In 2021, solar costs increased, ending a trend of declining prices.

• A report released by the Solar Energy Industries Association and Wood Mackenzie stated that solar costs increased in 2021 due to supply chain constraints.
• Since 2014, the price increase is the first recorded by Wood Mackenzie.
• Total U.S. still added a record amount of new solar capacity in 2021.

The increase in solar adoption in 2021 was due to rising prices, which were caused by economic challenges such as supply chain constraints.

Last year, the Solar Energy Industries Association and Wood Mackenzie released a report stating that prices in some sectors of the solar industry increased by as much as 18%.

Since 2014, when Wood Mackenzie started tracking the data, it was the first year that prices increased across all three markets - residential, commercial, and utility scale.

The report stated that in addition to supply chain bottlenecks, trade actions and policy uncertainty also had a negative impact on the sector.

In 2021, the solar industry set a new record with 23.6 gigawatts of new capacity installed, representing a 19% increase from the previous year. Texas surpassed California as the state with the most solar capacity added during the year.

The number of residential installations increased by 30% annually, reaching a new high of over 500,000.

Although the utility side added a record-breaking 17 gigawatts of new capacity, installations were lower than anticipated. One-third of utility-scale projects scheduled for the fourth quarter were delayed by at least one quarter, and 13% of projects planned for completion this year have been delayed by a year or more, or cancelled altogether.

The industry experienced quarter-over-quarter and year-over-year price increases starting in the second quarter of 2021, which persisted until the end of the year.

Analysts say it could get worse before turning a corner.

Michelle Davis, principal analyst at Wood Mackenzie and lead author of the report, stated that the supply chain constraints of the previous year will have the most significant impact on 2022 installations, reducing capacity by 7% compared to 2021. However, she added that long-term growth will outweigh these short-term challenges, particularly if federal clean energy incentives are passed.

If the Investment Tax Credit is enacted, solar capacity will quadruple by 2032, according to Davis. The ITC, a crucial solar incentive, was included in President Biden's Build Back Better plan.

If policy action is not taken, the U.S. will only achieve 39% of what is required to meet Biden's 2035 decarbonization goal.

The report emerges during a renewed discussion about energy security due to Russia's conflict with Ukraine. There are differing opinions on the best course of action, with some advocating for increasing oil and gas production, while others support accelerating the transition to high hydrocarbon prices. Some believe an all-of-the-above approach to energy sources is necessary.

To address global supply uncertainty, we need to increase clean energy production and reduce our dependence on hostile countries for our energy requirements, according to Abigail Ross Hopper, CEO and president of SEIA. She emphasized that policymakers have the solutions at their fingertips, including passing the ITC and investing in manufacturing.

"Our ability to deploy solar is crucial to America's energy independence, and the opportunity to do so has never been more evident and pressing," she stated.