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8 June 2022

Biden uses energy emergency to undo solar mess

US President Biden has declared an emergency concerning the US power supply and has invoked the Defense Production Act to boost domestic solar manufacturing, while announcing a two-year lifting of import duties on solar cells and modules from Southeast Asia. This comes after more than a month of warnings of power shortfalls from California, Texas’ ERCOT, the Midcontinent Independent Systems Operator (MISO), the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corporation (NERC).

Among other things, the White House’s Declaration of Emergency states, “In order to ensure electric resource adequacy, utilities and grid operators must engage in advance planning to build new capacity now to serve expected customer demand… Additions of solar capacity and batteries were expected to account for over half of new electric sector capacity in 2022 and 2023. The unavailability of solar cells and modules jeopardizes those planned additions”.

That “unavailability of solar cells and modules” refers to the Department of Commerce, which effectively shut down all imports of solar panels from Indochina, which make up 80% of the total US supply, with the announcement of its ongoing anti-dumping investigation in late March. Some 50 GW of solar developments were affected – indeed roughly equal to the solar developments of the remainder of 2022 and 2023. Auxin Solar, the company which brought the successful petition to the Department, says it is weighing its legal options against President Biden’s declaration.

The Department of Commerce released a statement on the president’s declaration which includes the following words: “The Commerce Department’s anti-circumvention proceeding continues uninterrupted, and whatever conclusion Commerce reaches when the investigation concludes will apply once this short-term emergency period is over. In accordance with the President’s declaration, no solar cells or modules imported from Cambodia, Malaysia, Thailand, and Vietnam will be subject to new antidumping or countervailing duties during the period of the emergency. Existing duties on Chinese and Taiwanese imports of solar cells and modules remain in effect.”

In relation to the invocation of the Defense Production Act, the Biden Administration boasts of $100 billion invested by the private sector in domestic EV and battery manufacturing, and claims the US is “now on track” to reach 24 GW of domestic solar manufacturing by 2024, up from 7.5 GW today. That depends on what the Defense Production Act achieves for the solar industry, with the Biden Administration having previously failed to pass manufacturing subsidies as part of the $1.75 trillion budget reconciliation quashed by Senator Manchin. And if such subsidies could not be passed now, they are even less likely to be passed after the looming Republican victory in the midterms.

The US does have First Solar, which has the better part of its global 10 GW CdTe photovoltaic manufacturing capacity within the United States. The US has Wacker’s 20,000-ton Charleston polysilicon factory, enough to serve up to 6 GW of Si photovoltaics a year when running full pelt, and it has a host of smaller manufacturers and start-ups – but it does not have much wafer or cell production, even if it is already on track for as much as 24 GW of module production capacity by 2024.

According to the Biden Administration, the Defense Production Act (DPA) will “accelerate domestic production of clean energy technologies, including solar panel parts” and “put the full power of federal procurement to work spurring additional domestic solar manufacturing capacity by directing the development of master supply agreements, including “super preference” status – we have yet to see what is meant by that phrase.

In April President Biden called upon a provision of the Defense Production Act to boost production of metals used in lithium-ion batteries, and this new invocation is not limited to solar power – it also covers transformers, grid components, heat pumps, insulation, electrolyzers, fuel cells, and Platinum Group Metal (PMG) catalysts.

Another pro-solar action recently taken by the Presidency without needing the recalcitrant Senate’s approval was to halve federal rents charged on solar projects built on public lands – a rule change from last week.

As for the projected power shortages across much of the US, the causes are varied. Those include high demand, several GW of likely power plant breakdowns, and several transmission lines threatened by wildfires, all thanks to uncommonly high temperatures – and there is a drought reducing hydropower reserves. Then there is the decommissioning of old fossil fuel capacity which has yet to be fully replaced by wind, solar and storage, and the disrupted world energy markets. Republican and Democrat FERC Commissioners have been arguing about where the emphasis should be placed – for the Republicans it is due to the decommissioning of fossil fuel plants, for the Democrats it is because of climate change and extreme weather.

The North American Electric Reliability Corporation (NERC) says over 9 GW of power plants may break down from extreme hot or cold in MISO and California each, plus another 2.9 GW in Texas – so while decommissioning power plants is never purely helpful, they are getting old and need to be replaced. The weather threat to transmission lines is not limited to California, whose exposed lines don’t just have to be shut down at times to avoid wildfires, but are sometime knocked out by falling trees in high winds. A tornado has also disabled a 1 GW transmission line connecting MISO’s north and south regions, which is to be repaired only later this month. In Texas’ case, six gas plants came offline in May due to hot weather.

In Texas the grid has already come under strain in the past week – with a price spike of $5,500 per MWh in Houston on Monday and 3,600 customers in Austin having their power cut on Saturday due to a demand surge. ERCOT has said it may seek several GW of “outage adjustments,” but so far rescheduling of maintenance at several power plants has sufficed. Since the February 2021 power cuts, ERCOT has been updating market rules to compel generators to report all forced outages, and since November a further rule requiring ERCOT approval for all planned resource outage requests, not just those made less than 45 days in advance, has been working its way through the regulator, and is now under consideration by the Public Utilities Commission of Texas.

In the MISO grid, the expected problems are most acute in the north, as described in its 28th April forecast of 124 GW of demand, 119 GW of supply. The utility has retired 18.3 GW of coal capacity since 2015, leaving it with 55 GW, while gas capacity has been stable. For scale, yesterday its peak demand was 90 GW. MISO’s forecasting now puts the state of Wisconsin, not normally one of the states with grid issues in a “high risk” category. A coalition of MISO’s industrial customers has filed a complaint with the FERC stating that they should be exempted from the capacity charges normally incurred when they cut back their power demand anticipating MISO’s expected shortfall.

MISO’s total accredited capacity – accredited means taking into account the varying reliability and capacity factors of different generation types – has declined by 3.2 GW in one year, even as expected peak demand has increased by 1.7%. MISO counts its 26.7 GW of wind power as just 4 GW of accredited capacity. Net accredited capacity is expected to further decline by 5.7 GW in 2023, according to ICF analysts.

One thing to consider here is the seasonal nature of peak demand in the US. For now peak grid demand comes in the summer, but as more and more demand is removed from the grid by distributed solar-plus-storage, it’s expected to flip to wintertime. Solar generation has seasonal variation with around twice the power output in summer compared to winter – so for now adding solar is exactly what’s needed. When peak demand is in the winter, each MW of rated solar capacity will be less powerful at peak times. By then solar’s costs will have come down a lot as supply chains are expanded. Right now renewables provide a disproportionate boost to generation in springtime, from wind and hydro.

As for manufacturing – the Declaration of Emergency states “The Federal Government is working with the private sector to promote the expansion of domestic solar manufacturing capacity, including our capacity to manufacture modules and other inputs in the solar supply chain, but building that capacity will take time.”

Meanwhile a team of House Republicans have published their preferred vision for energy strategy here. The document has predictable complaints such as the cancellation of the Keystone XL pipeline, constantly rising fuel prices, and dependency of Chinese imports for solar panels – even on Russia for more fuel than before, at least in 2021. It calls for more US production of energy and of rare earths.

What is more interesting is that aside from one sentence that calls for 4,400 pending Applications for Permits to Drill (APDs) to be approved, the document avoids explicit calls for more US fossil fuel production, and doesn’t mention coal at all. It certainly guides the reader to desire more fossil fuel production – but does so while touting hydropower and calling for 12 GW of new hydropower – which is all very well, but it’s not an energy strategy for 350 million people.

The Republican Party can be expected to reach majorities of 53 in the Senate and around 240 in the House in the midterm elections. Yet even as they head into what might be a very clear victory, with cost of living and cost of oil and gas being major factors, the party seems to feel the need to use hydropower as a clean energy rhetorical fig leaf. That shows the media power and popularity of green energy, when even its opponents make this kind of verbal concession as they seek to bail out fossil fuels, but apparently don’t dare try to discredit the whole energy transition.