Social and regulatory pressures have boosted the interest and support for renewable energy expansion in the United States. Last year, the federal government instituted the Inflation Reduction Act (IRA), committing $369 billion to climate and clean-energy investments, as well as additional funding toward federal loans for energy projects. Thanks in part to these initiatives — and many others on the federal and local levels — the future is sunny for the solar industry.
With new business opportunities comes an increased need to secure ventures with proper insurance coverage — and in an industry like solar, those needs are ever-evolving. For retail agents and brokers working with clients in the solar industry, here are the trends to keep an eye on during the remainder of 2023 and the years ahead.
1. Solar Installations Expected to Triple by 2028
In an effort to decarbonize the electrical grid, the U.S. has a goal to install an average of 40 gigawatts direct current (GWdc) of solar energy each year through 2025, then increase that goal to 100 GWdc per year by the end of the decade. The solar industry is rising to this challenge. Based on projections from the Solar Energy Industries Association (SEIA), the U.S. solar industry is predicted to grow significantly, making it the forerunner in clean energy. In the first two quarters of 2023 alone, the industry has installed a record-breaking 32 GWdc of solar capacity — an increase of 53% from the previous year.
Over the next five years, U.S. solar installations are expected to triple, taking us from the current aggregate total of 153 GWdc to 365 GWdc.
2. Component Costs Remain in Flux
Over the past few years, solar equipment costs have risen, thanks to supply chain disruptions and increases in both raw materials and shipping costs. Those costs have started to ease, but that doesn’t necessarily translate to immediate decreases in component costs. There are a number of factors at play that will continue to impact costs. For instance:
- There is limited access to land and grid connections, and it currently takes five years to connect a new solar farm to the electric grid. These capacity limits add strain to development efforts, driving up network upgrade costs and delaying project timelines.
- Skilled worker shortages are driving up construction labor costs.
- Prices have fallen for polysilicon, an important raw material used in solar panel production. This has led to a decrease in photovoltaic (PV) module prices. However, the drop in PV module prices is likely to be offset by manufacturers hoping to recover from previous losses.
3. Emphasis on U.S.-Based Manufacturing Continues
Supply chain disruptions and national security concerns have prompted the U.S. to reduce its dependence on imported fuel and bring solar production closer to home. In addition, clean-energy incentives (like the Inflation Reduction Act) are motivating American companies to invest heavily in expanding our domestic solar manufacturing capacity. This will result not only in new factories and facilities but also create an abundance of jobs.
4. Rising Electricity Prices Boost the Appeal of Solar Energy
Although inflation is falling, electricity prices aren’t. The U.S. Energy Information Administration (EIA) predicts that prices in the U.S. will increase by 4% this year, following an 11% increase in 2022. Although decreases in the wholesale price of electricity may help temper residential prices in the future, current pricing hikes may make solar energy more attractive to both residential and commercial consumers.
Solar panel systems can reduce or even eliminate electricity bills for homeowners and businesses, offering long-term energy cost savings. While solar panels do require an upfront investment, they aren’t prone to the same pricing volatility as electricity provided by utility companies.
5. Supply Chain Disruptions Are Easing
According to SEIA and Wood Mackenzie, we’re still experiencing supply chain constraints, but some of that is easing, and we’re seeing imported solar module shipments finally move through shipping ports. Importers are catching up with the restrictions imposed by the Uyghur Forced Labor Prevention Act (UFLPA) and bringing their operations into compliance. This has allowed a greater volume of detained modules to enter ports and has sped up the process of new shipments going through customs. As more suppliers fall in line with the UFLPA guidelines, we can expect to see more products flowing more quickly through the supply chain.
6. Federal Programs and Policies Influence Solar Adoption
There are a number of U.S. policies that will continue to encourage the solar industry and impact the clean energy sector. Here are just a few:
- Solar for All: This past summer, the EPA announced a $7 billion grant competition to expand solar programs into low-income communities.
- Federal Solar Tax Credits for businesses: The federal government offers either the Investment Tax Credit (ITC) or Production Tax Credit (PTC) to nonprofits or businesses that purchase solar energy systems.
- State-specific policies: California’s Community Solar program, Illinois’ recent law limiting counties’ abilities to regulate solar energy facilities, and New Jersey’s solar incentive program all support and promote solar energy adoption and expansion. Many other states have enacted their own local policies and programs as well.
7. Promising New Technologies on the Horizon
New technologies will continue to offer innovative ways for solar energy expansion. Agrivoltaics is just one example, and it’s projected to grow to a $9.3 billion market within the next decade, with an appeal to both the solar industry and farmers.
Agrivoltaics, also known as agrivoltaic systems or solar farming, involves installing solar panels or PV arrays alongside crops or other agricultural practices. Plants provide a cooling effect to the solar panels, increasing their energy output by up to 10%. In addition, the electricity generated from the panels can power farms and reduce water usage. Farmers can sell excess energy to be stored in battery banks or shared with the grid for broader consumption.
Although these kinds of emerging technologies may not be ready for broad-scale use, they signal advancements toward meeting our goals of expanding our solar-power footprint and meeting our climate goals.
Powerful Coverage for Solar Power Companies
The solar industry is poised for growth. And while the opportunities are exciting, they aren’t without their risks, like theft, breakdown, damage from extreme weather, and more.
“You have to really understand the intricacies of the solar industry and solar operations to create proper insurance packages,” says Doug Mangus, Managing Director of Jencap’s Environmental Division. In rapidly evolving industries like solar, where technologies are advancing in leaps and bounds, it can be difficult to adequately account for risk.
Mangus goes on to explain, “There are so many people involved in a solar operation. It can be tricky, from an underwriting perspective, to determine ‘who’ solar energy is. Is it the team that designs the solar power system, or the team that installs the system, or the team responsible for maintaining and repairing it? What about the team that installs the battery banks or EV charger? Or the team that connects projects to the power grid?”
In reality, it’s all of these groups. “From end to end, solar production is made up of a microcosm of solar consultants, contractors, and employees,” says Mangus. “Each has to be considered in light of their own unique set of challenges and risks.”
Jencap’s environmental brokers stay ahead of solar energy and other leading environmental trends. We offer expertise in solar operations and provide solutions for any solar industry risk — from commercial general liability and environmental liability to professional liability and workers’ compensation, and everything in between. Contact us for a consultation and quote today.