On October 27, the George Washington University’s Environmental & Energy Management Institute (EEMI), part of the university’s School of Engineering and Applied Sciences, hosted Timothy Kim, CEO of ibV Energy. Discussing the state of the solar market and likely accelerators as well as challenges, Timothy provided key context and insights to this esteemed group.
EEMI leadership-- comprising senior energy, environmental, and climate professionals from industry, government, as well as university faculty-- meets every two weeks with senior members of the institute to discuss both university-related issues as well as connect on key happenings and developments in the wider energy industry. EEMI brings together experts from GWU’s engineering, law, business, and public health schools as they work to advance the future of energy. As a part of efforts from EEMI leaders to stay plugged in on the latest trends and forecasts related to solar energy, they invited Timothy to share a state of the solar sector in light of the Inflation Reduction Act (IRA) and participate in a question-and-answer session with EEMI members.
Timothy, as CEO of ibV Energy Partners, shared the work the company has been doing in the renewable energy space, particularly in certain states and regions that have been slower to take up solar projects due to political or social barriers. After sharing the background and footprint of ibV Energy, Timothy dove into the specifics of the solar industry today from his perspective:
- The Good News: The Inflation Reduction Act (IRA) paved the way for 10 years of investment planning in the renewable sector and stabilized the investor market for renewables. Further, solar wins because energy storage is among the other technologies that is getting valuable tax credits. The renewable sector is now planning smartly for the next decade, and the pipeline of projects has measurably increased (about 4 gigawatts, GW, already announced) as that market certainty has brought investors once again into the fold. The IRA is also incentivizing American-made steel, bringing well-paying jobs and apprenticeships to the solar sector. The other good news for U.S. solar was the Solar Energy Manufacturing Act (SEMA), which brought panel manufacturing and jobs back to the United States. For now, the IRA remains a guidance document until the IRS and the other relevant government agencies fill in the specifics, but the market signals are already showing response to the legislation.
- The Bad News: That said, the United States remains behind the Biden Decarbonization Goals of 50% reduction by 2030. This lag has occurred because of various policies in recent years that have challenged the solar sector, including 1) the Section 201 tariffs on solar panels during the Trump Administration that were extended by the Biden Administration, 2) the Department of Commerce’s investigation on duty circumvention coming from the specious claim by a little-known U.S. solar manufacturer that halted imports for several months, 3) the implementation of the Forced Labor Prevention Act that led to gigawatts of panels being seized at the port to prevent import and causing major international solar manufacturers to stop sending any panels to the United States, and 4) the non-clarification on how “Made in the USA” will be defined as per the IRA. Because of these slowdowns, the 50% carbon reduction is likely to take until 2040 rather than the targeted 2030, if not later.
- State of Solar Energy Pricing: Renewables pricing is largely divorced largely from traditional energy pricing as it doesn’t rely on feedstock prices like fossil fuels. But that means it is commodities-driven for solar equipment, and solar prices have skyrocketed by up to 40% in some cases because of supply chain challenges that have persisted since the start of the COVID-19 pandemic. The expectation is that prices should settle by the second half of 2023, but any unexpected policy shocks could readily interrupt that price reduction trend. Watching solar price trends is critical not just for the economics but also because corporate procurement of clean energy is what drives decarbonization goals. Companies like Toyota and Dow, which ibV Eneryg is working with in Kentucky, and global corporate giants like Amazon and Google are the real drivers of clean energy deployment, but they are more sensitive to price and timelines than utilities. So as solar pricing goes, so to will rate of corporate procurement.
- Summing it Up: The IRA is indeed good news, bringing the solar sector finally on the right track. That said, while the IRA might not be inflationary, the policies that flank federal decisions can take air out of the sails for the solar industry and can stunt the otherwise growing trends in the sector.
After the presentation, EEMI members were eager to share with Timothy their questions as well. Key Q&A’s of note during this portion of the call included the following:
- Can you provide numbers on key points of modules and growth?
- Timothy: Over the next 10 years, there's a projected 480 GW of new solar capacity that is being projected to be installed. This year, that total projected is 15 to 17 GW, though about 35% of that will not be installed on schedule. The same trend is being seen on wind, and in fact every year for the last five years the sector has fallen short between 10% and 30% of projections.
- What are the delays in solar installations?
- Timothy: About 30% of the projects are delayed because of interconnection issues. Other projects get delayed because of pricing issues, stemming from the fact that it’s still so challenging to get solar panels into the market. Whereas a few years ago, an order of solar panels would require a six-to-nine week lead time, today it can stretch up to two years.
- What’s being done for equity amid the energy transition?
- Timothy: The IRA is heavily incentivizing and centralizing equity requirements. Projects that utilize tax credits, which will be almost all of them, will be incentivized to use apprenticeships that typically come from local community colleges and local training centers. We also know that solar industry associations have been pushing for including diversity equitableness into the industry and we believe the best way to do this is through the apprenticeship programs, not only during the construction phase but also during the operational phase. We also believe that not only our company, but the industry as a whole will be looking more towards DEI features within the development phase.
- How do we get cost of solar supply chain down?
- Timothy: You know, when I began in this industry in 2007, it used to cost about $4 per Watt to build a solar power plant. Fast forward to 2018, where it costs approximately $0.85 per Watt, and a lot of that was due to panels. Today it costs approximately $1.00 per Watt and we do not see that price. So the era of bottom dollar cost solar is over. But that is a good thing. It is a good thing because a lot of these solar projects that were projected for 1.8 cents or 2.2 cents per kWh were never built. Such projects were pipe dreams because it just couldn't have been built that way. There was always a race to the bottom. But the way the IRA is set up will be best to stabilize the price of solar, so it's not about moving up and down, but it’s about that stabilization that the industry needs.
- Will U.S. solar panel manufacturers be able to learn rapidly and compete?
- Timothy: Do I see U.S. manufacturers being as competitive as Asia? I see them being more competitive. We have to remember that solar panels were made in the United States previously. We once had a very robust panel manufacturing industry, both in the United States and also in Germany. That said, while it is possible, we don't suspect that that will happen once again until probably 2027 or 2028. The reason for this is that the next generation of solar technology is going to be where U.S. manufacturers can differentiate from Asian manufacturers, who are already dominant with the current technology.
- Why doesn’t the United States appear to have a concrete plan of retiring coal units for the energy transition, a coal-closing plan, like other nations?
- Timothy: Let's keep in mind that there's been over 300 coal plants have been closed since 2015, 100 GW have gone offline since 2010. During the last two years, what we've seen is that planned retirements have been extended and delayed. They're being extended out because the volatile nature of the policies in the renewable energy policy world, as was the trend before the IRA. So while the United States does not currently have a comprehensive national coal-closing plan, this is also due to the fact that there are seven markets energy markets in the United States. There's actually a lot more, but there are seven mainstream wholesale markets, and each of these markets have dozens of utilities and rural electric co-ops that have their own plans as well. So, we are fractured in our approach to retiring fossil fuel. However, we do see that fossil fuel retirements are happening, just in an unclear manner. We do see in Europe there is a consolidation of the power markets and moving towards more merchant based activities. In other words, building a power plant, a solar power plant, or a wind power plant without having a contract with a utility. I think that once we go down that road in the United States, we will see a greater level of competition amongst fossil fuel versus renewables, and a consolidation and resource planning.