A solar market analysis firm said that the 25 GW of utility scale capacity expected to be deployed in 2022 may end up closer to 15-20 GW as supply chain-related issues continue to challenge the industry.
In a note to clients, Roth Capital Partners said that three Tier 1 suppliers–Jinko, LONGi, and Trina–face ongoing import challenges. Those challenges largely stem from federal action taken in response to allegations of forced labor in parts of the solar supply chain that originate in China.
The research note said that the three companies represent on the order of 40-50% of annualized module supply, or around 10-13 GW. One question is how much of that supply could be met by Tier 2 suppliers, such as Znshine and Talesun.
The firm said that one industry contact reported that 70-80% of the shortfall involving projects that have not yet started construction could be met by Tier 2 suppliers. Another industry source it contacted suggested that as many as 4 GW of projects in 2021 did not receive modules at all, but were unlikely to shift suppliers as they wait.
Moving to a new supplier presents its own set of problems, however. Successfully adding Tier 2 vendors to approved vendor list and bankability lists of tax equity lenders. Those processes can take more than a year to achieve, Roth said. What’s more, if an extension of the federal Investment Tax Credit is included as part of a revived Build Back Better legislative package, then even more gigawatts of solar project capacity could be pushed from 2022 and further depress 2022 volumes.
The supply chain disruptions stem largely from action taken by Congress and the Biden Administration to address allegations of forced labor in a number of supply chains, including solar. And it comes as the administration nears a decision on whether or not to extend tariffs on solar modules imported from China.
In May 2017, a group of U.S. solar panel manufacturers filed what is known as a Section 201 safeguard petition with the International Trade Commission (ITC). The petition sought global tariffs in response to what it claimed were unfair trade practices, particularly by China. The ITC unanimously found that the imports had injured U.S. solar panel producers. In January 2018, President Trump concurred with the ITC recommendation to impose a four-year “safeguard measure” on foreign solar panels.
Last fall, the ITC again unanimously recommended that the tariffs be extended for another four years, effective in early February.
The Reuters news agency in late January reported that the administration was weighing a plan to double the amount of solar modules that could be imported before duties were applied from 2.5 GW to 5 GW. The proposal would entirely exempt bi-facial modules, which are increasingly popular in utility-scale projects.
The tariff extension, if approved, would maintain pressure that has been building since last year on Chinese imports.
In June, a Withhold Release Order (WRO) directed U.S. Customs and Border Protection agents to ensure that products imported to the United States did not contain components suspected of being manufactured with the use of forced labor. Credible reports have surfaced over the past 18 months that such labor is being used in the Xinjiang region of China, a center of polysilicon production, a key component in solar modules.
Modules may be detained at U.S. ports of entry until the importers are provided traceability documents that prove no forced labor was used. A major stumbling block is that Beijing denies that any forced labor exists within China. The government has passed legislation penalizing companies that cooperate with U.S. and other western governments’ efforts to trace supply chains.
The WRO gained added teeth in December when President Biden signed H.R. 6256, the Uygher Forced Labor Prevention Act. The Act bans imports from the Xinjiang Uyghur Autonomous Region and imposes sanctions on foreign individuals responsible for forced labor in the region.
In January, the Ultra Low-Carbon Solar Alliance told Renewable Energy World that evidence was mounting that supply chains are diversifying away from those conflict regions such as those in Xinjiang.
The shift is being aided in part by growing global demand for solar energy equipment. New sources of supply across the entire solar production supply chain are being added, offering alternatives to solar developers in the U.S. and elsewhere.
“We are seeing a supply chain realignment,” said Michael Parr, executive director of the U.S.-based Ultra Low-Carbon Solar Alliance (ULCSA). “The pace has been faster than expected.”
In late January, polysilicon manufacturer Daqo New Energy Corp. said that its subsidiary, Xinjiang Daqo New Energy, said it planned to raise more than $1 billion for a proposed 100,000 MT polysilicon expansion project in Baotou, Inner Mongolia. The project is expected to break ground in March and be completed in the third quarter of 2023.
Parr said in an interview with Renewable Energy World that deployments in the range of 20-22 GW of capacity are likely this year. An emerging worry early in 2022 is the extent to which the Omicron variant of the Covid-19 virus will impact China, and the variant’s ability to disrupt manufacturing and exports alike.
Supply chain worries were confirmed in part by a report from analyst firm IHS Markit, which said that the “highly synchronized global supply chain system developed over the past 30 years is under strain like never before.” The firm said that resolving the disruption will likely run well into 2022.
Source: Renewable Energy