U.S. solar installations soared in first quarter, supply squeeze weighs

Arrays of photovoltaic solar panels are seen at the Tenaska Imperial Solar Energy Center South in this aerial photo taken over El Centro, California, U.S., May 29, 2020. Picture taken with a drone. REUTERS/Bing Guan

June 15 (Reuters) - U.S. solar installations are on track for record-breaking growth over the next three years, a view that could be challenged by soaring project costs or accelerated by new subsidies championed by the Biden administration, according to an industry report released on Tuesday.

In the first quarter, solar installations soared 46% to more than 5 gigawatts, according to a report by energy research firm Wood Mackenzie and the industry trade group Solar Energy Industries Association. The United States is on track to install 24.4 GW this year, an increase of nearly 24% over last year.

The report reflects both robust demand from utilities and corporations seeking to meet greenhouse gas reduction goals and declining costs for the technology that has made it competitive with power generated from fossil fuels.

The sector's growth has also benefited from a long-standing generous federal tax credit for solar energy systems that the administration of President Joe Biden wants Congress to extend by a decade as part of its push to address climate change by investing in clean energy.

Projects for utilities and other big customers made up nearly three-quarters of the total in the first quarter. That segment of the market has a contracted pipeline of projects nearing 77 gigawatts.

The utility-scale sector would see dramatic gains from Biden's clean energy proposals, the report said. But it also faces major challenges from soaring raw material and shipping costs.

Builders of solar projects are also experiencing a tight labor market that could become more constrained if federal incentives are linked to new labor requirements around wages or other benefits as the Biden administration has proposed.

Solar project developers have tried to renegotiate existing contracts because of the price pressure, but so far have not been very successful because of the competitive market for solar, the report said.

The impact of the supply chain squeeze will be more evident when the industry reports its second-quarter results, SEIA President Abigail Ross Hopper said in an interview.

Reporting by Nichola Groom; Editing by Lincoln Feast.

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