Solar power has seen tremendous growth in recent years as costs have declined dramatically. However, the solar industry faces some emerging threats that could impact the future trajectory of photovoltaics. Understanding these challenges is key for policymakers, businesses, and consumers when considering investments and adoption of solar technology.
Declining Government Subsidies
Reductions in Tax Credits and Rebate Programs
Many governments around the world offer generous tax credits, rebates, and other incentives to spur the adoption of rooftop and utility-scale solar installations. However, some key solar markets are now looking to scale back support mechanisms as costs have come down.
In the United States, the federal investment tax credit (ITC), which allows solar customers to deduct 30% of installation costs from their taxes, is set to drop to 26% in 2020 and 22% in 2021 before phasing out completely for residential customers. Loss of the 30% credit could result in a roughly 15% drop in US solar expansion.
Pressures on Policymakers to Reduce Support
With solar becoming an increasingly cost-competitive electricity source, lobbyists and politicians are calling for reductions in subsidies and credits to improve budget conditions. The success in driving down costs is now working against the solar industry.
Emergence of Ultra-Low Cost Solar Imports
Flood of Super Cheap Modules from Asia
Chinese companies have ramped up production capacity of solar modules and panels to meet growing global demand. The result is an oversupplied market with rock-bottom prices. Top-tier solar panels are selling for 25-30 cents per watt. This is driving many Western solar manufacturers out of business, unable to compete.
Increased Investments in Automation
Solar manufacturing leaders are aggressively investing in automation and advanced production techniques to further reduce labor requirements. This enables efficiency improvements and cost reductions exceeding the expectations of policymakers and forecasters. If solar gets too cheap it could destabilize policy support.
Grid Management and Infrastructure Challenges
Costs of Storage, Transmission, and Reliability
While panel and module costs have decreased dramatically, the expenses for ancillary infrastructure such as batteries, inverters, transformers, and transmission lines are lagging. This balance of system costs now represents over half the price of installed solar capacity. Grid stability and solar development could be constrained without adequate supporting infrastructure.
Curtailment and Overgeneration Risks
At high levels of renewable power generation, some grid operators are being forced to curtail solar production to avoid overloading networks. This can rob power plant owners of vital revenue. Smarter grids and better demand forecasting are critical to maximizing utilization rates as solar penetration increases.
The next 5 years look bright for solar as panel efficiencies continue to climb while costs keep falling. However, emerging economic threats and grid integration challenges must be actively managed to keep solar energy affordable and accessible. Creative policy solutions combined with new technologies such as integrated storage and smart inverters can enable solar to sustain reliable and cost-effective growth into the future. With proactive planning and investment, the supercharging of solar power will benefit all.