A couple of things worth noting today that reflects our commodity index in today's daily report but also looks at some of the results below. The linked solar headline is confirmation of one of the topics that we have probably worn out over the last few months, which is that renewable power ambitions have not taken into account real limitations in the rate of equipment supply, especially solar modules. New forecasts suggest that the US expected installations of solar capacity could come in 25% short in 2022, which has implications for energy transition ambition, but also overall power supply as the shortfall will have to be made up elsewhere. It is not just a function of solar module availability but also solar module costs, because of some of the material cost inflation illustrated in exhibit 1 (see today's daily report). These shortfalls will have implications for natural gas demand in the US if it needs to fill the gap, and we have already noted that we think US natural gas prices could spike in 2022, much higher than we saw in 2021.
We struggle with both of the charts below, as we see the rate of potential renewable additions as far too optimistic, not because of a lack of capital, but because of a lack of materials and the knock on effect that this could have on capital if project costs increase meaningfully or if timelines extend. The solar expansions planned for Texas for example all require solar modules and there is simply not enough capacity to make these modules and in many cases not enough raw materials. All of these projects are not planned for the same year, but regardless, when you add the Texas plans to plans all over the World, you have an annual rate of addition that the equipment makers will not be able to meet. Today, many of the projects are in the planning and financing stage and the installers have yet to go looking for equipment – when they do, they may have to rethink.