Environment

U.S. solar on track for record year despite climbing costs - report

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

Sept 14 (Reuters) - New U.S. solar installations soared 45% in the second quarter and are on track for a record year despite a supply chain squeeze that has increased the cost of both residential and utility projects, a report published on Tuesday said.

The solar industry installed 5.7 gigawatts in the second quarter, or about enough capacity to power more than 1 million homes. It is on pace to put up 26.4 GW this year, about 8% more than the industry expected three months ago, according to the report by energy research firm Wood Mackenzie and solar trade group Solar Energy Industries Association.

The forecast reflects robust demand for solar from utilities and corporations seeking to meet greenhouse gas reduction goals as well as homeowners who want to generate their own clean power. Solar accounted for more than half of all new electricity generating capacity additions in the first half of the year, outpacing wind and natural gas.

Wood Mackenzie also raised its forecast for the next five years by 10%, it said.

But the study also flagged some major risks to the industry's dramatic growth, including supply chain constraints stemming from the coronavirus pandemic, tariffs on overseas-made panels and a ban on imports of solar materials from China's Xinjiang region over forced labor allegations.

That ban, imposed in June, "represents a significant, widespread downside risk to our near-term outlooks," the report said, as U.S. Customs and Border Patrol inquiries into detained equipment shipments could cause substantial project delays.

Solar's growth has benefited from rapidly declining costs that have made the technology competitive with power generated from fossil fuels. In the last year, however, prices on utility-scale projects, which make up the bulk of the market, have jumped as much as 12.5%.

A surge in costs for components and freight is responsible for the uptick, which the report said is delaying some projects but is unlikely to hurt long-term demand.

The passage of several solar subsidies by Congress, including an extension of its key tax credit, would offer meaningful support for the industry, it added.

However, it noted that negotiations around the proposed $3.5 trillion budget bill that would include the clean energy support provisions are "fraught with obstacles and possible delays."

Reporting by Nichola Groom; editing by Richard Pullin

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