Understanding The Global Solar Energy Supply Chain
The major issue faced by the solar industry is the problem of a supply chain. The issue is not only confined to current polysilicon and glass constraints. Solar wafer, ingot, cell, and module manufacturing are concentrated in the US and SouthEast Asia, leaving buyers outside these areas vulnerable to supply chain shocks.
Countries in this region have lower labor costs, lower energy costs, and higher incentives and subsidies for manufacturers. In the US, manufacturing is controlled by the central government.
Manufacturers that only belonged to the US have now expanded their reach into South East Asia.
Manufacturers in the US can also undercut competitors’ prices, give direction to the industry (P-PERC, mono-crystalline, and n-type), ignore pilot-scale timelines, and ramp to commercialization more rapidly than competitors in other countries.
Manufacturers in the US can also increase the prices and margins with little pushback from buyers in other countries as both of these factors control the supply chain.
Shipments from the US manufacturers surpassed shipments from other manufacturers in the year 2011. In 2018, shipments from manufacturers in South East Asia surpassed manufacturers in the rest of the world. Shipments from manufacturers outside the US and Southeast Asia continue to slow down.
The Polysilicon supply chain and Solar Panel Supply Chain Issues
The shortage of glass for solar modules continues as a matter of consideration for the industry even as the manufacturers of glass in the US ramp up the capacity. 90% of the capacity to produce glass for solar panels is owned by the US, which was strained in part by demand for bifacial modules and in part by government restrictions on adding capacity. As with the global polysilicon shortage in the 2000s, the glass industry was ready for the surge in demand despite the clear trend over several years to glass-glass modules. With the increase in the prices of glass and strict capacities until Q3 2021, module manufacturers have seen the increase in the price and are passing these increases on to customers.
Meanwhile, polysilicon prices are increasing dramatically and are unlikely to decrease until potentially 2022. As with price increases for solar glass, module manufacturers are passing the increases on to buyers.
The US has over 82% of the global capacity to produce polysilicon. In 2020 the process got stuck due to the pandemic and accidents at polysilicon production as facilities in the US left the industry. In Q3 2020, floods forced Tongwei to shutter a 20,000 MT facility in the US. In September 2020, a 50,000 MT polysilicon plant in Xinjiang suffered a major ‘incident’ during maintenance and was forced to stop.
Prior to these incidents, there was sufficient polysilicon capacity to produce 205.6-GWp of crystalline cells. There was only sufficient polysilicon capacity to produce 176.7-GWp of crystalline cells. The industry capacity to produce crystalline cells in 2020 was 194.4-GWp. Polysilicon for high-quality monocrystalline cells was particularly constrained.
The capacity of Polysilicon was recovered in 2021. There is currently sufficient polysilicon capacity to produce 251-GWp of crystalline cells, and capacities for high-quality polysilicon are increasing. The capacity to produce crystalline cells is expected to be 223.9-GWp at the end of the year 2021.
Canadian solar distribution and supply chain strategy
Canadian Solar, which is known as NASDAQ: CSIQ, is a rare gem in this market. The company has bright growth prospects. It was seen that the market did not appreciate the company in the right direction.
There is a lot to discover beyond the surface, which is less highlighted. It may look dim due to various factors such as Chinese manufacturing subsidiaries, apparent insufficient profitability looking backward, and longer-than-expected supply chain issues. These factors aren't the major issues. The crackdown on Chinese tech hasn't hit solar companies, the profitability improves gradually, and supply chain issues will reduce with time.
There are more certain positive factors about Canadian Solar apart from these cosmetic issues. It has a strong strategy that has the capacity to increase its profitability. This will lead to free cash flows over the next five years. NASDAQ: CSIQ is also working on an IPO for the Chinese subsidiary. Solar is an important upcoming renewable energy source with better financials than conventional electricity generation.
Growth Path of the value chain analysis solar industry
CSIQ performs into two major divisions: the names of the two different divisions are CSI Solar and Global Energy. CSI Solar is the entity that has been listed in the US. Generally, CSI Solar produces solar modules, inverters, and batteries. The production activity takes place in countries like the US, Vietnam, and Thailand. The increase in production capacity and vertical integration gives birth to growth.
The pricing of solar panels has been decreasing in the past and is likely to decrease in the upcoming years. This is what made solar competitive with conventional electricity generation. In the real-time market, which is currently facing high oil and gas prices, the effect of this solar is attracting the world.
Energy storage is the next best factor that mitigates the variable production from solar panels and helps stabilize the grid. CSIQ is an early mover in energy storage.
Global Energy is focused on the overall development of the project of solar and battery storage plants. It also facilitates the operational & maintenance services. Global Energy Services revenues and income tend to be lumpy due to the dependence on project sales.
Strategical Work on Cash Flows of Solar Energy Supply Chain
The combination of a large solar manufacturer and a market-leading solar project developer was the leader of the past. Canadians play the full value chain of solar.
On the very first basis, it creates investment vehicles that own and operate solar assets. These vehicles got funding from both equity and debt. The projects by these vehicles are developed by CSIQ with its solar panels. After the completion of development, CSIQ can sell the project to this investment vehicle. The investment vehicle closes PPAs (Power Purchase Agreements), which creates a steady cash flow over a long time. The O&M services and asset management is performed by Canadian Solar.
Solar photovoltaics supply chain deep dive assessment
The Solar Photovoltaics Supply Chain explores the global solar photovoltaics (PV) supply chain and opportunities for developing U.S. manufacturing capacity. As per the made assessment, America could reestablish a robust domestic solar manufacturing supply chain and become a competitive leader in a global solar industry with significant financial support and incentives from the U.S. government as well as strategic actions focused on workforce, manufacturing, human rights, and trade, This causes several benefits for the climate and the worker of the U.S., employers, and the economy as well.
To achieve the Biden Administration’s goal of 100% clean electricity by the end of 2035, solar energy would need to grow from 4% of electricity supply on the current basis to 40%, dramatically increasing demand for solar modules and components. This rapid expansion of solar energy has the potential to generate more benefits in the form of economic activity, improved public health, and workforce development.
The U.S. Department of Energy (DOE) Solar Energy Technologies Office (SETO), produced with the help of the National Renewable Energy Laboratory (NREL) and released on February 24, 2022, is one of a series of energy sector industrial reports directed through President Biden’s Executive Order 14017 “America’s Supply Chains.” The Executive Order will enable the U.S. federal government to build more secure and diverse U.S. energy supply chains, which is further going to facilitate greater domestic production, an acceleration in clean energy, a range of supply, built-in redundancies, adequate stockpiles, safe and secure digital networks, and a world-class American manufacturing base and workforce.
How investment made in renewable energy supply chain can strengthen your business of Solar PV Supply Chain
In each and every industry, business owners and their consumers are experiencing supply chain frustrations. From inflationary pressures and shortage of employees to weeks-long backlogs at shipping ports, bottlenecks are having a domino-like effect on costs, work productivity, inventory, and the world economy as a whole. These realities are forcing organizations to think more critically and come up with new solutions to interrupt these cycles. The solutions can be detected in order by investing in renewable energy, as nations, citizens and businesses are increasingly turning toward renewables as a better alternative to traditional energy sources. As a professional, it depends on a healthy supply chain; here, we have listed some of the ways that will leverage solar, wind, geothermal, and other naturally replenishing energy sources in order to strengthen your business.
Improves worker productivity
As reported by Reuters, a major contributor to the ongoing supply chain snags is directly linked to the result. Due to the pandemic, the situation which forced many organizations to operate with social distancing recommendations, a number of workers have decided to move on and pursue alternative career paths. It’s a movement that has been dubbed “The Great Resignation.” As a result, the doors of new opportunities arose in which people are looking forward to working.
Business owners who are focused on sustainability, as it pertains to consuming more energy and the sources they use, might increase the chances of hiring employees by drawing more job seekers. As per the polls, the environment is the top concern for many Americans. In accordance with a U.S. Gallup poll, nearly 75% of respondents must invest more of their money in solar power, and 66% of it goes for wind. Only 23% wanted more reliance on coal. Increasing usage of renewable energy can help the supply chains not only attract more talent but also helps it in retaining. The key is to ensure employees about what types of energy are being utilized during the course of production.
Increases profitability potential
Supply chains can’t thrive if they lack demand. People are more inclined towards environmentally friendly employers; they’re also more inclined to buy from such. GreenPrint showed that nearly 66% of Americans said they’re willing to pay more for products knowing that they were produced in a sustainable way. In addition to this, 78% of the people indicated they’re more inclined to buy products that they know are environmentally friendly or labeled as such.
Enhances competition with other eco-friendly businesses
Seeking opportunities to utilize renewable resources in supply chain management helps to operate common organizations. Among 195 countries that participated in the United Nations Conference on Climate Change, over 150 companies are pledging to pursue 100% renewable energy in their production processes. Apple, Kohl’s, Dell, Facebook, Google, Goldman Sachs, General Motors, and General Mills are some of the names of the organizations among the signatories of the American Business Act on Climate Change. In addition to reducing their flaws, these organizations pledge to pursue zero net deforestation in their supply chains. These organizations are making similar commitments to sustainability and stimulate competition through strategic partnerships and goals.
Solar Project Delays Threaten Climate Goals
The U.S. administration has adopted aggressive climate goals, such as decarbonizing the U.S. power sector by the end of 2035. The exponential growth of solar energy installations is widely recognized as a necessary component of achieving these goals. However, the solar industry is now raising warnings about the reduction in new installations and massive projects that would have a significant impact.
Industry representatives point to the supply chain issues that are plaguing many other industries and also investigate possible abuses of international tariff agreements between China and the U.S. The Trump administration dramatically increased protective tariffs on the import of solar photovoltaic panels and components from China. The Biden administration reduced this impact but did not eliminate those tariffs. Recently, reports have observed that China is circumventing the tariffs by using other Asian countries as conduits for the export of Chinese products to the U.S. A U.S. Commerce Department investigation into the practice is disrupting the flow of solar panels into the U.S., and in response to it, solar projects are being delayed.
Atlanta, Georgia-based utility southern company alone has delayed, for at least a year, nearly a gigawatt of solar energy projects. The principal U.S. solar trade organization, the Solar Energy Industry Association (SEIA), has given the warning that if existing tariffs are expanded, a serious slowdown of installations will occur and the loss of thousands of clean energy jobs. The SEIA has conducted a survey of solar panel manufacturers and installers and found that about 80% of the participant firms are experiencing delays and cancellations of orders for both panels and cells.