Newsletter: Solar’s got a supply crunch, too

Solar usually gets cheaper over time, but not right now.

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Hi Canaries, it’s Julian again. I’m back from my hands-on exploration of hydrokinetic energy in Cabo. I hope you enjoyed our first guest newsletter from Dan Finn-Foley last week. You may see a few more new faces popping up here from time to time.

As my flight home traced its way up the long, lonely spear of Baja California to L.A., I got a visual reminder of the difficulties that persist in shipping goods and materials. Here’s the view over Long Beach:

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Apologies for the hazy airplane shot, but I trust you can see the parking lot of container ships floating offshore. That traffic jam, plus a bunch of other factors, is driving scarcity and higher prices for the solar industry right now.

The solar industry bounced back from the Covid-19 pandemic and had its biggest year ever in 2020. But now a combination of gummed-up shipping, more expensive raw materials and geopolitical constraints is pushing up prices for solar. My colleague Emma Foehringer Merchant has the story.

The situation breaks from the familiar story of how growth in manufacturing and learning-by-doing continually push solar costs down. 

  • Solar module prices jumped 18 percent this year, according to a recent analysis by Roth Capital Partners.
  • This hurts the profitability of manufacturers but also scrambles developers and installers that need to get panels in the ground with tight deadlines and thin margins.

The grid battery industry is grappling with a similarly pervasive supply crunch, as I reported recently. But the core dynamics are different: In the case of batteries, top-tier manufacturing capacity hasn’t kept pace with tremendous growth in demand for batteries on the grid. 

Both cases could serve as fodder for federal investments in domestic manufacturing. Having more solar and battery production stateside would blunt the effects of constrained global shipping.

But there’s nothing here to suggest a long-term threat to solar’s ongoing cost declines. It’s just hard to tell when this challenging episode will end.

Julian Spector is an editor at Canary Media and reports on the rise of clean energy. He worked at Greentech Media for nearly five years, and before that he reported for CityLab at The Atlantic.