The state of the solar industry: What to know in 2022

It's no surprise that the American solar energy industry is expanding: solar prices remain low, and there's never been an easier time to reap the economic and environmental benefits of going solar. Solar capacity from installations in the U.S. grew 33 percent in Q3 2021 compared to Q3 2020, and we can expect continued rapid growth throughout 2022. However, the exact rate of solar growth in the U.S. will depend on a number of factors, including policy implementation and manufacturing trends. In this article, we'll examine the state of the solar industry and explain the policies and manufacturing practices that we're following in 2022.

There are a number of new policies on the table this year that could make it easier for you to go solar – and ultimately save money. Many of these policies display a trend of increasing federal support for solar energy, despite supply chain issues caused by the pandemic. We've been following some key solar policies throughout the start of 2022, including the Build Back Better Act, net metering 3.0, and the Section 201 tariffs.

Build Back Better Act

President Biden announced on September 8th, 2021 that solar energy has the potential to power 40 percent of the electric grid by 2035. Backed by the U.S. Department of Energy, Biden's forward-thinking announcement would mean more than doubling the amount of solar energy installations every year for the next four years, requiring significant federal support.

A major goal of the Biden administration has been to pass the Build Back Better Act, a bill that currently focuses on climate change, tax changes, and social spending. On January 12th, 2022, the Biden administration released a memo related to this bill, outlining further support for renewable energy goals including those for solar energy. Designed to spur jobs and growth in the industry, the memo includes specific points such as support towards solar projects on public land and growth of solar installations and jobs in rural areas (through the reduction of permitting times and expansion of financing options).

As it stands today, the Build Back Better Act would provide a number of benefits to the solar industry, including crucial tax credits for American solar manufacturers at every state of the production process – from materials, to components, to final assembly. It would also expand the solar tax credit for another 10 years, increase it to 30 percent, and make it refundable. Due to insufficient Senate support, it's likely that the bill will need to change in order to pass, but the portions related to the solar industry seem to still have strong support.

Net metering 3.0

States with net metering have made huge strides in making solar more affordable and more popular. Net metering allows you to earn credits for any excess solar electricity you send to the grid when your solar panel system generates more than you need. This year, California is planning to update its net metering policy to net metering 3.0, which could have some negative effects on the solar industry as a whole.

At the moment, the policy has been postponed indefinitely, but that doesn't mean it's off the table – as it currently stands, net metering 3.0 would cut the value of solar credits by up to 75 percent. Existing solar owners would be grandfathered into their original net metering policy, but new customers would face new monthly fees, increased payback periods, and lower payments for excess power.

Section 201 tariffs

In 2018, under Section 201 of the Trade Act of 1974, former President Donald Trump imposed a four-year tariff on solar imports with a goal of creating more jobs in the American solar industry. These tariffs were scheduled to end this year, but in February 2022, the Biden administration announced that they would be extending them. However, in order to help American installers, Biden reduced the list of impacted products, including an exemption for bifacial solar panels, which are used in many large-scale solar projects across the country.

Many problems from the pandemic affecting the solar industry have continued into 2022. Currently, solar manufacturing is largely dominated by Chinese companies, but the Biden administration aims to increase domestic manufacturing. We're watching a few key factors that could impact the solar industry, including supply chain constraints, ethical sourcing of materials, and expanded U.S. solar manufacturing.

Supply chain constraints

The solar energy industry was not spared from the same supply chain issues that have plagued most areas of the COVID-impacted American economy. From shipping constraints, to container shortages, to other issues affecting imports from China and other traditionally reliable manufacturing countries, the disrupted supply chain has led to significant delays in the production and manufacturing of solar products, which have continued into 2022. Because of these constraints, Wood Mackenzie has lowered the utility, commercial, and community solar outlooks by 33 percent, 4 percent, and 0.3 percent, respectively. The residential solar sector is still expected to increase by 4 percent (but this likely would've been higher without the constraints).

Ethical sourcing of materials

Recent events have shown that reliance on Chinese solar products can be problematic from an ethical standpoint. After reports surfaced that forced labor is being used in Chinese solar production facilities, President Biden joined a host of other world leaders in placing sanctions on goods imported from the Xinjiang region of the country, where most of the world's polysilicon (a material necessary in the production of photovoltaic cells) is produced. Since then, companies and industry organizations have taken steps to avoid further use of forced labor through a series of audits. The Solar Energy Industry Association (SEIA) 's pledge against forced labor highlights manufacturers' commitment to humane labor practices.

You can check that your service provider has ensured their solar equipment is ethically sourced simply by asking if they abide by SEIA's Solar Supply Chain Traceability Protocol. Not surprisingly, given these issues, some companies in the solar industry are looking for alternative locations for sourcing their installation equipment.

Expanding solar manufacturing in the U.S.

While there's still a large amount of international influence in the market, there are signs that American manufacturing will be able to meet rising demand. Currently, American solar manufacturers are able to meet roughly half of the demand for solar panels. First Solar, the largest American solar manufacturer, has plans to build a new factory that could increase the share of domestically produced solar sales to 60 percent.

Chinese solar panels are currently around 23 percent cheaper per unit than American panels, but research has shown that the key for American manufacturers to close this gap would be a matter of increasing the scale of operations. Significant political support in the U.S. towards this goal is a good indicator that manufacturing is on the rise.

If you'd like to add American-made solar components to your home or commercial property, you can find an extensive list of manufacturers in the U.S. from EnergySage. Using the EnergySage Marketplace, you can compare quotes from multiple suppliers and installers. All installers on the EnergySage Marketplace are pre-vetted so you can feel confident that your installer is experienced and trustworthy!