Supply chain issues likely slowed 2021 solar development in Southeast US, may persist

Solar developers added almost 2.9 GW of capacity in Southeast US in 2021, a 20% increase to the region's cumulative total but below 2020's near-4-GW addition. Pandemic-related supply chain issues may have contributed to the slowdown and may affect further growth in 2022, an analyst said Jan. 21.

"Supply chain issues are dominating," said Aneesh Prabhu, S&P Global Ratings power sector analyst. "A combination of factors has led up to this, including commodity inflation in polysilicon, steel, and copper that will continue to keep solar costs elevated. ... As an example, polysilicon costs have about tripled over the last year, while prices for hot rolled steel have doubled. While freight costs have corrected modestly (by 20%), they are nowhere close to the pre-pandemic levels and are still about 400% elevated."

The addition of so much solar capacity with near-zero marginal costs would tend to diminish wholesale power prices, all other things being equal, but summer 2022 forwards have strengthened over the past year, according to Platts data.

As of Jan .20, the Into Southern July-August on-peak power forward package settled at about $48/MWh, up from an average of about $40.25/MWh for the period of January 2021 through January 19. In July and August 2021, Into Southern day-ahead on-peak power averaged $48.45/MWh.

Florida added the most solar capacity in 2021, followed by Virginia and Georgia, but North Carolina retained its lead in cumulative total solar capacity in the Southeast, with almost 5.5 GW, followed by Florida with almost 4.8 GW, according to S&P Global Market Intelligence's power plant database.

Four states added no solar capacity in 2021-- Kentucky, Louisiana, Mississippi and Tennessee. However, Tennessee has a 150-MW solar farm under construction that is slated to come online in February.

Under-construction capacity

Among the 10 Southeast states included in this analysis, eight have capacity under construction with projected completion dates in 2022 for a total of over 2.9 GW, but two states have no solar capacity slated to come online in 2022 -- Alabama and Kentucky.

With the current schedule, Georgia leads in planned capacity additions in 2022 with 867.4 MW, followed by Florida with 726.2 MW and North Carolina with 537.9 MW.

However, solar expansion may be delayed by continued supply chain issues, partly because of port delivery delays from China, Prabhu said.

"We expect [port issues] to improve by the second half and resolve in 2022 as US Customs clears up the backlog," Prabhu said. "We also expect new non-China module manufacturing capacity to come online but still expect polysilicon, steel and freight costs to drive the inflation narrative for solar panels."