The Resiliency of the Solar Industry in 2022
Although the US solar market faced unexpected challenges over recent years, the industry hit record-breaking numbers in 2021. So what’s on the horizon for 2022?
Continued growth can certainly be anticipated in the new year. The solar industry is expected to persist upward in 2022. Some of the key factors to consider are supply chain developments, storage growth rates, and policy changes. Let’s break this down further.
Supply Chain Developments
Due to the pandemic, many industries have faced increased pricing due to supply shortages and the solar industry is certainly one of those affected. There are ongoing supply chain issues out of the Pacific Rim, both with regard to component shortages and port congestion of container vessels. Today’s U.S. solar industry heavily relies on imports. Inverters, modules cells, and finished modules have primarily been affected by these supply shortages. Import problems regarding the use of forced labor have only complicated matters. The supply chain has been one of the biggest obstacles the solar industry has faced this year, and it may not fully recover until 2024.
What can installers do to stay ahead of the curve in 2022?
The key to handling supply chain problems is to plan for these disruptions and order as far in advance as possible. Try to order up to 6 months in advance. Previously, most parts could be delivered in 6-8 weeks, but lead times for modules and inverters are now running 26 weeks plus. Achieving supply consistency can best be done by obtaining a reliable partner who supports you. The past strategy of spot-buying cheap products in bulk is not viable in this market.
All of the barriers mentioned make partnerships more crucial than ever. So where’s the good news? CED Greentech provides best-in-class options for material storage and inventory planning. CED Greentech has significant industry leverage and continues to import products in volume. We are deeply involved in the stationary storage market as well, and with more lithium-ion capacity coming online each quarter, we should experience improved battery supply just in time to support the increased attachment rates we are seeing in various segments of the US market.
Storage Growth Rates
As solar batteries and backup power gain continued momentum in the solar industry, battery storage attachment rates will likely accelerate substantially. This past year’s supply constraints undeniably held back market growth. Pre-planning will continue to be important here, and the situation should generally improve over the next year or so.
California’s NEM 3.0 is a “Waterloo moment” for the distributed generation solar industry. It is the most important policy debate in the U.S. today. An adverse ruling could impact the growth of residential solar in California by 35-50%. Concurrently in Florida, a local utility is also beginning the energy metering pushback process. This is unfortunately something we will see more often in the coming years. We will need to be ready to mobilize to help the industry respond forcefully.
What can be expected for products/technology developments?
Legacy solar manufacturers have consistently diversified their product portfolios over the years by adding new inverters, batteries, and EV charging stations to their product offering. With the popularity of solar, both from a consumer perspective, and from a capital markets perspective, some substantial new manufactures will be entering the game in the coming years. So what does this mean for 2022? There will be new entrants jumping into the market, leading to greater long-term product choices for contractors and homeowners. Some of today’s most prominent manufacturers in the solar industry will create alliances with third parties to increase their respective technical competencies, system-interconnectivity and resilience in an ever-changing market. This will encourage the deployment and integration of whole home energy management technologies as a way for manufacturers to protect their market positions as the evolution of the solar industry progresses. Along with all this will be ever-increasing module efficiency and format changes (60 cell, 66 cell, 72 cell) and cell types (back contact, heterojunction, half-cell, etc.). This pace of innovation is unlikely to slow as manufactures compete aggressively in a rapidly growing, highly attractive market.
It is likely that given the pace of change in the market, the need for technical and sales training will be increasing significantly for installers to stay competitive. CED Greentech will be active in bringing best-in-class training offerings to our customers.
Which areas of the solar industry are expected to grow the most in the new year?
The residential solar industry will continue to dominate in 2022. The process of underwriting residential loans is expeditious, making the in-home sales process efficient. In the commercial and community solar space, financiers are becoming much more comfortable with solar as an asset class as the technology matures and as legacy installed solar portfolios perform at a high level. Although growth in the commercial solar market has lagged that of residential over the last 2-3 years, it is likely the commercial markets will resume their growth trajectory as supply chain problems subside and the capital markets continue to search for secure yield.