Several global crises put enormous pressure on supply chains, compounded by challenges specific to different industries.
FREMONT, CA: Wind and solar energy represent a glimmer of optimism as nations worldwide strive to achieve ambitious decarbonization objectives. These renewable sources continue to be crucial toward attaining global net-zero carbon emissions by 2050 since they are carbon-free, naturally plentiful, and becoming more widely available. Stable marketplaces and robust supply networks are necessary for this quick expansion. Due to variations in the quantity, pricing, and availability of raw materials and frequent regulatory changes, the market for renewable energy has recently been very volatile. The practice of long-term capacity planning and achieving advantageous rates for significant amounts of raw materials have been particularly challenging by this lack of continuity.
In today's unstable environment, renewables developers and OEMs must overcome many challenges to reduce risk and create a more robust supply chain.
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Procuring resources: The tightening supply situation affecting the wind and solar sectors will only worsen as demand rises due to international decarbonization initiatives. High-power magnets, such as those made of the rare earth elements neodymium and praseodymium, are necessary for electric cars and wind turbine generators. Recycling will become increasingly significant, yet it can only supply 10 percent of the demand. Green steel is yet another illustration. Steel produced with little to no CO2 is becoming more and more appealing to the wind and solar sectors due to environmental, social, and governance (ESG) standards. But there are several obstacles to increasing steel manufacturing using hydrogen rather than fossil fuels. Large-scale facility building sometimes requires protracted attempts to get funding, design, and create specialized machinery. Parallel, steel companies must construct expensive electrolyzers or make long-term agreements to ensure hydrogen supply. In addition, substantial infrastructure improvements are needed, such as building a network of pipes to carry massive amounts of H2.
Optimizing production: Factory utilization rates in the sector have risen due to the rising demand for renewable energy sources. This may increase the susceptibility of supply networks to unforeseen catastrophes unless more capacity is supplied. Since 2020, capacity utilization rates have increased to 100 to 110 percent, leading to shortages and price increases due to factory accidents and floods that impacted polysilicon production. Significant investments are required across the renewable energy supply chains to increase capacity in step with demand and prevent significant supply-demand mismatches. The dominance of one area and the relatively small number of providers further reduce the robustness of the supply chains for renewable energy sources. Several providers' recent announcements of capacity increases will probably only increase their market share.
Transportation: It will need a lot of skill and equipment to install new wind and solar power capacity. But both are frequently in need of more supply for developers. EPC contractors have been selectively bidding on fewer projects due to a lack of skills, which has decreased competition and raised pricing for developers. Many developers are getting one bid for a project, which is more expensive than the typical six to eight. While solar developers' margins have been pressured, EPC contractors' have increased. The ships used to construct offshore wind turbines are another region with a restricted capacity. Although the size of the wind turbines for major offshore projects has increased, only a few boats have been modernized to handle their transport and installation. The Global Wind Energy Council only counted nine large-scale, including turbine boats with a capacity of more than ten megawatts vessels in 2020. The firms that can add this desperately required capacity are just a select group of well-established players. Only a few businesses want more heavy lift and jack-up installation vessels than three.