The current global energy crisis has generated a new surge of enthusiasm about the future of renewable energy. Advocates of solar and wind power are seizing this moment of rising prices and tight supplies for fossil fuels due to war in Ukraine — coupled with record-shattering heat waves around the world and warnings of power shortages to come this summer — to argue for accelerating the move to clean energy. The unprecedented blowup of traditional energy practices, they say, makes this the absolutely right time to shift the transition into a higher gear.
Indeed, the immediate future for renewable energy looks bright: 320 gigawatts of generating capacity, led by solar and wind, are projected to go on line this year, according to the latest report from the International Energy Agency.
But the race to turbocharge the shift to clean energy has been slowed by unforeseen obstacles — in the form of trade policy and business model hiccups. How these speed bumps are navigated will determine if the speed of adoption for solar and wind power can be increased or whether the projected rapid growth will stall out — a crucial issue as increasing alarms are being sounded that limiting a rise in global warming to the target of 1.5 Celsius is in question.
Just how dark are these storm clouds? Chief among them is a lawsuit that has canceled or delayed more than 300 solar projects in the U.S. A legal action filed by Auxin Solar, a U.S. solar component manufacturer, has triggered an investigation by the U.S. Department of Commerce into whether China is evading U.S.-imposed tariffs by re-shoring solar panel production in other Asian countries. It turns out that Cambodia, Malaysia, Thailand and Vietnam provide 82 percent of the solar modules most commonly used in the U.S. Auxin claims this equipment is really Chinese in origin. "Chinese manufacturers make 63 percent of the polysilicon used in most solar panels globally, and more than two-thirds of the wafers that are the next step in the manufacturing process," according to energy consulting firm Wood Mackenzie.
This case has my attention, we are focused on it, and we’re doing everything we can to move it as swiftly as we can in the confines of the law.
Auxin’s petition argues that these components from Southeast Asian countries are actually being provided by Chinese-owned and managed companies that have moved production to those other countries to avoid tariffs on solar cells and panels imposed by the U.S. government in an effort to support domestic manufacturing. This, says Auxin, a small manufacturing company (less than $10 million in revenue, with 30 employees) based in San Jose, California, is unfair competition and should be investigated and the situation corrected.
At the bottom line, of course, are the economics of solar manufacturing. Chinese companies have produced large volumes of solar components at low prices for some years, resulting in that country effectively cornering the market. With higher costs and less government support, U.S. and European Union manufacturers have been unable to compete on price.
Chinese officials point out that financial support by the U.S. and European countries to clean energy companies does exist in the form of grants, loans, and tax credits — however limited they might be by comparison with China’s fully backed governmental largesse. As for the outsourcing of production, the Chinese solar industry could argue the wisdom of diversifying in an age of supply chain disruption, much of it due to the pandemic. Their Exhibit A is the effect of the current widespread lockdowns due to COVID outbreaks within China. The country’s solar power industry is seeing a "severe impact" from the strict pandemic control policies, slowing both production and installations, according to the Shanghai Solar Energy Society.
The problem is imports of solar components from Southeast Asia to the U.S. have been halted until the Commerce Department completes its investigation. Overseas manufacturers are concerned about the potential of retroactive duties being levied if the agency finds that anti-dumping rules are being violated. The current impasse has resulted in 318 solar projects in the U.S. being canceled or delayed due to lack of equipment, according to the Solar Energy Industries Association. The hit to the industry threatens to become a big one, says a Rystad Energy analysis: 64 percent of 2022 U.S. solar projects are "in jeopardy."
A solution is in the works. Gina Raimondo, the U.S. Commerce head, has promised to move "swiftly" to look into the issues. "This case has my attention, we are focused on it, and we’re doing everything we can to move it as swiftly as we can in the confines of the law," Raimondo told Bloomberg, a day after calling the issue an "urgent" matter. The idea of a "timely" report from a federal agency may raise an eyebrow or two, but the pressure is on: 22 senators have sent a note to President Joe Biden asking for a quick resolution of the conflict. A "swift" decision would allow the entire U.S. solar industry to rev up back to full speed.
Meanwhile, the wind power industry faces its own headwinds. Issues cover the waterfront, in some cases, literally. Off the Carolinas on the East Coast, the Interior Department is auctioning development rights to a 110,000-acre site that could generate more than 1.3 GW of energy from wind power. It’s part of the Biden administration’s plans to build out 30 GW of offshore wind power by 2030. More sales are planned for areas off the coast of California, the central Atlantic region and the Gulf of Mexico to achieve the ambitious goal. The effort will need broad support, as the U.S. had just seven offshore wind turbines installed as of 2021, compared with 5,852 in Europe, according to the Global Wind Energy Council industry association.
The problem is many areas being put up for offshore leasing are a prime focus of commercial and recreational fishing businesses. How to compensate these fisheries for additional costs and/or complete loss of business? A solution exists — so valuable are these leases that wind developers are making private settlements with local fishing groups. For example, the company behind the $2.8 billion Vineyard Wind project off the Massachusetts coast has allotted $40 million to the local fishing industry. From a government policy angle, the American Clean Power Association has suggested that compensation for fisheries could come from funds raised from the lease sales.
A knottier issue relates to the bottom line for wind power companies. Today, makers of turbines are struggling to translate soaring demand into profits. Big players, including Vestas Wind Systems, GE and Siemens are "reeling from high raw material and logistics costs, changes in key clean-power subsidies, years of pressure on turbine prices and an expensive arms race to build ever-bigger machines," reports Bloomberg.
The answer is a business-like adjustment to a business problem. The companies plan to "compete for fewer projects in fewer markets, raise prices, streamline their product lineups and cut manufacturing costs." Notice that they do not say they are quitting the field altogether. The prospects for profits from an inevitable clean energy transition are too assured to abandon, especially as the skyrocketing prices of fossil fuels look to continue long in the foreseeable future, making renewables more competitive.
So, headwinds for renewable technologies, sure, but paths to navigate them exist and will be taken. Shifting the concept of a global energy industry historically based on fossil fuels into a clean energy reality on the ground has its twists, but its ultimate success is as certain as anything in a world that displays uncertainty at every turn.