Despite incentives, US manufacturers still could fall short of renewable, grid demand
US energy manufacturing is set to grow dramatically under the Inflation Reduction Act, but manufacturing capacity will still fall short in the near term to meet the needs of the renewable and transmission sectors, according to industry and government officials.
“What keeps me up at night is certainly a lot of the concerns around supply chain that we are hearing from industry,” Maria Robinson, the director of the Department of Energy’s Grid Deployment Office, said Oct. 13 at an event the American Council on Renewable Energy hosted.
The supply chain for grid components is even tighter now than it was earlier this year, Robinson said. The lead time for large-scale transformers is 90 weeks on average and the lead time for distribution transformers is six to nine months, she said.
“This is a great opportunity, at the same time, for the United States to get on board with greater manufacturing of some of these grid components here in America,” Robinson said.
The Inflation Reduction Act provided manufacturing tax credits for a range of products related to clean energy, including grid modernization equipment and components. DOE is also seeking public input on how to use the Defense Production Act to boost the production of transformers and other grid components.
Renewable sector concerns
The renewable sector also sees key bottlenecks in the US clean energy supply chain.
“I think managing expectations around capacity here in the US as it relates to steel and iron, modules, electrical systems, all of these different pieces, is going to be critical,” Jessica Lawrence-Vaca, vice president of government affairs at Solv Energy, said at an Oct. 12 meeting of the Energy Bar Association.
Solv is an engineering, procurement, and construction company building utility-scale renewable projects.
Already, US trade actions like tariffs and duties have put the brakes on US renewable development, Lawrence-Vaca said. Most developers and contractors have not seen any large-scale shipments of solar panels come into the US for the better part of 16 months, she said.
“There is not enough capacity here in the US to supply my company alone in the utility-scale market, let alone every other company that is out there,” she said.
The IRA is set to accelerate solar deployment to five times the 2020 rate of 10 GW of capacity, Lawrence-Vaca said. There could be as much as 49 GW of utility-scale solar added each year by 2024, she said. “That is an insane amount and that still is not going to get us to the goals the administration has set,” she said.
It will take two to three years to ramp up domestic production of modules, trackers, inverters, backsheet, and glass, Lawrence-Vaca said. And it will take three to five years for metallurgical grade silicon and polysilicon upgrades, ingots, wafers, and cell capacity to come to the US, she said.
“There is going to need to be large commitments from the developer community to actually purchase them before people are going to be able to really make those long-term commitments to move here to the United States,” Lawrence-Vaca said.
To win the maximum amount of tax credits under the IRA, companies need to comply with requirements for prevailing wage, apprenticeships, and domestic content. The last requirement will add further pressure to the domestic clean energy supply chain.
Proving compliance with these requirements will be up to the engineering, procurement, and construction sector, Lawrence-Vaca said. “This really is like a bit of a head explosion for every contractor out there because we are obligated to make sure that we are ensuring compliance for the developer, who is then getting the tax credit,” she said.