering the land useless for other purposes.

If the cost problem persists, which is quite likely given that supply chain analysts expect disruptions to continue into 2022, it would make achieving the DoE’s solar target all the more difficult. The government has indicated it will fully support strong growth in solar capacity, but this capacity has been touted as super cheap and affordable, with lots of incentives for households and businesses to go solar, too. With higher prices, these incentives might start to ring hollow, and the federal government won’t be able to pay for every added GW.

The “bright future” outlined by Secretary Granholm may be harder to achieve than believed because of these challenges. Developers are already delaying project completions because of the cost increases. If this continues, some projects might get shelved. The Wood Mac and SEIA report notes that government support remains essential, but if we are being realistic just how much support and for how long can the government provide when it is already stretching itself thin with billions planned for one or another energy-related initiative that lack unified support even among Congress Democrats?

By Irina Slav for Oilprice.com

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