U.S. solar installations to contract this year on inflation -industry forecast

An array of solar panels is seen in the desert near Victorville, California, U.S. March 28, 2018. REUTERS/Lucy Nicholson/Files

March 10 (Reuters) - U.S. solar installations soared 19% to hit a record last year, but new capacity will slide in 2022 as project developers struggle with cost inflation and shipping delays, according to an industry forecast published on Thursday.

The subdued outlook comes as the industry is lobbying aggressively for Congress to extend subsidies that have been critical to its growth. If solar tax credits are not renewed, the report by energy research firm Wood Mackenzie and industry trade group Solar Energy Industries Association warned, the nation will not meet President Joe Biden's goal of decarbonizing the electricity sector by 2035.

Solar accounted for nearly half of all new U.S. generation capacity last year thanks to robust demand for clean energy from utilities, homeowners and businesses, according to the report.

In total, the industry installed 23.6 gigawatts of projects, of which nearly three quarters were large installations for utilities and other big customers. But that market segment is expected to decline 14% next year as developers cancel or delay projects due to higher costs and supply constraints stemming from the coronavirus pandemic.

The cost of solar projects has soared 18% in the last year, the report said, a major about-face for an industry that had experienced dramatic price declines over the last decade that have enabled it to compete with fossil-fuel-fired projects.

A 30% tax credit for solar projects, which the industry wants Congress to keep in place for 10 years, would expand the industry's capacity to 700 gigawatts by 2032, compared with 464 GW without those incentives, the report said.

Texas was the top state for new solar installations in 2021, followed by California, Florida, Virginia and Georgia.

Reporting by Nichola Groom; Editing by Leslie Adler

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