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US solar PV capacity to continue to rise; likewise supply chain fears
Solar PV installations in the US are expected to continue increasing through 2023, according to the latest government forecasts, building on the last decade's stratospheric rise. But the projections are inching lower, and whether even adjusted projections will be met is becoming more uncertain as supply chain fears grow.
In its latest Short-Term Energy Outlook (STEO), issued 12 April, the US Energy Information Administration (EIA) forecast utility-scale solar capacity additions would total 20 GW in 2022 and 24 GW for 2023. EIA said it expects solar additions to account for nearly half of new electric generating capacity in 2022. Utility-scale solar capacity rose by 13 GW in 2021, according to the monthly outlook.
Still, EIA's latest solar capacity projections in the April edition of STEO are 1.6% lower than they were a month earlier for both 2022 and 2023. The agency in March said 82.1 GW and 106.4 GW of solar capacity would be operational by the end of 2022 and 2023, respectively, but now expects those totals to be 80.8 GW and 104.8 GW.
EIA, the Department of Energy's statistics unit, also expects what it terms "small-scale solar capacity," or systems of less than 1 MW, will increase by 4 GW in 2022, and by almost 6 GW in 2023. In 2021, small-scale solar increased by 5 GW to an overall total of 33 GW, it said.
Solar's capacity additions over the next couple of years will be bigger than wind's though, according to EIA. The agency estimates the US added 14 GW of new wind capacity in 2021, but only expects 10 GW of new wind capacity will come online in 2022 and just 4 GW in 2023. The pace of growth is set to be squeezed because a tax credit is currently set to expire at the end of 2022 and much-publicized offshore wind auctions will not net significant installations for some years.
The latest solar capacity additions come at the end of a run of unprecedented success. The ramping up of installations was particularly steep as the last decade ended and this one began (see graph below).
Source: S&P Global Commodity Insights
It has been part of a worldwide installation boom. Solar overtook wind globally for the first time in 2021 in its share of renewable capacity. The International Renewable Energy Agency (IRENA) Renewable Capacity Statistics, released 11 April, show solar energy accounted for 28% of the world's renewable power generation capacity, compared with wind's 27%. A year earlier, the two were tied on 26% each.
IRENA data show some 133 GW of solar capacity was added in 2021, increasing overall operational capacity by 19%, while wind installations rose 93 GW or 13%. The share of renewable energy as a whole in terms of total global generation capacity expansions increased to 81% in 2021 from 79% in 2020.
The upcoming solar additions won't just be in flat, wide-open parts of the countryside, according to a new study. The top nine US cities for solar power combined now have more capacity installed than the entire country did 10 years ago, according to a study released 18 April by Environment America Research & Policy Center and Frontier Group.
Installing this renewable capacity takes up large amounts of land and the output remains intermittent, so the industry is adapting, according to observers.
Hybrid projects on the way
Some 100 GW of hybrid, co-located renewable capacity will be installed in the US between 2021 and 2030, according to S&P Global Commodity Insights. Analysts at the company expect 67% of that total to be PV and battery storage (known as hybrid units) and a further 14% to be wind, PV, and battery storage. The heaviest uptake will be in the Midwest and Southwest states. Globally, S&P Global expects 560 GW of hybrid renewable capacity to be built by 2030.
The shift is already underway in the US, trade association data show. Developers placed 2.238 GW of US hybrid project capacity online in the fourth quarter of 2021, bringing total 2021 installations to 4.967 GW, according to the American Clean Power Association (ACP), which said the 2021 figure was a nearly 14-fold increase from 2020's 357 MW.
ACP said solar and storage projects dominated US hybrid installations in recent months. In Q4, some 1.858 GW of solar and storage projects came online as part of an annual total of 4.478 GW. Over 5.9 GW of solar and storage capacity was operational in the US at the end of 2021, ACP data show. Meantime, 380 MW of wind, solar, and storage capacity came online in Q4.
New systems are coming online every week. California's Pacific Gas and Electric (PG&E) said 18 April that the 182.5-MW Tesla Megapack battery energy storage system-known as the Elkhorn Battery-at its Moss Landing electric substation in Monterey County had been commissioned. PG&E said it has contracts for battery energy storage systems (BESS) topping 3.3 GW of capacity to be deployed through 2024.
The PG&E facility is located close by another battery storage facility that made headlines for reasons its backers were unhappy with in September. Vistra Energy's 300-MW Moss Landing lithium-ion battery facility in California—touted as part of the world's largest BESS system—shut after smoke triggered sprinkler systems. Vistra expects to bring all of the facility back online in the second quarter of 2022, before the peak California cooling season starts. In January, Vistra inked a deal with PG&E to build a 350-MW addition at the site, taking Moss Landing's overall capacity to 750 MW by June 2023.
Battery and hybrid facilities are coming up against other problems though, issues that echo wider supply chain worries for renewable energy project developers, the energy transition, and global leaders' green ambitions.
US BESS provider Ameresco said 10 April that projects for PG&E's neighboring utility Southern California Edison were running into major hurdles. Due to COVID-19 lockdowns in several regions in China, Ameresco's battery supplier won't be able deliver the batteries on time, the company said. Also, newly implemented Chinese transportation safety policies may cause delays in the shipment of a portion of the batteries, it added.
As a result, Ameresco said it was issuing a force majeure declaration on its contract with Southern California Edison for the project, avoiding penalties for failing to meet deadlines set under its agreement with the utility, although the developer still expects to deliver the system eventually.
Ameresco's problems with importing the batteries for the Southern California Edison exemplify issues facing US developers across the energy transition arena, but especially when it comes to batteries for EVs and storage—the US has nowhere near enough manufacturing capacity at the moment. And this is a problem for US President Joe Biden, who is staking a large part of his presidential program on winning the climate change battle.
Things have become so desperate, Biden has gone on an actual war footing to meet the US' critical mineral and battery needs. On 31 March, Biden said he will issue a directive, authorizing the use of the Defense Production Act (DPA)—originally enacted in 1950 as part of a war mobilization effort—to secure American production of critical materials "to bolster our clean energy economy by reducing our reliance on China and other countries for the minerals and materials that will power our clean energy future."
The DPA will support the production and processing of minerals and materials used for large capacity batteries such as lithium, nickel, cobalt, graphite, and manganese. Biden is also reviewing potential further uses of DPA "to secure safer, cleaner, and more resilient energy for America."
However, Biden is not doing his ambitions for an all-of-government approach to tackling climate change any favors, solar industry participants say. Biden is hamstringing development, and threatening the chances of achieving the installation targets the EIA is projecting, they say.
On 28 March, the Department of Commerce decided to investigate a request for circumvention tariffs requested from Auxin Solar. Auxin argues exporters in Malaysia, Thailand, Vietnam, and Cambodia assemble solar cells and modules, but do not produce polysilicon ingots or wafers, with these components sourced from China instead. The US has had antidumping and countervailing duties in place against Chinese producers since 2012.
More than 80% of the modules the US imported in 2020 and 2021 came from Southeast Asia. Some 52 GW of module capacity and 48 GW of cell capacity will be located in the region by the end of 2022, according to S&P Global Commodity Insights.
Commerce has until 25 August 2022 to make a "preliminary determination." A final determination is not due until at least 22 January 2023.
The decision enraged solar industry executives and advocates.
George Hershman, CEO of SOLV Energy, which portrays itself as the nation's largest utility-scale solar installer, said the decision was a "devastating blow that will cost the solar industry tens of thousands of jobs." He added that solar companies across the US were already experiencing unprecedented supply chain delays. "These tariffs are a significant barrier that will drag out projects and drive up costs. More tariffs are the last thing the solar industry needs right now," he said.
Gregory Wetstone, American Council on Renewable Energy CEO, added in a 28 March prepared statement that the decision would upend the renewable energy industry at "the worst possible time." He noted that Congress had yet to enact a long-term, full-value clean energy tax package, and that the investigation created uncertainty that would chill new investment and cause layoffs.
ACP CEO Heather Zichal was less diplomatic. The decision "signals that the Biden administration's talk of supporting solar energy is empty rhetoric. If its commitment to a clean energy future is real, the administration will reverse this decision immediately," she said, adding that Commerce ignored precedent and "subsequently drove a stake through the heart of planned solar projects and choked off up to 80% of the solar panel supply to the US. It must fix this now."
Biden was already under scrutiny from the industry for a previous tariff decision. On 4 February, the administration extended Section 201 tariffs on imported crystalline silicon solar voltaic panels (CSVP) and solar cells for four more years. The tariffs were imposed in 2018 by the US International Trade Commission for four years as part of President Donald Trump's America First industrial policy.
The Solar Energy Industries Association warned the Biden administration that the Section 201 tariff program was ineffective and should be ended, arguing it should be replaced by targeted tax credits for new capacity.
SOLV Energy, formerly known as Swinerton Renewable Energy, said after the Commerce decision that without investments in solar manufacturing and legislative action from Congress, the industry will only be able to deploy less than half of the solar needed to reach Biden's 2035 clean energy goals.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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