Global Supply Chain Issues are Affecting Solar Prices - Midwest Renewable Energy Association

Global supply chain issues are affecting solar prices, according to industry sources.

Key causes for price increases of late are increasing prices for steel and polysilicon. Since March 2020, steel prices are up 215%. Steel is used in racking that modules are attached to. The price of polysilicon, the raw material used in solar cells, is up 175%.

The cost of shipping has also increased dramatically in the last year (upwards of 500% compared to a year ago), owed to extreme weather and the ongoing pandemic. Increased costs of fuel and labor round out the equation.

What does this mean for solar prices?

Over the last ten years, prices for PV in all segments have declined. This has been the result of a combination of market forces and government intervention. The federal renewable energy investment tax credit, MACRS depreciation, and the DOE’s SunShot initiative led to a precipitous decline in price for solar, resulting in a virtuous cycle of deployment, innovation, and further price decreases.

?? The solar price curve is leveling out ?? Source

But have solar prices hit bottom? Data from the past few years suggests that supply chains and labor together represented around 23% of the overall cost of a solar array. Today’s supply chain issues coupled with the present labor shortage make it easy to wonder whether prices may have reached their nadir over the last year or so. It is therefore reasonable to expect that prices will increase in the first part of 2022, but will those increases persist?

In March, the Biden administration announced a goal of reducing the cost of solar energy by 60% within the next ten years. In that announcement, they focused on investments in perovskite, cadmium telluride, and concentrated solar plants. Efforts have since been announced to fast-track permitting with SolarAPP, and advance equitable access to energy storage.

While we don’t ultimately know how long prices will be buoyed by supply chain and pandemic-related issues, a year or more seems likely. What we do know is that there are inevitable limits to price reductions in solar. The narrative that solar prices continuously fall year over year may be reaching its end. We also know that every day spent without taking advantage of the sun’s rays for electricity production is another day spent relying on some other form of electricity production, most of which are still predominantly fossil fuels.

Our advice for the near term? If you are seriously considering solar, it may be wise to lock in pricing soon rather than wait for the solar industry to feel the full brunt of ongoing supply chain complications, which are already showing upward pressures on price.

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