The Point of 232. Stop relying on foreign made solar panels and create a domestic manufacturing ecosystem. Through a series of duties and tariffs, the US has built out a supply chain for domestic module assembly, nearing 60GW and growing while starting a cell manufacturing ramp up. There is a hopeful mission that can be written as a headline with an undertone of shifting margin to a few companies that are taking victory laps for the 232 proclamation that gives domestic suppliers room to breathe in that 40cent per watt range. I don’t know that this is the end of the road though and whether the runway exists to drive the Capex for the full build out of the domestic supply chain given the ITC and 45x sunsets.
Fixing The Downsides. The cost of modules is going up and that’s going to hurt the economics of every project that isn’t taking delivery by December, which means they’ve likely already ordered the modules. There are a couple of things that are worrisome, first is the 10-15cents per watt that projects will have to absorb, second is what happens to the projects that are circa 2030 and don’t have an ITC to support the current off take levels pre-232 costs and third is how the manufacturers will raise the capital for the Capex of the production plants. If you take all of those into a simple umbrella, the solar industry is looking at a future that needs an extension of the ITC and 45x, ideally soon. Soon, so that certainty allows for capital to continue to be invested for projects and manufacturing. The reality is that there is significant pressure on PPA itself with most of you being told that off takes will have the need to adjust the pricing, a message that I am being told you should be pressure checking because the people in the room don’t know how likely that is.
Scenarios Of 2030. Here are the variables I am thinking about in the Post ITC, post 45x world. How will the domestic market look and what is the total demand for solar in 2030 and beyond? What elasticity do we see in the PPA market from the utilities, CCAs, corporate off takers? How close will the solar+storage LCOE get to the gas turbine LCOE for the data center universe? What does the development success for data centers look like given the local opposition? Will the solar industry and Congress come together to find a way to extend the ITC and/or 45x or does the industry stay on the sideline?
Wakeup Premium. I am soft launching this to figure out the back end of this concept. Here’s my idea, to take this dialogue of the SolarWakeup commentary into a smaller group for a ‘micro-consulting’ concept, giving you another voice/opinion/data point to consider in your day to day, then shape the topics that are most important to you for me to consider writing about. You can find the signup on the SolarWakeup website if you desire to get involved early, you’ll see this commentary shifting into a separate mailing list in the coming weeks.
- Bloomberg: The US Has a New Tactic to Challenge China’s Solar Dominance
- PV-Magazine: Sunset of ITC means solar PPAs will do more heavy lifting
- Utility Dive: Siemens’ gas turbine backlog nears 70 GW as company expands manufacturing
- Reuters: Mapping America’s mammoth power machine
- CNN: Americans are rallying against data centers. Surprisingly few are actually getting built
- Axios: The U.S. just had its hottest month on record
- PV-Tech: Sunrun solar-plus-storage capacity additions up in Q2, trims forecasts
- Canary Media: In North Carolina, rooftop solar is alive and well despite headwinds
Opinion
Best, Yann