Tech Insights

Solar Struggles Amid Changes in Demand, Policies

April 15, 2024 by Shannon Cuthrell

Numerous issues, including fierce competition, an oversupply of modules, and changes in net metering agreements, challenge solar equipment manufacturers and technology developers. 

Solar companies worldwide are making significant changes in manufacturing, operations, and employment to adapt to a rapidly changing market. Problems with supply and demand, quality, and regulations have prompted solar manufacturers to close plants, scale back production, cut costs, and institute layoffs. 

These moves come as solar module capacity has drastically exceeded the anticipated demand for solar panels, partly due to policies incentivizing manufacturing across North America and Europe. The International Energy Agency called the phenomenon a “supply glut,” leading to the stockpiling of Chinese modules imported into the U.S. and Europe. This effect slashed module spot prices in half last year. 

 

Solar farm engineer.

Solar farm engineer. Image used courtesy of Adobe Stock

 

Power and Revenue Loss from Equipment Faults 

Equipment failures challenge the industry’s recent growth. According to a Raptor Maps analysis of more than 125 GW of PV systems, equipment faults and other underperformance issues grew by 178% since 2019 and 43% in the last year alone, which translates to an average of $4.6 billion in revenue losses annually ($4,696 per MW). Larger sites topping 100 MW were hit even harder at $5,000 per MW. Underperformance from equipment faults and related issues increased from 3.13% in 2022 to 4.47% last year. 

Raptor cited increasing component quality problems, with at least one failure plaguing nearly one-third of products’ bills of materials. Labor constraints are also tied to growing quality and operational issues. Raptor also mentioned operational inefficiencies like time-consuming visual inspections and preventative maintenance. 

Raptor emphasized the importance of proactive performance and asset health measurement. 

Tracker issues nearly doubled from 2022 to 2023, indicating a broader trend of challenges in system performance. System-level faults, including inverter and combiner defects and string outages, remain the largest drivers of power loss. At the module level, thin-film modules incurred less losses than monocrystalline or polycrystalline systems. 

 

California Net Metering Changes for Solar

In residential solar, sales were supercharged by consumers looking to take advantage of tax credits in the Inflation Reduction Act. States like California upped the ante with additional sales incentives

However, recent changes to solar billing have tanked solar growth in California, the nation’s top solar producer with 32 GW of utility- and small-scale capacity. The state instituted substantial cuts to solar export rates, meaning customers with solar installations get lower compensation when selling excess electricity back to the grid. The California Public Utilities Commission’s Net Energy Metering (NEM) 3.0 policy slashed the value of solar energy shared back to the grid by homes and businesses by 75%. 

 

Utility interconnection data charts falling solar sales in California from 2022 through the end of 2023

Utility interconnection data charts falling solar sales in California from 2022 through the end of 2023. Image used courtesy of the California Solar and Storage Association (Slide 8)

 

According to a California Solar and Storage Association survey, 17,000 jobs were lost in 2023 because of the net metering changes—22% of all California solar jobs. More than half of residential solar and storage contractors expect more layoffs. The industry group also said rooftop solar sales were down 66% to 83% year over year following NEM 3.0 implementation.

 

Solar Industry Job Cuts

SolarEdge announced in January it would lay off around 900 employees—nearly one-fifth of its global workforce—to reduce operating costs. Over half of the affected employees hailed from the company’s manufacturing facilities. The move came as it discontinued production in Mexico, scaled back its China operations, and stopped working on e-mobility activities.

LONGi, one of the world’s largest solar component manufacturers, reportedly planned to cut 30% of its 80,000-person workforce. However, the company later said it only intended to cut 5% due to a competitive environment and the need to boost organizational efficiency. 

Software providers are also announcing layoffs. Aurora Solar, which markets software aiding in solar design and sales, filed two notices to authorities in New York and California disclosing plans to cut 129 jobs—about 20% of its workforce—due to economic reasons. Most of those layoffs (114) occurred in California, where solar firms are seeing the effects of a new billing structure reducing compensation for consumers selling excess solar energy back to utilities.