2021 has seen several disruptions to the solar industry’s international supply chain. A disparity between supply and demand, rising costs of raw materials, and new government policies and regulations have all contributed in varying ways to create new uncertainties and challenges.
These disruptions have exposed EPC and developer firms to risks that threaten logistics and fulfillment, two crucially important aspects for success in commercial, industrial, and utility photovoltaic (PV) projects.
In a recent webinar, Steven Zhu, President of North American Trina Solar, discussed how Trina remains hard at work developing new ways to help EPC and developer firms manage and mitigate these new risks in the solar industry supply chain. Let’s take a look at these potential risks and what’s being done to overcome them.
1. Supply and Demand Disparity
Typically, most manufacturers can account for supply and demand based on market forecasts, and the solar industry is no different.
Over the past three years, the U.S. installed around 20 gigawatts (GW) of PV capacity per year. However, through October 2021, the U.S. already surpassed 23 GW of installed PV capacity. This surging growth of PV capacity has reached a point where raw material and component suppliers are struggling to keep pace. Now, manufacturers have limited supplies of the materials needed to manufacture modules, such as silicon, steel, aluminum and the ethylene vinyl acetate (EVA) used for laminating PV panel glass.
This market imbalance will take some time to surmount. It can take 12-16 months to scale up production for the manufacturers of polysilicon and the producers of the chemicals that make the EVA for PV panels. Additionally, these operations require capital-heavy investments to effectively increase capacity. But as global polysilicon capacity increases, the supply and demand disparity should ultimately balance this market in 2022.
2. The Rising Cost of Raw Materials
The skyrocketing solar demand with limited supplies also creates another major risk: increasing prices.
For many market watchers, nobody forecast these price increases for raw materials. The solar industry faced the worst polysilicon shortage in 10 years at the beginning of 2021, which raised prices and continues to push them higher. In another example, the steel prices for the hot rolls used for manufacturing racking and trackers have more than doubled per ton over the past year. The cost of other raw materials is following a similar upward trend.
To help counter this trend, Trina Solar continues to make significant sustainable investments into boosting manufacturing capacities using sophisticated technologies. Trina is developing bigger modules with the same panel or similar size of the panel that would be able to produce more power; last year we were using 400W per panels, and now we are up to 550W panels, and going forward we’re using the 21 series with 210mm wafers in 660W panels.
But it’s not just the higher panel wattage that makes a difference. Although the efficiency remains the same, customers can save on reduced BOS costs and lower LCOE costs. Logistically, each container holds about 0.27MW, an increase of almost 20% compared to lower wattage panels.
In the long run, better technology will play a big part in reducing costs and increasing efficiency in the supply chain. Availability and rising costs remain problems in the short term, but Trina remains dedicated to finding innovative new solutions for these problems.
3. New Government Policies and Regulations
At the same time, government policies and regulations have added extra impediments that have also up-ended the supply chain.
In June 2021, the U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) that bans any silicon-based products that come from China’s Xinjiang province. Although Trina Solar maintains robust material traceability guidelines (see the company’s 2019-2020 Corporate Responsibility (CSR) Report for more details on this), the WRO has disrupted the importing of modules.
Trina Solar is no stranger to issues like this. We’ve been operating in the U.S. since the birth of the U.S. solar industry and the company is intimately familiar with both the challenges and opportunities for Chinese OEMs in the domestic market. This is not the first time we’ve faced these issues. In 2013 there was an AD/CVD circumvention tariff against Chinese manufacturers, and in 2014 there was one against Taiwan. In 2017, the government implemented the Section 201 tariff. They don’t call it the “solar coaster” for nothing.
One way Trina Solar has prepared for this is by implementing an IT system that traces component sourcing all the way to the polysilicon. However, since Trina doesn’t buy the polysilicon directly, and instead buys the wafers, we’ve had to go to our vendors to get additional information on their procurement processes. This time, the current WRO was unexpected. In order to trace from wafer to polysilicon down to the metallurgical-grade silicon (MGS) used to make polysilicon, it requires additional effort, time and capital for these vendors to adjust to the new requirements. Moving forward, Trina is pursuing options to buy polysilicon directly in order to sidestep these sourcing issues.
The company continues to focus on innovating new solutions together with our customers to mitigate the risks, diversify our manufacturing locations and restructure our supply chains to find the new balance of the market.
4. On-Site Logistics
These supply chain issues are also forcing EPCs and developer firms to face challenges with other logistical risks, such as system designs, permitting, weather issues, surveys and unknown site problems with the soil.
The new risks are creating longer lead times and impacting timelines for these logistical processes. Conversion lead times have moved out significantly over the past 12 months, and now firms must create forecast requirements over a longer horizon to account for supply chain challenges. But dealing with longer forecasts increases the chances for unexpected delays that can derail a project.
Solar is a project-based business and it requires strategic relationships with suppliers that can sustain slow periods. If possible, EPC and developers firms should try using these suppliers for other business operations to maintain the partnership and keep supply steady. Additionally, it’s easy to establish relationships with partners who are unable to grow, but it’s critical for business success to find partners who are able to grow along with your company in this industry.
TrinaPro, the all-in-one utility-scale solution from Trina Solar, helps EPCs and developers further mitigate the risks. With streamlined procurement, optimized interconnection and an innovative bundling of major components, EPCs and developers have the solar solution they need to help them efficiently manage supply chain and logistics and deliver higher PV project value.
Want to learn more about what Trina’s doing about the supply chain and logistic challenges facing EPCs and developers? Reach out to us today!
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