Graphics Credit: Freepik
By Ryan Li
The solar energy industry in America is doing very well for itself right now. The annual amount of electric power generated through solar has almost quadrupled in the last six years, rising from 25 billion KWh in 2015 to 91 billion KWh in 2021 (Statista). Thanks to competitive bidding markets and various state Renewable Portfolio Standard incentives, solar energy production is projected to quadruple in the next decade. Even areas with governments unsupportive of adopting renewable energy are transitioning to solar despite the lack of state incentives. Wisconsin and Indiana, for example, have seen their annual solar installations grow sixfold in the last year thanks to solar’s sheer affordability. Yet, America is still facing two problems in its quest to become a super sustainable sun-run society: supply shortages and interconnection queues.
The first problem is pretty easy to wrap your head around: We can’t actually make our own solar panels. According to the National Renewable Energy Research Laboratory (NREL), the United States solar cell manufacturing capabilities have fallen from thirteen percent of the world’s supply in 2004 to below one percent in 2021 (NREL ). In particular, the small-scale development of polysilicone crystals has led to production bottlenecks in the United States (Wood Mackenzie). American solar developers instead rely on China—home to more than 60 percent of the world’s photovoltaic (PV) module cell manufacturing—as their main source of solar PV material.
However, this relationship is perilous. In June, the Biden administration announced a ban on Hoshine Solar, one of China’s leading solar manufacturers, over reports of human rights violations in Xinjiang. “Our environmental goals will not be achieved on the backs of human beings in a forced labor environment,” U.S. Energy Secretary Alejandro Mayorkas said in a press briefing (AP News ). Yet, in order for the U.S. to remain consistent with this policy, it would need to achieve a manufacturing capacity that is far beyond what it could do today. Owing to pandemic-related shortfalls in exports of steel, copper, semiconductor chips, and aluminium, mainstream PV modules have seen a slight uptick in average price starting September of last year (PV Magazine).
This supply problem weighs especially heavily on companies developing big projects that have between 10 and 200 MW of generation capacity. These larger solar developments—called utility-scale projects—typically provide power to between one thousand and 30 thousand homes each (Lewis and Clark University). The vast majority of utility-scale projects are commissioned by utility companies (think Con Edison or Pacific Gas and Electric). The utility company typically does not operate the solar facility themselves, but instead agrees to a Power Purchase Agreement (PPA) with the developer. These agreements dictate that the utility buys electricity from the solar developer at a fixed price. According to the Solar Energy Industries Association, PPAs are long term contracts, with effective durations of between five and 20 years (SEIA). Because of the long-term effects of these arrangements, solar developers have found themselves charging more to cover supply costs. The consulting firm LevelTen Energy reported that PPA prices have been “creeping upwards now for over a year” (Utility Dive), and that Q1 2021 experienced a 2.6% increase in average PPA price.
The second problem that the U.S. solar industry faces is a bit more complicated. Slow interconnection queue responses have led to a bottleneck in project development. Put in simplest terms, the American electric system was not designed to handle so many projects at once. So for now, it’s backed up.
Much of the American electrical grid is split into “Regional transmission organizations (RTOs)” run by six nonprofit Independent System Operators and one private company. Each RTO controls and manages the electrical grid in a geographical area within the United States (FERC). When a distributed energy project—like a solar field, for instance—wants to start producing energy for that grid, the energy developer must submit a request for an interconnection impact study conducted by the RTO. These studies can take years, leading to long queues and costing the developer in question millions of dollars in lost revenue. The PJM grid, for instance, which covers most of the mid-Atlantic east-coast states such as Pennsylvania and Virginia, has over two thousand projects—totalling in over 50 GW of capacity—pending impact study (PJM). According to Canary Media, the estimated interconnection queueing time for utility-scale projects has gone up from 1.9 to nearly 3.5 years in 2019 (Canary Media). Moreover, only 15 percent of projects are approved even after this waiting period. These significant bottlenecks will only worsen as more renewable energy developments are expected to be constructed to meet the Biden administration’s ambitious goal to achieve 100 percent renewable energy by 2035. The U.S. solar PV industry remains one of the fastest-growing in the energy market—projected to grow from 11 percent of America’s distributed power to 48 percent (Statista). Yet, for this growth to be financially and economically robust, it is imperative that issues of almost non-existent domestic PV production and cumbersome interconnection processes must be resolved. □