Clean energy buyers grappling with supply chain
US renewable energy buyers continue to contend with a market beset by supply chain disruptions, but recent federal legislation bolstering investments in low-carbon technologies could eventually smooth the landscape, industry analysts said this week.
US renewable energy projects may have to push back operations in the near-term as developers continue to wrestle with a confluence of hurdles in the supply chain, consultancy Edison Energy, a subsidiary of California utility Edison International, said in its third quarter market update. These constraints on new generation coincide with demand for renewables hitting "record highs."
The near-term development pipeline for "available" projects — those that have not fully contracted for their output — remains thin, with Edison saying it expects just seven such utility-scale wind and solar farms combined on line in 2023. That total is expected to jump to 27 in 2024 and 30 in 2025, with another 17 projects slated for 2026 or after. The bulk of those available projects, 65 overall, are solar farms.
One new impediment to the US solar industry is the Uyghur Forced Labor Prevention Act, which restricts goods imported from China's Xinjiang Uyghur Autonomous Region from entry into the country under the assumption they were made with forced labor. The US began enforcing the law in late June and in roughly three months has detained more than 3,000MW of solar panels at the border. Industry analysts forecast that the US could impede 9,000-12,000MW of modules by the end of 2022.
The US relies heavily on imported raw materials, components and modules to build new solar farms. This disruption, coupled with high demand, will result in delayed operations, and buyers should expect premiums on purchases from systems with allocated panels, Edison said. As the sector builds more transparency into the supply chain, and the industry can ensure "responsible sourcing," delays will alleviate, likely in the "medium-term."
Additionally, uncertainties around the US Department of Commerce's inquiry into solar imports from Cambodia, Malaysia, Thailand and Vietnam — which froze the solar sector during the second quarter — still loom over the sector after Commerce extended the deadline for its preliminary decision to 28 November. While President Joe Biden delayed the onset of any new tariffs resulting from the agency's investigation until June 2024, the industry remains "eager" to see where Commerce will land on the issue, as any decision will provide "longer-term clarity" on the availability of components and help set price expectations going forward.
The four countries under investigation provided 80pc of the US panel supply to be installed this year, according to Edison.
The US has added 4,200MW of solar during the first half of 2022, less than half of the planned capacity.
Buyers have fared little better finding favorable pricing in the wind sector. Major wind turbine manufacturers such as Siemens Gamesa and Vestas Wind Systems have raised prices in the face of inflation and supply restrictions. Inputs like steel and copper have increased significantly since the beginning of 2020, which has hit manufacturers' bottom lines.
The federal Inflation Reduction Act should ultimately alleviate these issues through its tax incentives for both project and domestic supply chain development. Edison expects the policy suite to lead to an increased availability of projects and lower power purchase agreement prices for buyers in the medium- to long-terms.
At the same time, the group warned that the new law is likely to change wholesale market dynamics, effects of which could include difficulties for new projects in securing grid interconnections because of higher renewable buildouts and congested interconnection queues.
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UN carbon market enshrines appeal, grievance processes
UN carbon market enshrines appeal, grievance processes
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Beccs revenues 'dependent on sustainability'
Beccs revenues 'dependent on sustainability'
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Oregon renewable diesel pours into CFP bank
Oregon renewable diesel pours into CFP bank
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Battery storage stands out in Japan clean power auction
Battery storage stands out in Japan clean power auction
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