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US renewable generation supply chain challenges toughest on record: execs

13 December 2021 Keiron Greenhalgh

Acute supply chain challenges are hurting US renewable generation construction projects and ambitions more than ever before, according to industry executives, including when it comes to sourcing equipment and shipping delays.

The difficulties come after installation records were set—the US added a record 29.2 GW of renewable capacity in 2020 and will add even more in 2021—and ambitions raised, with the Biden administration hoping to create a net-zero emissions US generation sector by 2035.

And on top of that, equipment costs are rising. IHS Markit found that PV systems costs increased by 4% in 2021 compared with 2020. This comes as solar PV installations are set to experience double-digit growth in 2021, IHS Markit Clean Energy Technology analysts forecast.

The supply chain challenges are "overwhelming," Art Fletcher, executive vice president, construction, Invenergy, told an American Clean Power Association (ACP) event in Salt Lake City 8 December, adding that obtaining equipment had been a "very significant strain" on the Chicago-based generation developer's resources, with difficulties reaching "an all-new level."

Invenergy currently has 12 wind, solar, and energy storage projects under construction in the US, plus two in Mexico, according to the company's website. It has developed or is in the middle of developing over 29 GW of generation capacity globally.

Fletcher said he had always felt players in the renewable energy industry were nimble, but the current supply chain situation has required that attribute more than ever before.

Shipping costs rose from $4,000 a container to as much as $25,000 in the summer of 2021, he said, which led to Invenergy and its rivals scrambling to assess their options. Costs have decreased since the summer's peak, but will never return to where they were previously, he added.

The supply chain issues, especially those influenced by trade policy, meant developers had to build more flexibility into their ambitions and projects, said Fletcher. The ongoing uncertainty is the renewable energy industry's worst enemy, he said, especially in the solar sector.

Numerous developers have racks without solar panels at the moment, Fletcher said rivals had told him. There is a need for companies that are currently building solar panels and other equipment beyond US borders to invest long-term in American manufacturing facilities, AES Senior Vice President, Procurement, Josh Skogen told the same panel.

Solar cell tariff extension

A day after the conference session took place, a US trade panel concurred. The US International Trade Commission (ITC) recommended the extension of tariffs on crystalline silicon photovoltaic cells. The domestic solar industry, the US ITC said, is making a "positive adjustment" to competition, but it "continues to be necessary to prevent or remedy serious injury" from imports in the field.

US crystalline silicon solar module output soared 371.8% between 2018 and 2020, to 2.2 GW, according to the US ITC. However, the industry's needs are a magnitude larger. In 2020, the US installed 19.2 GW of solar capacity, according to the Solar Energy Industries Association.

Whether the protection is extended beyond 7 February—four years after President Donald Trump introduced the tariffs—is up to President Joe Biden. The measures introduced under Trump were upheld in September by the World Trade Organization, which held an investigation of the tariffs at the behest of China, the world's largest PV cell producer and exporter.

But the ITC decision didn't please the largest US solar industry trade association, the Solar Energy Industries Association (SEIA). On 8 December, Abigail Ross Hopper, SEIA CEO remarked that growing American solar manufacturing is critical to the country's long-term clean energy future, but years of tariffs have not moved the needle nearly enough to justify the USITC's recommendation.

"President Biden has set a bold vision for the US to lead the world on clean energy. Extending these tariffs will hold us back from realizing that vision," she added.

"We're urging [Biden] to take a different approach from his predecessor and enact real industrial policy to grow US manufacturing. Senator [Jon] Ossoff's amendment in the Build Back Better Act will be the first investment our nation has made to truly incentivize domestic solar production after years of punitive import duties on US companies," Ross Hopper said. "It's time to let these ineffective tariffs end and start a new era of American clean energy leadership."

The Build Back Better Act is still under debate in the Senate. Ossoff's amendment will provide tax credits for American polysilicon, solar cell, tracker, and inverter manufacturers.

Decisions on solar tariffs were always likely to be tough needles for Biden to thread, with competing vested interests facing off against a tableau of increased demand and jobs promises. Fletcher's employer Invenergy was one of a number of big generation developers on the opposite side to the US government in the waning days of the Trump administration in a case at the US Court of International Trade that saw a ruling that namechecked "Whack-a-Mole."

Sourcing difficulties ratcheted up a notch in June when the Biden administration placed extensive import and export restrictions on producers of polysilicon products in the Xinjiang region of China on 24 June, saying there is compelling evidence they are using forced labor involving the region's ethnic Uyghur population. The affected firms were Hoshine Silicon Industry, Daqo New Energy, East Hope Nonferrous Metals, GCL New Energy Material Technology, and XPCC.

The SEIA supported those tariffs though. The SEIA has been calling on its members since October 2020 to stop sourcing poly­silicon from the Xinjiang region and to use traceability protocols in their supply chains.

Fighting climate change

Alongside the Build Back Better Act that has garnered SEIA support, the White House staked its position on the fight against climate change on a second piece of signature legislation: a $1.2 trillion bipartisan infrastructure measure.

The bipartisan bill contains $73 billion for modernizing the nation's grid and could prove to be a boon for wind and battery projects, according to IHS Markit analysts.

Vice President Kamala Harris touted the infrastructure bill's benefits to ACP members in address to the Salt Lake City conference this week.

"This law will make the most significant investment in infrastructure in a generation, and the largest investment in transmission infrastructure in American history. And it will help you deliver clean, affordable, and reliable energy to families and communities across our nation," Harris told attendees in a recorded message. "And it will help ensure our electric vehicles are powered by clean energy and improve people's health.

"A clean energy future is not just possible, it is vital. Our nation has set the goal of making the electric sector carbon-free by 2035 and achieving net-zero emissions no later than 2050. We know that in order to meet our climate goals we must double the pace of clean energy deployment, and then double it again," added Harris.

Those climate goals include halving the US economy's GHG emissions by 2030 compared with 2005, revamping the US Department of Energy's mission, tighter methane rules for oil and natural gas production, and challenging US automakers to make half of all light-duty vehicles electric by 2030.

But the White House in a June report on supply chains acknowledged that China refines 60% of the world's lithium and 80% of the world's cobalt—two core inputs to high-capacity batteries as well as solar and wind industry equipment. The International Energy Agency believes a transformation of the supply chain for minerals is a critical vulnerability for US and European energy transition ambitions.

Reshoring

The biggest US automaker, GM, plans to sell only electric light-duty vehicles by 2035. But GM is facing a supply chain issue in the battery sector. As a result, it inked a 9 December partnership with MP Materials to develop a fully integrated US supply chain for rare earth magnets used in EV batteries.

IHS Markit Vice Chairman Dan Yergin told ACP CEO Heather Zichal during the trade body's conference that reshoring—the return of manufacturing and services (in this case to the US) that may have been offshored in past decades as costs were cut—and where industry sources equipment are becoming and will become more important in the clean technology space, especially with the Biden administration's zero-emissions power generation sector goal for 2035 and 2050 net-zero target.

Copper is a really good example of the problems sourcing the requirements of the energy transition poses, especially for siting a mine, said Yergin. "There have to be materials if the growth is to come," he said.

In the solar sector, copper is used in heat exchangers, wiring, and cabling. Copper is also used in the cabling, wiring, turbine, transformers, and turbine transformers of a wind farm.

Should the ramping up of energy transition equipment manufacturing meet demand requirements via reshoring, it could be akin to how Japanese automakers arrived in the US in the 1980s and 1990s, Raymond Long, senior vice president, external affairs, at US generation developer and operator Clearway Energy, told attendees of the ACP conference.

The first Japanese automaker to build a car in the US was Honda, according to data from IHS Markit's Carfax unit. Japanese companies set up auto plants in the US in the 1980s and 1990s to beat tariffs. As the third decade of the third millennium starts, one third of US-built cars are Japanese brands, the data show.

With the supply chain and storm-induced chaos, the US power sector has been on a rollercoaster over the past year, IHS Markit Managing Director, Global Power and Renewables Xizhou Zhou told the ACP conference 7 December, and he questioned whether this is a sign of things to come or an ingrained characteristic of the energy transition.

Posted 13 December 2021 by Keiron Greenhalgh, Senior Editor

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