Declining costs have been a key driving force behind solar adoption, but in 2021 prices jumped as broad economic challenges — including supply chain constraints — hit the industry.

A report by Wood Mackenzie and the Solar Energy Industries Association shows that prices increased as high as 18% for some segments of the solar industry last year.

It was the first year that prices rose across all three markets — residential, commercial and utility scale — since 2014, when Wood Mackenzie began tracking the data.

According to the report, supply chain bottlenecks were not the only factors that affected the sector. Trade actions and policy uncertainty had a significant impact on it.

The record-breaking 23.6 gigawatts installed by the solar industry in 2021 was a 19% rise over 2020. Texas had the highest solar additions in 2018, surpassing California for first time.

The residential sector saw an increase in installations of 30%, year-over-year, and reached a record high above 500,000.

Another record-breaking feat was achieved by the utility sector, which added 17 gigawatts to its capacity. However, the actual number of installations was lower than anticipated. The completion of a third of all utility-scale projects, which were scheduled to finish in the fourth quarter, was delayed for at least one quarter. Other than that, 13% were delayed or cancelled on projects that were originally scheduled for completion in the fourth quarter.

The industry was plagued by quarter-over-quarter, year-over–year price rises for most of the year.

Analysts believe it will get worse before the situation turns around.

Michelle Davis, Wood Mackenzie’s principal analyst and the lead author of this report, stated that 2022 will be the most affected by the supply chain restrictions of last year. This means 2022 installation capacity could shrink by 7.7% in comparison to 2021. But our projections indicate that the long-term gains will outweigh any short-term difficulties, especially if federal clean fuel incentives are adopted.

Davis stated that the Investment Tax Credit will allow for six times more installed solar capacity by 2032 if it is approved. ITC is an important solar subsidy, which was part of President Joe Biden’s Build back Better plan.

However, this report found that the U.S. won’t achieve Biden’s 2035 goal of decarbonization if they don’t take any policy actions.

It comes as energy security is being discussed again after a revival in recent months. Russia’s war on Ukraine. Opinions differ about the next move — some say oil and gas production needs to be ramped up, while others believe high hydrocarbon prices should accelerate the energy transition. Some others believe that in the area of energy, a combination of all three is necessary.

Abigail Ross Hopper, CEO of SEIA and President, stated that “in the face global supply uncertainty,” we need to increase clean energy production and reduce our dependence on hostile countries for our energy requirements. She said that policymakers “have the answers” and called for the passage of the ITC as well as investments in manufacturing.

She said that America’s energy independence depends on America’s ability to use solar power, which she stated.