Hilton and Lund Discuss Reasons Supply Chain Issues Won’t Stop Solar Industry Expansion

Energy development attorneys Seth Hilton and Morten Lund contributed an article to Reuters Legal News titled “Supply chain woes won’t stop solar industry expansion,” published December 1, 2021. The authors outline several factors that are causing disruption to the supply chain feeding the U.S. solar industry and why they believe it to be a near-term issue that won’t ultimately halt the rapid growth in numbers of solar installations.

The authors give a real-world example of an event impacting the supply chain to U.S. solar companies — a prohibition placed by the U.S. Customs and Border Protection on the import of products made with materials from a Chinese company located in a province where forced labor violations are alleged to have occurred. The prohibition has two immediate effects – it removes a major supplier of materials used to make solar modules, and it can delay importation of the modules until they are determined to not be subject to the prohibition.

The impacts would be compounded were other Chinese companies to face similar prohibitions, and if China takes any retaliatory actions in response, the result could be a renewed and broader trade war. The authors note that resulting concerns about the sustainability of the current module/silicon supply chain are happening in the greater context of supply chain issues caused by the pandemic.

The resulting higher price of modules has led in some cases to the cancellation of projects, particularly large ones. The largest effect has been in low-price markets without mandates, such as Texas, while markets with mandates that make them less price sensitive are less affected. Though increased module prices may cause a near-term dip in overall installations, much of the U.S. solar market is either driven by mandate rather than price, or, in the case of residential or commercial installations, is able to absorb some price increase on modules, and the authors expect the number of installations to continue its rapid growth after the dip is over.

Hilton and Lund conclude: “We are not suggesting that the silicon shortage should be treated casually. We are suggesting that this is not a crisis. It is not unrealistic to believe that the industry will survive this shortage just fine — it is unrealistic to believe that the solar industry growth curve would continue its upward trajectory without an occasional blip. This is a blip.”