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The demands of measures such as the Uyghur Forced Labor Prevention Act (UFLPA) mean that solar panel prices in the United States can double those in Europe.
In the last two years there has been an increase in the production of photovoltaic modules. Clean Energy Associates (CEA) forecasts a 15% increase in annual solar production capacity through May 2025, compared to 8% more demand.
Several factors have contributed to this imbalance. The prospect of new antidumping and countervailing duties (AD/CVD) from the US government, with new countries potentially affected, further complicates the picture for solar module buyers.
With elections scheduled in the United States in November 2024, further political upheaval is possible.
Tariff changes
Developers have enjoyed falling prices for the first time in a long time, but new tariffs could drive up prices in the United States despite abundant supply.
The worlds largest solar module manufacturers are accommodating UFLPA restrictions to ship more product than expected, and U.S. module production is expanding. New manufacturers based in the United States and other countries not affected by AD/CVD - such as Turkey and Indonesia - would take time to adapt to the new trade policy, as occurred after the introduction of the UFLPA.
Solar energy developers may need new suppliers and will have to step up quality assurance and factory acceptance testing to ensure quality.
Technology in transition
The sector is in the midst of transitioning from passivated emitter rear cell (PERC) to tunnel oxide passivated contact (TOPCon) solar energy. Heterojunction (HJT) solar is changing, including in PERC modules, with new materials that make the panels more weather resistant. Historically, developers have had difficulty purchasing insurance for projects in hail-hit areas, such as Texas. A film can now be applied to the glass of the PV module during production to strengthen the products. However, these technological changes add additional risk to supply agreements.
Favorable conditions s
After a 24- to 36-month selling market, a change in trend could reopen favorable conditions for buyers. When manufacturers had the upper hand, promoters had a hard time convincing them that they were registered importers and, therefore, responsible for products crossing borders in compliance with the traceability requirements of the UFLPA of the Office of Customs and Protection. US Borders (CBP). When shipments are detained, the importer of record is the responsible party.
If the buyer is the importer of record, they may have to pay for products held in customs. If the supplier is responsible, payments do not have to be made until the panels are in the country.
The buyer could integrate a liquidated damages for delay clause in the supply contract to avoid this situation. If a shipment is delayed because it has not cleared CBP requirements at the border, the seller would have to reimburse the buyer for any additional costs incurred.
Developers have to ask themselves: “If I decide to set the price, will these modules stay in warehouses for long?” This is one of the drawbacks of pre-planning and purchasing at lower prices. If a project is delayed, modules remain in warehouses where they can be moved repeatedly on forklifts, which can cause damage. However, developers can negotiate conditions that limit the risk associated with long-term storage.
There is also the risk of the technology becoming obsolete. In the past, developers have learned the hard way that when they have put away a lot of equipment - transformers and modules - it has sometimes resulted in projects being canceled or delayed long enough for the technology to evolve and their product becoming obsolete. As a result, promoters have had to resell the equipment for a fraction of the price they paid for it.
Regulatory uncertainty
Regulatory uncertainty poses another challenge. What will happen in the upcoming US presidential election and how will it affect solar equipment supply and production levels? Developers have to plan for this uncertainty, as well as think about keeping their projects on schedule.
The current increase in supply has occurred in such a short period of time due to tax incentives incorporated in the US Inflation Reduction Act (IRA) and manufacturers are locating in the United States to avoid import restrictions .
The world of construction and project development is not moving as fast as solar energy production and manufacturing. Even as problems in the development phase mount – projects are delayed, funding is not forthcoming, and planning regimes change – manufacturers continue to move full speed ahead.
The dynamics in Europe and the United States are very different right now because of the UFLPA. In Europe there is not yet a similar restriction, so the continental market is flooded with low-cost modules. The pricing environment is changing. In Europe, prices have dropped to $0.11/W of panel generation capacity. In the United States they are still around $0.24/W.
This price difference is due to the fact that many panel manufacturers are still unable to export to the United States, as they are still trying to resolve the UFLPA import process. The sector is creating a differentiated North American supply chain.
Products can go through the same facilities, but suppliers carefully separate those that require full traceability to go to the United States. Many modules stored in Europe lack the full traceability necessary for importation into the United States. |
