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Solar Energy Industry Challenges and Opportunities in 2021

The solar energy industry has been booming for over a decade, driven by tax credits and growing concerns about sustainability and environmental protection. Several solar stocks rallied in 2020 and the election of President Biden brought more optimism to investors as they believe his administration will be favorable to renewable energy initiatives. Here are some key challenges the industry faces in 2021.

1. The pandemic has created economic uncertainty

The widespread shutdown of businesses due to the pandemic has created a cloudy economic picture in the near term and intense budget tightening. While federal tax credits can help lower upfront solar installation costs, many companies simply are not in a position to spend money on renovation. Even though adding solar panels to a commercial roof leads to significant energy savings, business survival is a higher priority. Businesses have shifted focus to meeting short term budget needs, as it’s still unclear how long the pandemic will last.

2. Most of the world still relies on fossil fuels

At the moment fossil fuels still dominate the global energy mix, despite reduced demand for oil during the pandemic. The EU has been a leader in renewable energy, as its electricity production reached 38 percent output in 2020, while the United States ticked up to 17 percent renewable energy. Meanwhile, the number of coal plants are steadily declining in the US and EU and being replaced by solar farms.

Utilities are adopting both smart technology and renewable energy as strategies to cut power generation costs and waste. Power plants can use solar to fill energy transmission gaps during peak hours, triggered by AI technology. IoT sensors deliver real-time analytics that can help utilities allocate a diverse mix of energy sources more efficiently.

3. Upfront installation costs limit residential solar

Surveys generally show Americans want solar but they are hesitant to invest in it. The upfront costs for installing residential solar panels is thousands of dollars and homeowners don’t see ROI for several years. Many homeowners simply don’t have the savings and don’t want to go deeper in debt to finance solar panels. But increasingly more opportunities are developing for people to purchase solar-generated energy from their utility at a discount, if it has invested in solar arrays.

The average cost of a residential solar system can run $5,000 on the low end to $12,000 on the high end. As much as most Americans want to go solar, many people simply cannot afford the expense and are waiting for prices to come down even more. Although prices for solar panels have drastically declined the past decade, they still haven’t come down fast enough for the average homeowner.

4. Governments need to act more quickly

While the United Nations has addressed climate change for years, global progress lags where solar development should be to fight greenhouse gases and climate change. Governments must accelerate their planning for solar, especially at the local level. The transformation to solar energy among utilities has been steady, but there’s still resistance in many places where interlocking deals allow traditional energy producers to dominate.

Africa is the most “solar-rich continent,” according to African Development Bank executive Daniel Schroth. Policy challenges have kept solar development minimal and uneven throughout Africa, as it currently only accounts for 1 percent of the continent’s energy mix.

Policies need to be more flexible to meet the world’s demands for a clean and safe environment. US federal agencies, for example, are not allowed to enter Power Purchase Agreements (PPAs) with terms longer than ten years.

5. Solar needs wider promotion

Despite the rapid evolution and growth of the solar industry, it still gets minimal coverage by mainstream media. Yet over three-fourths of Americans believe it’s more important to develop renewable energy sources such as solar than to rely on fossil fuels, according to Pew Research. The solar industry needs help in getting the word out for people to learn more about it so they can demand faster development.

More people would likely support solar development if they heard about it more on a daily basis. Big media, however, is heavily sponsored by oil-based companies. The solar industry can gain more visibility in the market through social media and sites that promote sustainability.