Hardware shortages may slow solar growth in 2016

Dive Brief:

The rush to install solar before the 30% federal investment tax credit (ITC) reverts to its pre-2006 10% levels at the end of 2016 has sparked a backlog of orders for modules and inverters that could slow solar growth, ECT reports.
The shortage is causing scheduling difficulties for electric cooperatives developing utility-scale and community solar projects with average delivery times set at six months from large manufacturers and distributors, and could be fully booked for 2016 by early December.
The National Association of Rural Electric Cooperatives urged members to place 2016 solar hardware orders before the year’s end.

Dive Insight:

The bottleneck in orders has birthed concern from 14 electric cooperatives participating in the Department of Energy-sponsored Solar Utility Network Deployment Acceleration (SUNDA) project, which aims to increase co-op deployment of solar.

If the U.S. Congress doesn't extend the ITC, it will drop to 10% for commercial solar investments and zero for residential solar investments in January 2017. Such a concern has pushed installers and customers to throw up solar panels before the tax credit sunsets, which is causing a backlog for orders and might depress growth in the solar sector.

For the co-ops and DOE program, the backlog could hurt the co-ops. The program developed a standardized development package of engineering designs, business models, financing and insurance options and optimized procurement. The goal: Cut engineering design costs 25%, consolidated procurement costs 10%, and insurance costs 25% and bring the total installed cost down to $1.60 per watt.

Some solar analysts believe reversion of the ITC will compromise the value proposition of utility scale solar, though many co-op projects would not be affected because they are not taxed. With aggressive parameters and a 30% ITC, modeling produced a levelized PPA price of about $43 per MWh.

But if the ITC isn't extended and reverts to its original 10% credit, the PPA price is increased only to about $54 per MWh, according to Mark Bolinger, a Lawrence Berkeley National Laboratory scientist.

Bolinger recently told Utility Dive that “there have been a lot of contracts signed at that level, and it is not clear to me demand will suddenly dry up if we go back to a 10% ITC in 2017.”