How Are Supply Chain Issues Impacting Renewables?
There’s a growing interest in green energy and associated technologies. Individuals, companies and government leaders are starting to realize that investing in renewables makes sense currently and in the future. However, supply chain challenges could stifle adoption rates. Here are some issues facing the industry.
Solar Companies Hit With Shortages and Higher Shipping Rates
2020 was an impressive year for solar energy. Statistics for the United States showed a 43% increase in solar capacity compared to the previous year, its highest ever. There was also an 11% rise in residential installations. That was slightly lower than 2019’s 18% increase, but still a healthy amount of growth, considering how the COVID-19 pandemic caused so many disruptions. However, supply chain challenges could put the brakes on this momentum.
In May 2021, the CEO of renewable energy company SolarEdge revealed it had experienced a 100% increase in its ocean freight costs. The executive also noted that the organization’s prenegotiated shipping rates expired, driving prices up further.
Competitor Enphase Energy has similar supply issues, but the problems there are related to the widespread semiconductor shortage. Representatives said the lack of components would affect its second-quarter 2021 shipments. Conversely, reports from SolarEdge said the company had enough supplies secured to get through the second quarter without issue.
It’s also more challenging to source polysilicon and solar glass. For example, an examination showed that the April 2021 prices for polysilicon were 3.3% higher than the previous month’s rates. Trends showed they could get significantly higher, too. Analysts expect those shortages to resolve later in 2021, however. The supply chain does not consist of one-to-one relationships, so it’s crucial to consider all possible vulnerabilities within a network,
Issues Affect the Green Car Popularity Boom
Electric cars can also be considered renewables, particularly when people use green energy sources to charge them. Many drivers like the idea of plugging their vehicles in overnight and never having to budget for fuel again. They also appreciate the positive effects EVs have on emissions reduction. However, evidence suggests that a worldwide lithium shortage could hamper growth, especially in fast-growing markets like the United Kingdom.
Chris Berry, president of Washington D.C.-based strategic metals advisory firm House Mountain Partners, said: "The dramatic pace of U.K. electric vehicle sales growth runs the risk of slowing without a clear pathway to additional supply of lithium and associated battery metals." A typical lithium mine produces 30,000 tons annually. However, the renewables market needs approximately four new mines per year to keep up with demand. Plus, it takes seven years to locate and prepare another location.
British automakers are also faced with labor challenges linked to the so-called “pingdemic.”It poses problems because so many people in various industries get notifications about needing to isolate due to potential COVID-19 exposure.
Metals and Minerals Extraction Poses Challenges
Statistics indicate that more than 21% of supply chain executives cite visibility as their most significant challenge. When they have accurate, up-to-date data, it’s easier to set expectations for customers and the workforce. However, some resource shortages remain relatively far outside the hands of people who require the supplies. That’s certainly the case with difficult-to-extract minerals and metals. Renewables ranging from electric car batteries to wind farm equipment need them.
The International Energy Agency (IEA) examined the minerals and metals shortage and its impact on the electric vehicle market. One finding was that about 65 kilotons of nickel were needed to manufacture the electric vehicles sold in 2019. However, that amount will balloon to 925 kilotons per year by 2030.
The issues surrounding vital metals and minerals are not straightforward. The biggest challenge is not always a lack of supply but a shortage of people needed to extract the metals. Researchers are trying to develop alternative materials, but that effort is not a quick process.
Jordy Lee, program manager of the Supply Chain Transparency Initiative at the Colorado School of Mines' Payne Institute for Public Policy, clarified that the problem can sometimes span even further. He said, "We've never, in the history of ever, stopped extracting a resource because we ran out of it. It's always been for social reasons, economic reasons or environmental reasons. Even with oil and gas."
A related issue is that people in the U.S. began seeing mining as an unfavorable activity within the past few decades. That made the country more reliant on nations like China. There are ethical concerns, too. For example, much of the cobalt for lithium-ion batteries comes from the Democratic Republic of China and is often mined by child slaves.
A Lack of Vessels for Offshore Wind Installation Looms
The offshore wind market is booming, but it, too, could run into supply chain challenges. Although it’s not a problem yet, a shortage of offshore wind installation is expected by the mid-2020s.
An analysis by Rystad Energy found that the global fleet of wind installation vessels will be insufficient to meet demand by 2025. The organization also expects installation vessel demand to be four to five times the current level by 2030.
Another worrying finding in the report was that there were only four vessels able to handle next-generation wind turbines as of late 2020. A related change was that, from 2014 onward, wind turbine sizes got substantially larger, especially in Europe. The resulting bulk needs larger crane capacities and equipment with higher lifting heights.
Although this is not an immediate concern, it’s something supply chain managers in the renewable energy sector must begin examining and looking for ways around the potential problems. Planning makes it easier to address any issues that arise by applying the most practical solutions.
Labor Shortages Threaten Renewable Energy Expansion Goals
A lack of skilled workers may also curb efforts to move ahead with renewable energy efforts. After all, training cannot happen in a few hours. It’s typically necessary for people to enroll in programs and then eventually get certified to work in roles such as solar installers.
In the summer of 2021, representatives from small businesses in the clean energy sector appealed to members of Congress about needing help finding enough installation workers now and in the future. Some companies have internships, but those alone will likely not suffice.
U.S. President Biden set a goal of using 100% clean energy by 2035. For that to happen, the number of workers who currently spend half their time on solar power would have to quadruple by that year and total more than 900,000 individuals.
In-house training programs at clean energy companies will certainly help get closer to that lofty goal. However, making more significant progress will likely only happen if there’s a bigger push within the nation’s educational system to present the market as an appealing employment opportunity.
Many people initially think of supply chain challenges as a lack of physical products. Those problems are a factor, but the examples here show that having enough trained workers to meet demand is also crucial for a well-functioning supply chain.
Awareness Can Spur Future Action
Renewable energy’s future is not wholly bleak. After all, people are diligently looking for solutions to issues like mineral shortages and insufficient workforce sizes. Many of those efforts should eventually pay off and provide more resiliency for the industry. There’s no easy or quick way to fix these supply chain challenges. However, recognizing that these obstacles exist makes it easier for affected parties to look for potential solutions.
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