US' green energy ambitions losing spark

Editor's note: Clean energy projects have encountered setbacks in the United States. China Daily examines the faltering progress in the country's transition from fossil fuels.

Across the United States, big renewable energy and battery projects have been delayed or canceled due to supply chain constraints, rising prices of materials and increased tariffs on solar panels. The setbacks dealt to the country's green energy ambitions could even jeopardize its lofty climate goals, industry experts say.

The delays started in 2021 when solar installations came in at levels lower than expected. Developers have postponed 13 percent of the planned projects for 2022 by a year or more or canceled them outright, according to a report by the Solar Energy Industries Association, or SEIA, in April.

In recent months, several major battery projects meant to store power on the grid also have been reported postponed, scrapped or renegotiated.

Among them are six clean-energy projects of Central Coast Community Energy, a community-owned public agency in California. The projects, including 122 megawatts of storage, were expected to come online in 2022 and 2023, but the developers have warned of delays of between six and 12 months.

Another project, the Big Beau solar and storage project under development in California, recently wound up in court after its developer, EDF Renewables, asked to increase the price by $76.8 million, a 233 percent jump.

Early this year, Rhode Island's first utility-scale battery storage facility was scrapped by the developer. The 140-megawatt project was meant to be a key component of renewable energy sources.

In Hawaii, utility company Hawaiian Electric also is experiencing delays in solar and storage projects designed to replace the state's only coal-fired power plant. Developer Innergex Renewable Energy says it is seeking to renegotiate the terms of the deal－including price and timing－after receiving force majeure notices from its battery supplier, Tesla, according to Reuters.

Utility-scale battery storage is a necessary component for transitioning from fossil fuels to renewable energy, because renewable power such as wind and solar is intermittent and not able to continuously generate power, especially when power demand peaks in the evening after the sun sets.

Energy storage can absorb energy during abundant periods and provide power during peak hours, and the storage sources are mostly lithium-ion batteries, Gabe Murtaugh, storage sector manager at California Independent System Operator, or CAISO, told a webinar held by California Energy Storage Alliance, or CESA.

Energy storage makes up about 3 percent of operating clean energy capacity in the US and has been growing rapidly. Installations soared 170 percent in the first quarter to 758 megawatts, according to the American Clean Power Association.

CAISO has more than 3,500 megawatts of installed storage, according to Murtaugh, up from about 1,500 megawatts last year. The state government is calling for a massive buildout of storage to achieve its target of 100 percent clean electricity by 2045, he says.

California aims to have 50 percent of its power come from renewable sources by 2025, up from 33 percent in 2020, but it has not been able to match rising peak power demand in summer heat waves with new battery storage capacity.

"To get to that 2045 goal, we're going to need a very diverse mix of storage resources, and a lot of those storage resources are going to need to be long duration," Murtaugh says.

Crucial shortages

The slowdown in utility-scale battery installations is partly due to battery shortages. Prices for lithium-ion batteries have soared since last year on the back of costlier lithium and nickel, coupled with pandemic-induced disruptions to manufacturing and shipping.

"Lithium is a big deal in our world," Alex Morris, executive director of CESA, said at a workshop held by the California Energy Commission in May.

He says the lithium price changes are "significant" for developing a storage project because "there's usually a very competitive process and there are slim margins on it".

"The changes in the underlying and unhedgeable lithium carbonate costs will completely flip a project from lightly profitable to deeply unprofitable," he says. "So when you see these price spikes in lithium carbonate－like the 300 percent increase since last fall－you very quickly know that the projects will be underwater."

He says a 100-megawatt-hour battery configuration would have been priced at around $16 million last fall, but it would cost $23 million now. The 40 percent increase, excluding costs for other components and shipping, will "really much flip the project into negative returns and it's really catastrophic for the project", he says.

The industry also faces competition from electric vehicle producers that have robust demand for batteries. "The lithium-ion technology has been supported by electric vehicles over the last 10 years. We're still evolving and facing headwinds and the manufacturing base is not fully built to resist all of that," Morris says.

Aside from the battery shortage, uncertainty over potential tariffs on Asian imports has recently caused turmoil in the solar industry.

The US Department of Commerce announced in March that it would proceed with an anti-dumping circumvention investigation of solar cells from four Southeast Asian countries.

The investigation is a response to a petition by California solar company Auxin Solar, which accused solar-panel makers in Vietnam, Thailand, Cambodia and Malaysia of circumventing anti-dumping tariffs imposed on China by buying the same priced parts from China and then shipping them to skirt the duties that can range up to 250 percent.

The Commerce Department's investigation could take a year to resolve, but the industry has already felt the severe impact.

Seventy-eight percent of companies say they already had solar module orders canceled or delayed after the investigation was announced, according to a survey conducted by the SEIA on 412 firms in April.

Insufficient capacity

More than 80 percent of the domestic manufacturers say they expected severe or devastating impacts. Two-thirds of the respondents report that at least 70 percent of their solar and storage workforce is at risk and 56 percent of them say at least 70 percent of their current-year solar pipeline is at risk, according to the survey.

The SEIA's data shows that 84 percent of all US module imports come from the four countries affected by the investigation, and there is not sufficient capacity to supply US demand anywhere else in the world except China, which is already subject to tariffs of 40 percent to 275 percent.

If enacted, these new tariffs could reduce solar deployment by up to 16 gigawatts annually, and put 70,000 US solar jobs at risk, according to the national association.

The Auxin petition has also affected energy storage development. Since most energy storage projects are paired with solar, without the solar components, the energy storage components are likely to become uneconomical, according to the SEIA. Putting aside the economics, moving forward would require renegotiation of all project financing agreements.

The renewable energy and storage industries are also grappling with the effects of the "Uyghur Forced Labor Prevention Act" signed into law by US President Joe Biden in December.

The key to the legislation is "rebuttable presumption", which extends the import restrictions to any company that operates in Xinjiang Uygur autonomous region, a mountainous area in Northwest China, unless it can prove its shipments aren't tied to forced labor.

The act took effect on June 21. It has caused confusion for the industry, as "a lot of the industry folks are wrapping their head around what this means", Morris says.

Xinjiang is home to about 50 percent of the world's polysilicon production. Polysilicon is used to make solar wafers, cells and modules, which generate power from light as part of photovoltaic panels.

Despite China's denial of the accusations, US Customs and Border Protection blacklisted solar suppliers in Xinjiang in June last year and two-thirds of the solar modules used in the US became subject to the agency's sweeping detentions from August.

The American Clean Power Association, representing more than 700 companies in the solar industry, has warned that detention and the slow pace of the clearance process have come with a huge economic cost.

The trade group says nearly one-third of the planned utility-grade solar projects set for development in 2021 were delayed or canceled and further unnecessary detentions would translate into billions of dollars in lost economic opportunities and put tens of thousands of people out of work.

There are multiple steps regulators can take to help alleviate some of these disruptions, says Morris, but "the fundamental story is there are a lot of different issues, and each issue has its own discrete set of solutions".

The disruptions to clean-energy projects and utility-scale battery installations are likely to threaten the pace of the US transition from fossil fuels as the Biden administration has set a goal of reaching 100 percent carbon pollution-free electricity by 2035.

In California, a state that already relies heavily on renewable energy, the delayed or potentially canceled solar projects as well as the storage capacity could cause operators to extend the life span of fossil fuel plants, setting the state back in its ambitious goal of relying entirely on zero-emission energy sources for its electricity by 2045.

The Biden administration has announced it would waive tariffs for two years on solar panels from countries affected by the Commerce Department investigation, an attempt to revitalize solar installations.

The White House also announced funding of $3.16 billion to assist with battery shortage development in the country. Officials said the money would help domestic manufacturers make more batteries in the US to address the supply chain issues for components.

Industry experts said bringing a supply chain to the US would take years.

Even siting and permitting a US plant could take a year or more, while construction and production could take an additional one to three years, according to the SEIA report surveying the Auxin petition's impact.

Based on Chinese and Southeast Asian public filings, the association estimates the construction periods for cells and modules at 6-24 months and for polysilicon and wafer at 12-24 months.

Vanessa Witte, a senior energy storage research analyst with Wood Mackenzie, says building the manufacturing and raw-material capacity to meet that demand could take time.

A new mine, for instance, takes around five years to set up, while a battery manufacturing plant would require at least two years, she told Utility Dive, an energy industry news website. "These things just take time to catch up, and that's really been the source of the issue," Witte says.