Global Supply Chain Squeeze, Soaring Costs Threaten Solar Energy Boom

Global solar power developers are slowing down project installations because of a surge in costs for components, labour, and freight as the world economy bounces back from the coronavirus pandemic, according to industry executives and analysts interviewed by Reuters.

The situation suggests slower growth for the zero-emissions solar energy industry at times world governments are trying to ramp up their efforts to fight climate change and marks a reversal for the sector after a decade of falling costs.

It also reflects yet another industry shaken up by the supply chain bottlenecks that have developed in the recovery from the coronavirus health crisis, which has businesses from electronics manufacturers to home improvement retailers experiencing huge delays in shipping along with soaring costs.

Among the biggest headwinds for solar is a tripling in prices for steel, a key component in racks that hold solar panels, and polysilicon, the raw material used in panels.

Soaring shipping freight rates along with higher costs for fuel, copper and labour are also pinching project costs, company executives said.

Project developers in the United States, the No. 2 solar markets behind China, told Reuters they are struggling to price projects for 2022 given the lack of clarity on how long price spikes will last.

Solar engineering, procurement and construction firm Swinerton Renewable Energy said some of its customers have also put “soft holds” on projects slated to start later this year while they wait to see if prices trend down.

“We’ve just become accustomed to such a low-cost energy source,” said George Hershman, Swinerton’s president. “Like  anything, it’s hard to accept that you’re going to start to pay more.”

Contract prices for solar were already up 15% in the United States in the first quarter compared with last year due to higher interconnection and permitting costs, according to a quarterly index by LevelTen Energy.

U.S. panel manufacturer First Solar Inc (FSLR.O) told investors in April that congestion at American ports was holding up its module shipments from Asia.

And a U.S. maker of solar mounting systems, Array Technologies Inc (ARRY.O), withdrew its forecast for the year last month due to steel and freight costs.

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