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Dark days for US solar as hurdles pile up

While solar has enjoyed a dominant role in the US renewables space, supply chain and regulatory issues are posing a threat to future progress.

A myriad of supply chain challenges are creating significant barriers to progress for the US solar market, industry figures told a webinar hosted by advisory firm Edison Energy on April 27.

Median prices for solar rose, on average, “approximately 24 percent this quarter [than Q1 2021]”, according to Mary Kate Francis, Edison’s senior director of energy sourcing. That’s despite solar being “the dominant technology available”, she said, accounting for about 80 percent of the development-stage] projects, and the other 20 percent were wind.

“A combination of the federal tax incentives, which are declining more rapidly for wind and solar, as well as the stronger forecasted economics of solar, have been driving this trend,” Francis added, before forecasting darker days ahead as a backlog builds up.

“The majority of the projects in our Q1 inventory were expecting to come online by the end of 2024 or later,” she stated. “We saw a 90 percent increase over last quarter of projects expecting to come online by the end of 2025 or later.”

Much of the delays and high prices can be chalked up to post-pandemic supply chain issues, according to Daniel Rodriguez, director of origination at National Grid Renewables.

It’s really no surprise that the supply chain challenges that have hit the global economy since coming out of the pandemic have impacted the solar industry particularly hard as we look at sourcing raw materials that go into solar projects”, he said. “We’re also dealing with… labour shortages and shortages in any freight or transportation that’s required for these projects”.

A larger backlog of projects is in the PHM transmission network, which covers electricity across 13 states in the US. This comes from the additional factor that the system’s queue is in desperate need of reform, according to Lisa Richey, business development manager at Apex Clean Energy, a renewables developer recently acquired by Ares Management. 

“They just weren’t prepared [for the influx of projects]. There wasn’t enough staff,” she said. “The plan at the moment is that [PJM] will file in late May or June their new plan with the Federal Energy regulatory Commission. Assuming that plan is accepted, the current start date is supposed to be October 1. That may slip to November 1. It all depends on FERC’s approval.”

A regulatory storm brewing?

Another issue for solar developers is a recent decision by the US Department of Commerce to investigate the dodging of tariffs placed on solar panels coming from Chinese manufacturers through southeast Asia. Rodriguez noted that “potential tariffs range anywhere from 50 to 250 percent. So [enforcement would pose a] very, very significant increase to the costs of power supply for developers in the US. It’s estimated that anywhere between 80 and 90 percent of US panel supply is coming from [southeast Asia], so it’s really an issue that is threatening to choke off the majority of supply for US developers.”

The Department of Commerce is expected to release preliminary findings of its investigation at the end of the summer, with a final decision to be released at the beginning of 2023, though it could be delayed through the spring of that year. 

“We’ve got a pretty significant timeline in front of us and a period of uncertainty”, Rodriguez stated. “In a lot of ways [the damage to the solar market] has already been done just by the Department of Commerce investigating. There is also a potential here that the tariffs could be retroactively applied back to November of 2021, so it’s a significant risk for the industry as a whole. It’s just another complication on top of [supply chain and inflation issues]”.

Indeed, when the investigation was announced in March, industry body Solar Energy Information Administration said the move “directly contradicts” President Biden’s stated goal of creating a policy environment that encourages private investment.

To weather the storm, Rodriguez stressed that “a combination of working very closely with procurement and EPC teams, having a strategy around priority projects and knowing exactly where we want those new modules to come in and moving very decisively in a market that is in a state of panic right now [is key]. It is challenging. Priority projects for us means an ability to navigate the long list of risk factors.”

Richey, however, was less concerned about some of the issues affecting solar, preferring to look at grid management issues.

At some point, the solar industry will get through this tariff issue and we will be building solar farms again,” she reasoned. “In the near term, is wind the great alternative to hitch your goals to? Absolutely. But I will also say that were seeing market leaders focusing on 24/7 renewables. Wind continues to become more difficult to build because while the sun shines everywhere, the wind doesnt blow in quite as many places.”