A Constrained Solar Supply Chain ... A Congested Market

Jeffrey Barnett

It is no secret that the solar supply chain is experiencing delays and raw material constraints like never before. Additionally, new concerns have arisen about a Section 201 Tariff extension as well as a new AD/CVD action targeting solar imports from Malaysia, Thailand and Vietnam. This confluence of events has severely limited the importation of solar modules into the United States resulting in very scarce inventories.

Further, new orders, if manufacturers are accepting them, have 12–16-week lead times, though many manufacturers are sold out until at least Q3 of next year.  Adding insult to injury for these negative cost and supply drivers are all-time high logistic costs – for example – the price for shipping containers from Asia to the U.S. have increased 6X from $4,000 to $24,000 in many instances. This can add up to $0.07/Watt alone.

Ironically, demand for solar in the United States is at an all-time high and finding the right modules for project(s) is becoming quite a challenge.

Fortunately, due to Aten Solar’s volume purchasing power and strong relationships with key suppliers, we have available inventory and can provide modules for your projects today and throughout 2021.

 

100X in 10 Years

Jeffrey Barnett

Each February, the U.S. Department of Energy releases an analysis of total electricity generation by source withing the U.S. The February 2021 version of Electric Power Monthly (EPM) reveals that solar—at all scales—accounted for 133 terawatt-hours (TWh), or 3.3% of all the electricity generated in the nation during the year.

While 3.3% may seem like a small number when compared to the much larger portion of U.S. electricity generated by other sources such as coal (19.1%), nuclear (19.5%), or natural gas (39.9%) – the significance of this 3.3% shouldn’t get lost in the proverbial “shuffle” of other generation sources. For example, in Hawaii and California, solar is meeting more than 17% of electric demand.

Also, if you really dig through past issues of EPM, going back a decade, you will see that solar generated 1.2 TWh in 2010. In other words, U.S. electricity generation from solar has grown around 100x over the last ten years.

It most certainly took a lot of blood, sweat, and tears to get us there. Everything from new business models to endless state policy battles to manufacturing better components including solar panels, racking/tracking systems, inverters and balance of systems have provided the framework to support a dramatic scaling of solar deployment across the U.S.

And the most important thing about these numbers is not what they say about the past. It is what they suggest about the future. Solar is on a remarkable growth path. If we scale solar even 15x-20x this decade, we’ll be meeting half of U.S. electricity demand—even after accounting for growth from the electrification of transportation and heating.

For solar to meet this challenge, the industry will have to continue to evolve. One major area is storage. As solar penetrations grow on the nation’s grids, it won’t be good enough to build solar anymore—solar is going to need to be paired with storage so that it can meet evening demand, not just mid-day demand. The market is already there in several places, including the Hawaiian island of Kauai’i, where solar is meeting 34.7% of electric demand, and will meet 42.5% of demand when the next big plant comes online.

The future is ours and as long as we continue to evolve we can accomplish this. Sometimes it is useful to look back and see just how far we have come.

 

Are You Ready for the Big Time?

Jeffrey Barnett

There’s no other way to put this: 2021 is going to be a massive year for solar. On the back of the U.S. Energy Information Association’s forecast that the United States will install 19.5 GWac of solar this year, we are seeing other signs that all point in the direction of major growth. The Renewable Energy Buyer’s Alliance (REBA) reports that in 2020 procurement of solar and wind from large corporate buyers broke the 10 GW mark for the first time, with contracts being signed for 7.6 GW of solar alone.

This is not un-noticed around the world, and the growing U.S. renewable energy market has increasingly been attracting global capital. The latest is Masdar, a renewable energy company backed by the sovereign wealth fund of the United Arab Emirates, which announced that it is buying half of a 1.6 GW solar and wind portfolio that EDF Renewables has under development. And in terms of hot markets, don’t even get us started on solar’s performance in the stock market.

And market growth won’t stop in 2021. By 2026, the Mid-Continent System Operator forecasts that it will have 10.8 GW of solar online, up from less than 2 GW today. This, in the not-so-sunny Midwest.

We’ve also seen promising signs for the battery market, with Plus Power winning bids in the ISO New England capacity market for two projects totaling 315 MW of standalone batteries in Massachusetts and Maine. These would be bigger than any batteries installed in New England to date, and could herald the beginning of a standalone battery market in the region.

But it isn’t just the market that is getting bigger. Solar modules are getting more powerful, with an increasing number of 500 watt+ products available, and the cells themselves are getting physically larger. Over the past year we’ve seen the shift to 182 and 210mm cell sizes increasingly gain speed.

These larger cells promise more bang for the buck, but they also require significant retooling not only of factories, but along the entire value chain. Inverters are adapting to modules that offer higher current from these larger cells, and trackers have to deal with new form factors.

The value chain will adapt, because ultimately what these larger cells mean is a lower levelized cost of electricity. This is already being shown in testing by DNV GL. But the path forward is not entirely clear. After many years of 156.75mm wafers being the industry standard, which size will the global solar industry settle on? 182 or 210mm?

It’s not clear that anyone knows the answer to that right now, but what is clear is that the progress of technology will not stop there. Right now, we are all along for the ride.

 

2021: Forward Progress for the Clean Energy Economy

Jeffrey Barnett

As we move into a new year, all signs on the demand side point to a bull market for solar. The late December stimulus deal which included an extension of the Investment Tax Credit (ITC) was the cherry on top of a year where the solar market grew despite many challenges in the larger economy.

We won’t have final US installation numbers for a few months, but what is clear is that solar became what Mercom Capitol CEO Raj Prabhu calls an “investment haven” in 2020. As a sign of this, the stock valuations of many solar companies are off the charts, and the Invesco Solar ETF nearly tripled in value during the year.

2021 looks like it will be a very good year for the solar market as well. But don’t take our word for it. According to the US Department of Energy’s Energy Information Administration (EIA), we are going to install 15.4 GWac of large-scale solar this year, with another 4.1 GWac of smaller installations. These numbers are likely conservative, as EIA is not exactly a solar advocacy organization. Texas alone is expected to host 28% of the big solar that is coming this year.

And it’s not only solar. EIA is also expecting a near-doubling of the current capacity of grid-tied batteries to more than 4.3 GWac. In fact, 2.1 GW of that is already under construction.

Policy indicators are also positive. In addition to a wide range of state-level action, the incoming administration is pledging to move to 100% zero-carbon electricity by 2035, which would mean dramatic growth for the already booming solar and wind markets. And even if this particular policy does not succeed, there are others that will.

One important step will be building the transmission lines that are needed to move electricity from all the wind and solar that is going online, the lack of which has been driving up interconnection costs. Here indicators are good, as both the incoming administration and the new chair of the Senate Energy and Natural Resources Committee have identified this as a priority.

All of this momentum on the demand side means that production will have to step up. And while there are some significant announcements—such as Jinko Solar’s massive 20 GW cell factory planned in China—there are still issues with polysilicon, glass and EVA for back sheets which could continue to put upward pressure on module prices.

Too much demand is perhaps a good problem to have, and 2021 means growth on all fronts for the solar industry and market, for batteries, and for transmission. We are entering not just a new year, but a new world.

 

A Year of Changes and Growth

Jeffrey Barnett

Twenty-Twenty has been a year like no other. It will be difficult for many to look back 12 months and recognize the same world we live in today. For many of us the rhythms of our daily lives have changed; we are even anticipating a new president.

And during this incredible time of change and struggle for so many, the solar market has not only shown its resilience, but solar is in a much stronger position than it was a year ago. After years of dramatically falling system prices, 2020 has shown solar can take an even bigger share of US and global power markets.

Solar has long been eating the lunch of coal and nuclear, but 2020 showed that solar and wind are increasingly replacing even gas. For the first nine months of the year the capacity of newly installed gas-fired power plants fell, and gas projects are now increasingly being cancelled in the interconnection queues of grid operators, to be replaced with solar and wind.

In fact, solar demand been so high this year that the global supply chain is having growing pains keeping up with demand. Shortages of polysilicon, glass, and the EVA used in module back sheets are driving up prices for these materials, and thus leading to an increase in the price of solar modules.

Further, Chinese solar manufacturers are putting pressure on the government to rapidly approve additional factories for raw materials and alleviate these shortages…but it’s a race between new capacity and new demand worldwide.  The result as in any global  market will be periods of shortage and periods of surplus. Long-term solar pricing will continue to trend downwards but for most of next year the outlook is for stable or rising costs for solar modules.

And it is not just solar that is booming. 2020 also saw breakout growth in the grid-tied battery market. As documented by Wood Mackenzie, after a record-breaking second quarter, battery installations skyrocketed even higher to 476 MW in the third quarter. The 2020 market promises to be double the size of the market in 2019.

The future isn’t even solar, wind, and gas anymore. It’s now solar, wind, and batteries.

Solar is doing so this despite changes in policy and inconsistent support. The ITC continues to phase down at the end of this year, but there is no sign of that stopping the solar market. The tariffs on imported solar modules have ended up being more of a speed bump than a roadblock, and even while they are still in place the solar market is gaining speed.

There is much more to do in the future, as solar and wind have the historic task of now only crowding out new fossil fuel investments, but increasingly replacing existing power plants. And in next month’s commentary, we will take a look at what these trends mean for 2021. For now, if only for a moment, we in the solar industry should look back and marvel at just how far we have come.

 

Utilities Are Quitting Fossil Fuels

Jeffrey Barnett

2020 is going down as one crazy year, and the plot twists just keep coming. But if you look underneath the madness of the headlines, there are some truly remarkable, positive things that are happening.

One big shift that is playing out by increments is that our society is moving towards a consensus that we will quit fossil fuels and decarbonize our electricity system by mid-century. The most obvious place that this can be seen is in the wave of utility commitments to go carbon-neutral by 2050.

September saw Entergy make such a net-zero carbon emissions pledge, adding to commitments by Xcel, Duke, Dominion and Southern Company. When you add these to the six states that have mandates to fully decarbonize their power sectors, there’s a significant and growing portion of the United States that has a plan to entirely get out of fossil fuels for electricity.

Of course, this means a lot of solar. Particularly for Entergy. The natural solar potential of the power company’s service area in the Deep South and the Gulf Coast of Texas is pretty good and the utility doesn’t have a lot of other good options for zero-carbon generation. Entergy has a sizable nuclear fleet, but given the dismal economics of new nuclear compared to solar, we don’t expect new nuclear plants to get built any time soon. Nor is land-based wind a particularly strong option for Entergy, as wind speeds are generally low where it operates.

Entergy is planning to build more gas plants, including some which will run a mix of gas and hydrogen, eventually moving to pure hydrogen. But it’s going to need power for the electrolyzers to make that hydrogen, which brings us back to solar. Entergy hasn’t said as much about batteries, but given the increasingly strong economics of solar plus energy storage, it’s going to be hard to see how the company will avoid deploying them.

And while the Deep South has long lagged on solar deployment, lately we’re starting to see some big projects. In September, a sizeable 2.4 MW rooftop installation on a series of warehouses was completed near the Industrial Canal in New Orleans, and a deal was announced for GM to buy the output of a big solar project in Arkansas.

The long-term promise of solar to help utilities decarbonize is bolstered by an increasingly positive short-term outlook. The economics of solar continue to improve even faster than expected, and what this means is that new fossil fuel power plants are less and less able to compete.

This doesn’t just apply to coal; projects to build gas plants are also being cancelled in the interconnection queues of grid operators, to be replaced by solar and wind. And with the rush to get projects online to qualify for a higher level of ITC, the market is booming. This is a great time to be in the solar business, and to be making the future happen.

 

Solar + Storage: The Viable and Reliable Solution

Jeffrey Barnett

The heat of late summer brings new challenges for many Americans. Over the last month we’ve seen one of the most severe hurricanes on record hitting Louisiana, while wildfires have raged across California and the West. We hope that you and your loved ones have stayed safe.

With climate change, both hurricanes and wildfires are getting more serious. But it is not only these obvious disasters; the rolling blackouts in California were set off by a spike in power demand driven by record heat, which additionally makes conventional power plants more prone to failure.

These kinds of crises demand both short- and long-term solutions. We have to both keep the lights on during and after disasters, but also make structural changes so that we don’t make these sorts of crises worse in the future.

For both the short- and the long-term, solar plus energy storage are perhaps the most viable solution. One of the lesser-known stories from Hurricane Laura is that as many people died from carbon monoxide poisoning due to the use of portable diesel generators as died from the storm itself. These deaths are tragic and they are avoidable.

With the tools and expertise that the solar industry has developed, PV systems can now be installed to withstand hurricane-force winds. When coupled with batteries these can keep life-saving services going indefinitely.

As a response to wildfires, forward-thinking municipalities and local utilities in California and Colorado are beginning to deploy solar and battery-powered microgrids to keep critical services online in the increasingly likely event that they lose grid power.

In the longer run, climate change isn’t going away and the need is greater than ever to shift to a cleaner, more resilient power system. Solar can and will play a leading role, and already we are seeing this happen. According to Bloomberg, last year solar made up the biggest portion of new electric capacity to come online globally, at 45% of all new power.

But we still need to up the pace. This includes in California, where the blackouts have underscored the need to get more generation—including battery storage—online faster.

Solar and storage are poised to play a major role in the future of energy, and not a moment too soon. A better future is for the energy system is coming. It is just a matter of how quickly we can make it happen.

 

Solar Leads the Way

Jeffrey Barnett

It’s truly amazing to watch. Solar in the United States continues to chart a path of historic growth and that path is accelerating. Despite dismal second quarter 2020 economic data, the first two quarters of 2020 were record breaking for solar and other forms of renewable energy—from the most solar installed during any Q1 at 3.6 GW to renewable energy generating more U.S. electricity than coal or nuclear.

And the solar industry isn’t stopping there. Last month we talked about Congress showing increasing ambition to deploy renewables, but the real action is happening at the state, local, and individual level. The U.S. electric grid is entering a phase of rapid transformation, and from consumers to politicians to developers to utilities, Americans are advancing the uptake of renewable energy at breathtaking rates.

Here are some of the headlines that have broken over the last month:

  • New York State has issued a 4 GW solicitation for renewable energy. This is the largest renewable energy solicitation ever issued by a state.
  • In Nevada, construction has begun on two solar plants as part of the Gigawatt Nevada Solar and Storage Project.
  • In Texas, San Antonio’s municipal utility CPS has announced plans to procure 900 MW of solar and 50 MW of batteries.
  • Indiana utility NIPSCO plans to add 300 MW of solar and storage by 2023.

These new activities are adding to already massive development pipelines, with a new analysis by Berkeley Lab showing 165 GW of solar and solar-plus-storage projects were added to the interconnection queues of grid operators last year, bringing the total to 362 GW. For context, at the end of 2019 the United States had only 76 GWdc of solar installed.

The unquestionable economics of solar provide a solid basis for further growth. According to Wood Mackenzie, 75% of the solar under development is being driven by either voluntary utility procurement or corporate procurement, not mandates.

And this development is increasingly not limited to the West Coast nor the Northeast; the three grid operators that added the most solar to their queues in 2019 were PJM Interconnection (East Coast and Midwest), MISO (Midwest and South) and ERCOT (Texas).

This clean energy boom that we are entering means jobs for Americans. It means economic development. And it means abundant, clean, cheap power.

 

When Solar Ambition Becomes Reality

Jeffrey Barnett

Many opportunities full of great ambition were also born during historical times of crisis. Today is no different. While the COVID-19 pandemic continues to wear on, there are signs that the United States is starting to get serious about rebuilding it infrastructure, including massive deployment of clean energy.

Last week a far-reaching climate plan was unveiled in Congress that envisions both implementing a national clean energy standard and extending the solar Investment Tax Credit (ITC) with a “direct pay” option, among a number of other measures.

The ITC extension/direct pay has made it into actual legislation, which will be voted on in the coming weeks. And while it is a long road to get through both the House and Senate, the odds of the bill passing may miss the point. This plan is a combination of ambition and attention to detail more aggressive than anything we’ve seen yet, and as a result, the national conversation about energy is shifting.

The House’s clean energy plan follows on and cites a breakthrough report put out by UC Berkeley which modeled moving to 90% clean electricity—solar, wind, batteries and legacy zero-carbon generation—by 2035 nationwide. Unlike other plans, this one did not rely on a nationwide HVDC grid. And perhaps what is most promising is that it showed that even with a lot of batteries, electricity costs would be lower than today.

Both the plan in Congress and the Berkeley study envision a massive role for solar, with a scale of deployment unlike anything we’ve seen in this country to date. There simply aren’t any more excuses to delay a massive transition to clean energy: distributed generation is more reliable and solar is less expensive than fossil fuels in more and more parts of the country—and getting cheaper all the time.

But it isn’t just national policy and academic findings that are hopeful. The introduction of more and more 500-watt modules show that the solar industry is also continuing to evolve. Who would have thought, even a few years ago, that you could get 1 kW from just two modules?

With SEIA and WoodMac predicting that the United States will install a record 18 GWdc of solar in 2020—despite the pandemic—it’s a good year for ambition. And it is times like these that we have to ask ourselves what we are waiting for to make the promise of the future a reality on the ground.

 
Change Is On the Horizon

Change Is On the Horizon

Julie Carlson

These are challenging yet hopeful times.

Crises force change, whether they are economic crises, public health crises or political crises—or a combination of all three. And while less dramatic than the demonstrations in the streets of our cities, the energy sector in the United States is under pressure.

Since March, electricity use has fallen enough to upend market dynamics. This has accelerated the decline of the U.S. coal industry, creating opportunities for other energy sources. Natural gas has also had a rough go of it. Who would have thought six months ago that tankers would be arriving at the Sabine Pass terminal in Louisiana to offload liquefied natural gas (LNG), instead of filling up there? A superabundance of gas in Europe is overflowing everywhere, even to the United States.

Perhaps the biggest blow has come to the oil industry. From late January through the end of April, oil has decreased from more than $60 per barrel to less than the cost of a 12-pack of craft beer. The damage to market capitalizations of oil companies has been no less harsh; and while oil prices and stock prices have recovered somewhat in the last six weeks, they are nowhere near pre-crisis levels.

Among the major energy sources, solar and wind have fared the best during this pandemic. The zero marginal cost nature of solar and wind means they continue to operate in wholesale power markets even as other fossil-fuel based generators must shut down due to diminishing electricity demand and depressed prices. And for the first time in more than a century, U.S. renewable energy sources generated more primary energy than coal during the first quarter of 2020. The solar industry is competitively positioned for the future and as costs continue to fall, we will emerge from these crises stronger and more sophisticated, and ready to take a bigger share of the global energy market.

However, the solar sector has also not emerged from this without its own disruptions. The interruption of business that this pandemic brought with it has been hard to quantify, but numbers released by SEIA show that a full quarter of the solar workforce has been furloughed in recent months, in what was supposed to be a boom year.

Yet recently, solar companies from the residential sector are reporting a spike in interest in new projects with batteries as homeowners look to offset energy usage as they spend more time at home while also seeking reliability amid uncertainty. And while there has been a recent 40% drop in the commercial and industrial sector due to the Covid-19 pandemic, as the economy continues to re-open many postponed projects are making renewed progress.

The good news is solar demand is returning quickly. Because this is what solar offers: security, economic certainty and resiliency. Change is on the horizon.

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