CPV Supply Chain: more kinks in the links?
As the CPV segment grows in the US and across the globe, so do the supply chain challenges.We look at the factors impacting the CPV supply chain today and how companies are overcoming the kinks.
Seldom do you hear about supply chain disruptions in mature industries. Automotive and electronics manufacturers, for example, have advanced supply chain management practices in place to avoid production slowdowns.
Although the aerospace industry occasionally faces delays when building new jets, large manufacturers such as Boeing and Airbus have ironed out many of the supply chain inefficiencies that used to plague their industry.
The CPV solar industry has not been so lucky as of late. As the global market for concentrated photovoltaic (CPV) systems enters a phase growth, supply chain disruptions are likely to increase as well.
Kinks in the links
“If you think you can put something into place to avoid supply chain disruptions you will probably be disappointed, especially in solar,” says Rob Lamkin, the CEO of Cool Earth Solar.
“There is so much upheaval and things moving around in solar that the idea of having a nice steady smooth supply chain is nearly impossible.”
Growth is certainly one factor contributing to that. According to research firm IHS, worldwide CPV installations are expected to increase by 750 per cent between 2013 and the end of 2020. CPV installations are projected to rise to 1,362 megawatts in 2020, up from 160 megawatts in 2013.
“The CPV market is on the verge of a breakthrough in growth,” says Karl Melkonyan, photovoltaic analyst at IHS. “Costs for CPV dropped dramatically during 2013 and are expected to continue to fall in the coming years.”
Some suppliers may have trouble keeping up with the dramatic growth predicted by IHS, leading to an inflexible supply chain at times. “The industry is young and it’s growing fast,” notes Lamkin. “It’s a new industry, which puts additional stress on the supply chain.”
Industry growth is just one reason for supply chain problems. A number of elements exist that could result in a perfect storm of supply chain instability. Chief among them is the continued uncertainty over tariff wars between the US and China.
The US recently announced its latest round of anti-dumping duties on Chinese solar imports. The proposed duties are high as 165 per cent on panels and cells being imported from China. Although the move must still be confirmed, the situation clearly adds to the uncertainty that exists in the solar market.
“You’ve got trade wars going on between countries that you typically don’t see in other industries,” says Lamkin. “So placing tariffs on other countrie’ products has got be causing supply chain issues for some.”
According to a report in Reuters, an unnamed Chinese commerce official indicated that the trade friction could have major implications.
“"If escalating problems in the China-US solar industry are ignored, in the end it will damage up and downstream industries in both countries,” he told Reuters.
Another key consideration is the ITS cliff that hangs over the industry in the United States. The Investment Tax Credit is the US government’s primary strategy for promoting renewable energy. However, the ITC tax credits are set to expire in 2016, leaving solar manufacturers with the potential to see a dramatic dropoff in demand, unless the credits are extended. Such uncertainty is not good for establishing a stable supply chain.
Ken Johnson, vice president of communications for the Solar Energy Industries Association (SEIA), says that CPV faces the same project development timeline challenges that other utility-scale solar faces with regard to the solar Investment Tax Credit (ITC).
“Because the timelines for solar projects vary and can be uncertain, many developers are worried that their projects will not be online by the time the credit expires,” says Johnson.
“SEIA is supportive of a commence construction modification that, compared to a rigid placed-in-service date, would provide added certainty and flexibility that would allow more clean energy projects to move forward during the statutory duration of 30% Solar ITC.”
Power of partnering
With so much uncertainty existing in the supply chain, experts recommend partnering with suppliers that have strong reputations, are financially sound, and have policies in place to handle disruptions in supply when they occur.
Lamkin, for example, says that Cool Earth Solar forms deep strategic partnerships with its suppliers, offering much more than just a basic purchasing agreement.
Cool Earth is unique in that it owns no manufacturing facilities and purchases all of its components from third party sources. In that case, a stable supply chain is vital.
“With all these moving pieces and a shifting landscape, whoever we are getting our solar cells from better be more than just a vendor-supplier relationship,” says Lamkin. “It needs to be much more strategic and more of a partnership. We have key strategic partnerships to make sure film is there and available to us when we need it for our concentrators.”
While guaranteeing volumes and specific margins can play into that, the value add is not always financial.
“Sometimes you give them certain pricing or volume commitments,” says Lamkin. “But there are other things we can offer that provide real value. The partner that we buy our thin film plastic from uses those same products in other markets. We do a whole lot of testing with the films we buy. We do some very intense testing, and we offer them all of our data on film testing. By sharing that data with our film suppliers, they can use it in their other markets and in future product development. Feedback and test results on their products can be invaluable to a supplier.”