Once Cheap, Wind and Solar Prices Are Up 34%. What’s the Outlook?
Early last year, I thought the increase in wind and solar power prices was a blip. After all, one of the constants in my decade-plus covering energy was that wind and solar prices were in a near-perpetual state of decline.
Not anymore. The trend is unmistakable. Prices are rising—by a lot.
But the good news for the wind and solar industries is that their resources remain among the least expensive, largely because every major source of electricity is also experiencing a spike in costs. And the Inflation Reduction Act, passed in August, contains incentives for renewable energy manufacturers to build their products in the United States, which could set the stage for a new era of growth in the domestic supply of wind and solar components, and could help to reduce prices.
This week, we have some new data points from LevelTen Energy about the extent of the price increases. The Seattle company, which runs an online marketplace for buyers and sellers of renewable energy, found that the prices of solar contract offers in North America have risen 30 percent in the third quarter of 2022 compared to the third quarter of the prior year. Wind contract prices were up 37 percent in the same timeframe.
Gia Clark, senior director of developer services LevelTen, said the market is being driven by “off-the-charts demand” from companies and governments that want to buy long-term contracts for wind and solar. These contracts, called power purchase agreements, are at the heart of how wind and solar businesses work.
“Supply can’t keep up,” she said.
The key dollar figure from the report is a national average of $45.93 per megawatt-hour, which is a price that includes wind and solar contract offers, and is up 34 percent from the third quarter of last year.
In 2018, when LevelTen started releasing the report, this figure was less than $30.
What’s driving the price increases? I asked Sagar Chopra, a solar industry analyst for the research firm Wood Mackenzie.
He said a major reason is that solar panels, the largest outlay for most solar projects, have gotten much more expensive. At the beginning of this year, solar panels were selling for roughly 35 cents per watt on average. Now, that’s up to about 45 cents, with some projects getting into the 50-cent range, he said.
Chopra attributes this to a long list of factors, starting with U.S. policies, like the tariffs on imports of solar equipment from China, and a ban on panels that include silicon mined in a region of China associated with human rights abuses.
The Biden administration issued a two-year moratorium on solar tariffs this year, but the policy, initially adopted by former President Donald Trump, was around long enough to affect current prices.
The rise in solar panel prices is happening at the same time that almost every aspect of building renewable energy projects is getting more expensive, from labor to the costs of acquiring leases for land.
“Everything has gone up,” Chopra said.
Looking ahead, he expects solar project costs to level off and then hold steady for several years. The good news here is that the price increases would slow or stop, but the bad news is that the increases that have already happened aren’t going away, at least not for a while.
The most encouraging part of his outlook is what happens in about 2025, thanks largely to the Inflation Reduction Act and its incentives for companies to manufacture renewable energy parts in the United States.
Even before the bill passed, solar panel makers were increasing their manufacturing capacity in this country, partly in response to tariffs. One notable example is Qcells of South Korea, which has announced plans to build a second panel plant in Georgia, near the one that the company opened in 2019.
It will take several years for companies to respond to the Inflation Reduction Act and shift resources to do more manufacturing in the United States, Chopra said. Once that happens, he envisions an era in which the supply of panels will be much larger than it is today, which should lead to more competition between manufacturers and lower prices.
In the meantime, developers continue to build solar and wind projects at a rapid rate, despite the price increases. Some buyers of the electricity are doing so to meet corporate goals or government requirements, which means fluctuations in prices don’t have much of an effect on demand.
Also, it’s important to note that price increases for wind and solar are happening alongside a surge in costs for all major sources of electricity.
“All the conventional power resources, they’ve gone up across the board,” Chopra said.
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And all that volatility is ultimately helpful for wind and solar. It underscores the appeal of signing a long-term contract with a wind farm or solar array as a hedge against continuing chaos in pricing.
But still, it feels strange to see wind and solar price charts that are going anywhere other than down.
Other stories about the energy transition to take note of this week:
Long-Delayed Georgia Nuclear Plant Is Closer to Coming Online: The utility Georgia Power reported that engineers at Plant Vogtle have begun loading nuclear fuel into the first of two new reactors, a major step toward beginning to operate one of the first new nuclear generating units to be built in the United States in decades. The new reactors are more than five years behind schedule and their costs have risen to more than $30 billion, more than double initial projections, as Drew Kann and Michael E. Kanell report for The Atlanta Journal-Constitution. The new unit should begin producing electricity for the grid in early 2023, the company said. “With all that we’ve gone through in the last several years, to be at this point where we’re loading fuel is a huge accomplishment,” said Chris Womack, Georgia Power’s chairman and CEO.
Biden Administration to Hold First Lease Sale for Offshore Wind Development on West Coast: The Department of Interior said this week that it would hold the first-ever sale of offshore wind lease areas on the West Coast. A bidding process on Dec. 6 would determine which companies have the right to develop offshore wind farms in five areas off of the central and northern coasts of California, as Reuters reports. The areas, if developed as expected, have winds that could generate 4.5 gigawatts of energy, which is enough to meet the needs of about 1.5 million homes, the government said. The department has already leased many offshore areas on the East Coast, but is just getting started on the West Coast.
How to Spot and Avoid Solar Scammers: Consumer advocates have seen an uptick in rooftop solar scams in which companies make claims about financial savings and system performance that they don’t meet. One of the warning signs is an offer claiming to provide “free solar panels,” as Sarah Bowman reports for The Indianapolis Star. Advocates say the solution is to treat the purchase of solar panels like any other major expense and shop around for multiple quotes, and take a close look at whether a company has a history of unresolved customer complaints. For more on one of the companies with a troubling track record, Erica Thompson of The Columbus Dispatch reports that Ohio’s attorney general is suing Pink Energy, a North Carolina-based company that racked up hundreds of consumer complaints before going out of business.
Fears Grow Over a Lithium Mining Boom in Nevada: Across Nevada, there are more than 17,000 prospecting claims for lithium, a soft metal sometimes called “white gold” because of its scarcity and its importance as a component in EV batteries. The possibility of a mining boom is worrying to some environmental advocates and Indigenous groups, as Oliver Milman reports for The Guardian. “The clean energy transition cannot be built on dirty mining,” said Lauren Pagel, policy director of Earthworks, an environmental group.
Convenience Stores and Gas Stations Are Going Big on EV Charging: Pilot Company said this summer that it is working with General Motors to build 2,000 fast charging stations for electric vehicles at 500 of the company’s Pilot Flying J travel centers. This is one of the larger examples of convenience store companies adding EV chargers, as Brett Dworski reports for Utility Dive. “The EV driver community is growing, and those are current and future customers of ours,” said John Tully, vice president of strategy and business development for Pilot. “We wanted to be part of that solution.” Typical charging times would likely range from 15 minutes to 45 minutes, he said.
Inside Clean Energy is ICN’s weekly bulletin of news and analysis about the energy transition. Send news tips and questions to dan.gearino@insideclimatenews.org.
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<span>Dan Gearino covers the midwestern United States, part of ICN’s National Environment Reporting Network. His coverage deals with the business side of the clean-energy transition and he writes ICN’s <a href="https://insideclimatenews.org/tags/inside-clean-energy/">Inside Clean Energy</a> newsletter. He came to ICN in 2018 after a nine-year tenure at The Columbus Dispatch, where he covered the business of energy. Before that, he covered politics and business in Iowa and in New Hampshire. He grew up in Warren County, Iowa, just south of Des Moines, and lives in Columbus, Ohio.</span>
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