Supply Chains, Inflation & The Cost of Solar

You don’t even have to follow the news to know about the various economic troubles we’re currently facing. All you have to do is go to the grocery store to experience both the inflation and supply chain issues plaguing our economy in the form of rising food prices and empty shelves.

Now, truth be told, some of the bad economic news hasn’t been all that bad if we narrow our focus to just the solar industry.

You’ve probably noticed that prices at the gas pump have gone through the roof, more than tripling in the last 18 months. More generally, this recent bout of inflation has hit the fossil fuel industry particularly hard. Over the last 12 months:

  • The cost of crude oil has more than doubled.

  • Natural gas prices have shot up 150%.

  • Coal prices have increased a whopping four time

Rising fossil fuel prices, of course, mean power plants that generate electricity by burning fossil fuels will ultimately have to raise their prices too.

And that means that, other things being equal, solar power will become even more attractive as even more homeowners are able to significantly decrease their energy costs by ditching their utility company and generating their own power from the sun’s rays. But “other things” will only remain “equal” if the cost of solar energy doesn’t also wind up increasing too much.

Sadly however, no industry is immune to the general economic woes we’re currently burdened with and solar power is no exception.

  • Supply chain problems have caused shipping costs to increase for solar panels as well as the components necessary for installing them.

  • The cost of labor has also increased.

  • The price of steel—a major component in both the racking used to hold up solar panels as well as manufacturing them—has tripled.

  • Copper prices have also increased, translating into more expensive wiring.

Moreover, there have been other recent economic developments that haven’t been in the news as much because they uniquely effect the solar industry.

In June, concerns about slave labor caused the U.S. to ban all imports of silica, the key component of solar panels, from one of the world’s largest producers, Chinese-based Hoshine Silicon Industry. As a result, hundreds of megawatts of panels have been seized at the border, increasing the general supply chain issues the solar industry was already facing along with everyone else.

There’s also talk of imposing tariffs on solar panels that would affect 80% of the current U.S. market, causing more industry-wide price increases. But the news isn’t all bad.

Fortunately, the inflation hitting the solar industry isn’t anywhere close to the doubling and tripling of fossil fuel prices we’re seeing. In fact, the average per-watt cost of solar power has only gone up around 9.8% in the last year. 

So long as the cost increases the solar industry is experiencing are substantially lower than those hitting fossil fuels, solar power should provide a means for even more Americans to decrease the amount of money they spend on energy.

In these uncertain times, however, whether that will continue to be the case is ultimately anyone’s guess. 

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