General News ‘Somebody has to bear the cost’
Sandhya Ganapathy, CEO of EDP Renewables North America (EDPR NA) – the US subsidiary of Portuguese utility EDP Renovables and one of the largest solar and wind project developers in the US – spoke to PV Tech Premium in Anaheim.
As a major developer, EDPR NA has framework supply agreements with US equipment providers, including First Solar, the Cadmium Telluride thin-film module producer based in Ohio. Ganapathy says, “We are big on domestic. We love things that are manufactured here. It supports the local economy, which is part of the renewable proposition, but more importantly, now we are seeing availability for those modules.”
Ganapathy’s enthusiasm for domestic products is tempered by her financial brain (she used to be an investment banker.) Could price disparity between US-made modules and imports, brought about by the global trade situation, cause issues for domestic procurement?
“Yes. Obviously somebody has to bear that [price increase], and if it’s the developers, a lot of them aren’t going to be able to manage that. And the question then is whether the PPA market can support an increase in pricing.”
Earlier this year, industry analyst firm Clean Energy Associates (CEA) predicted that the ongoing antidumping and countervailing duty (AD/CVD) tariff investigation could result in an increase of between US$0.10 and US$0.15 per watt on US-made solar cells and modules. Labour, materials and scale are also going to make it challenging for US producers to compete on price with Chinese competitors.
Ganapathy continues: “Domestic manufacturing does not mean to say ‘manufacturing at any cost’ – we should be very careful about the economics of that.
She says that if the current imbalance of supply and demand for domestic modules evens out with the addition of more US production capacity, the industry will benefit from “very market-driven pricing”.
‘Not designed to be cheap’
However, later in the day at RE+, PV Tech Premium heard from a source who said that US manufacturing “is not necessarily designed to be cheap manufacturing,” and that the benefits which developers and end consumers have had from low-priced Chinese products “are more or less over”.
“Developers will always tell you that any extra quarter of a penny is a quarter of a penny too much. But deployment incentives are pulling their cost way down, and trade measures [like AD/CVD] are partially pulling them slightly back up.”
The IRA offers a 30% tax credit for solar project developments, and the use of domestic content can add a further 10%. Simultaneously, global module prices have plummeted, though the US is partially insulated from that decline by its trade policies.
The central tenet of the IRA was the belief that “deployment and manufacturing must go forward in tandem,” our source said, adding that political support for a government-backed energy transition would wear thin if the products used to achieve it were being imported from the rest of the world. “Developers want one and not the other. Of course they do. But that doesn’t make it a realistic point of view.”
Competitive manufacturing
Ganapathy’s comments came the day after various US solar manufacturing groups criticised the US House of Representatives over a “missed opportunity” to impose legislation on Chinese solar manufacturers this week.
In a public statement on Monday (9th September), SEMA CEO Mike said: “While we should welcome foreign investment in the US, Chinese-owned solar companies should not have access to US incentives while they receive massive market-distorting subsidies in China and dump solar goods in the US.”
SEMA is a voice representing an increasingly isolationist part of the US manufacturing industry, which believes that a robust, non-Chinese, ideally American (or at least Western) solar supply chain is key to energy security and the energy transition.
Speaking on a panel at RE+, Alex Akar, president of American Ingot, a company looking to establish an ingot and wafer production facility in the US, said, “We’re only interested in doing this if we can do it with a fully Western supply chain.
“All of our machines need to be Western, our raw materials need to be Western.”
But achieving this is going to be incredibly difficult. On the same panel, Cora Dickson, renewable energy lead at the US Department of Commerce (DOC) said: “There’s not going to be an upstream until we tackle the competition issues for the modules.” Dickson said that the DOC records around 6GW of module imports to the US every month; over a year, that amounts to around 72GW. The Solar Energy Industries Association (SEIA) said that the US installed around 32GW of solar last year.
Additionally, CEA has forecast that imposing AD/CVD tariffs would create a “bottleneck” in solar cell supply, which would make it more expensive for the module assembly companies operating in the US. So far, very few US solar cells have been produced.
Ganapathy tells PV Tech Premium: “Personally, I think…the way to propel an industry is by creating an ecosystem where those companies are able to survive on their own merits, not by imposing tariffs on what is coming in because that is contrary to globalisation and everything we’ve been working on in the past few years.”
Upstream manufacturing and price are linked
It was clear that many in the RE+ halls feel that the current distribution of US PV production is off. Modules far outstrip cells, and ingot and wafer production is entirely absent.
Akar said that the absence of market players in upstream US production is making it harder to secure investment capital, as there are very few viable customers for domestic wafers.
In part, he said that developers have some responsibility here; they “need to have the understanding and make the investment to have a Western supply chain.”
From conversations that PV Tech Premium had over the day, it emerged that the US’ current reliance on module production ahead of everything else might not be sustainable in the long term. If there is no meaningful upstream production when the IRA incentives expire at the end of the decade, those module producers may not stick around.
Onshoring upstream manufacturing is more costly and time consuming than module assembly, and would require greater investment and commitment across the US value chain.
Stacy Ettinger, senior vice president of supply chain and trade at SEIA said that, to her, this is a “chicken and egg problem. You need both offtake and supply to come together for there to be enough confidence for people to invest in the manufacturing sector.” SEIA represents a vast proportion of the US solar industry and has previously been critical of measures like tariffs, saying that they lead to market uncertainty and disruption that hinders its progress.
Akar said that an extension of the IRA’s domestic content adder would help: “[the current bonus of] 10% is not enough to make a developer happy to buy a panel made with a western wafer. Somewhere between 10-15% is where that number needs to be.”
Essentially, US manufacturing will incur a price increase on the developer’s end. We found tension, then, around the idea of manufacturing and deployment advancing in tandem, which our source said was the central idea of the IRA. Making it work might require a middle way.
