The USA policy must address equipment availability, solar development path risk and time, and power transmission and distribution interconnection issues.
When we started in 2008, if someone proposed at a conference that solar energy would repeatedly become the largest single source of new energy infrastructure in the United States, they would get a polite smile-with a suitable audience. But here we are.
In the United States and around the world, as one of the fastest-growing and lowest-cost new power generation sources, solar energy outperforms natural gas and wind energy.
In the first half of 2021, solar photovoltaic (PV) accounted for 56% of all new power generation capacity in the United States, adding nearly 11 GWdc of capacity. This is a year-on-year increase of 45% and the largest second quarter on record. This year is expected to be the largest new solar installed capacity in the United States
Currently, the country installs a new project every 84 seconds, employing more than 250,000 workers by more than 10,000 solar companies.
This growth is largely dominated by utilities, municipalities and enterprises. Bloomberg New Energy Finance estimates that by 2030, the 285 companies in the RE100 can promote up to 93 GW (approximately US$100 billion) of new wind and solar projects.
Our challenge is our scale. The increasing global demand for renewable energy and the continued electrification of the U.S. power and automotive industries will only increase the already important supply chain issues of everything from modules to inverters to batteries.
Freight rates at the Port of Los Angeles and U.S. ports have increased by nearly 1,000%. The unprecedented expansion of ERCOT, PJM, NEPOOL, and MISO’s internally developed assets has caused interconnection delays of more than 5 years, sometimes even longer, and system-wide planning or cost sharing for these upgrades is limited.
Many current policies focus on optimizing the economic outcomes of owning assets through independent federal investment tax credits (ITC) for batteries, ITC extensions for solar energy, or direct payment options.
We support these incentives, but they make it possible for projects that are at or close to commercialization at the “top of the pyramid” in our industry. Historically, this has been effective in pulling early projects, but if we want to expand as needed, it won’t work.
At present, about 2% of domestic electricity generation comes from solar energy. Our goal is to reach 40% or more by 2035. In the next ten years, we need to increase the annual development of solar assets by four or five times. A more persuasive long-term policy approach must also focus on development assets that will become seeds of the future.
In order to sow these seeds effectively, the industry needs to be more transparent in cost forecasting, more confident in equipment procurement, more stable and transparent in its perception of interconnection, infrastructure and congestion, and in helping utilities make long-term plans and investments. Have an important voice.
To meet these needs, federal policy must address equipment availability, solar development path risk and time, and power transmission and distribution interconnection issues. This will enable our industry and investors to appropriately allocate risk capital among a large number of assets.
The development of solar energy requires less dualization and faster development to promote a larger and broader asset base at the “bottom of the pyramid” in the industry.
In our 2021 letter, we highlighted three bipartisan priorities that will help achieve U.S. decarbonization goals: (1) immediately reduce solar import tariffs (and find other ways to incentivize long-term U.S. manufacturing); (2) ) Co-investing with utilities and RTOs in aging transmission and distribution infrastructure; (3) Implementing the National Renewable Energy Portfolio Standard (RPS) or Clean Energy Standard (CES).
Eliminate solar import tariffs that threaten the speed of deployment. Solar import tariffs have greatly restricted the growth of the US solar and renewable energy industries, putting the United States at a global disadvantage, and questioning our ability to achieve the goals set by the Paris Climate Agreement.
We estimate that 201 tariffs alone will add at least US$0.05/watt to each project’s engineering, procurement, and construction (EPC) forecast, while domestic manufacturing has limited growth (if any). Tariffs have also created huge uncertainty and exacerbated pre-existing supply chain problems.
Instead of tariffs, we can and should encourage domestic production through incentives such as production tax credits. We must ensure the availability of supply-side materials, even if they come from China, and also pay attention to forced labor and other violations of human rights.
The combination of tailor-made regional trade solutions for specific bad actors and SEIA’s leading traceability agreement is a good starting point and a pioneer in the solar industry. Tariff fluctuations have greatly increased the costs of our industry and weakened our ability to plan and expand in the future.
This is not a priority for the Biden administration, but it should be. Climate change has repeatedly become the most important issue for Democratic voters. Solar energy is our most important tool to deal with climate change. Tariffs are the biggest problem facing the industry. The removal of tariffs does not require Congress’s approval or action. We need to remove them.
Support aging infrastructure upgrades. One of the biggest obstacles to expanding the scale of renewable energy is the existence of outdated and aging transmission and distribution infrastructure. This is a well-known problem, and grid failures in California and Texas have become more pronounced recently. The bipartisan infrastructure framework and budget coordination plan provide the first comprehensive opportunity to build a 21st century power grid.
Since 2008, solar ITC has led a period of significant industry growth. Infrastructure and reconciliation packages can do the same for power transmission and distribution. In addition to economic incentives, the package will also address some of the regional and inter-regional transmission issues required for the successful development of clean energy.
For example, the infrastructure package includes US$9 billion to assist states in selecting locations for transmission projects and to support the transmission planning and modeling capabilities of the U.S. Department of Energy (DOE).
It also includes financial support for the construction and modernization of the grid infrastructure across the eastern and western interconnection, domestic interconnection with ERCOT, and offshore wind power projects.
In addition, it instructs the Department of Energy to study capacity limitations and congestion when designating national interest transmission corridors, with the goal of promoting a nationwide version of the successful Competitive Renewable Energy Zone (CREZ) in Texas. This is exactly what must be done, and the government’s leadership in this area is commendable.
Adopt a congressional solution to expand renewable energy. With the release of the government’s new budget framework, as part of the federal budget coordination, Congress is unlikely to pass renewable investment portfolio standards, clean energy standards, and even the proposed Clean Power Performance Plan (CEPP).
But there are other policy tools under consideration that, although not perfect, will help promote a more sustainable future.
Congress is expected to vote on a budget coordination plan that aims to extend the solar investment tax credit (ITC) by 30% for 10 years and add 30% of new storage space to promote solar energy and other renewables Expansion of energy projects. ITC and an additional 10% ITC bonus for solar projects that show specific benefits to low- and middle-income (LMI) or environmental justice communities. These regulations are in addition to a separate bipartisan infrastructure bill.
We expect that the final package plan will require companies to pay current wages for all new projects, and may prove that the domestic content of the project, in addition to directly stimulating domestic manufacturing growth, will also incentivize companies that have a higher share of US-made components. The entire settlement plan is expected to create hundreds of thousands of new jobs in the manufacturing, construction and service industries across the country. Based on our internal analysis, we believe that 30% of ITC will effectively fund current wage requirements.
We are on the edge of the groundbreaking federal clean energy policy, which will fundamentally change the pattern of renewable energy, especially solar energy. The current infrastructure package and settlement bill provide a strong and promising catalyst for the redesign and reconstruction of our national energy infrastructure and transportation network.
The country still lacks a clear roadmap to achieve climate goals and market-based frameworks such as RPS to implement these goals. We must act quickly to modernize the grid through collaborative efforts with regional transmission organizations, FERC, utilities, and industry. But we are working hard to create an energy future, and many of us have been working hard.
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Post time: Oct-29-2021