Our top three takeaways from the Solar and Energy Storage Summit 2023
Head of Global Solar
Latest articles by MichelleView Michelle Davis's full profile
Now in its sixteenth year, Wood Mackenzie’s annual Solar and Energy Storage Summit has become a key event in the industry. Over the two days of this year’s conference, executives and thought leaders discussed everything from domestic supply chain challenges to community solar best practice to optimising operation and maintenance for storage projects.
Our latest insight presents the thematic highlights from the conference, along with our analyst’s views on their implications for the solar and energy storage sectors. Fill out the form at the top of the page to download the full insight, or read on to get a quick summary of three key takeaways from the event.
1. Everyone is wrestling with the IRA’s domestic content requirements
Buyers are keen to make the most of the tax incentives for domestic content available through the Inflation Reduction Act (IRA). However, developing an effective US-based supply chain will take time and money. At the same time, greater clarity is still needed regarding exactly what equipment qualifies for domestic content requirements.
Based on current guidance, solar asset owners would need to use US-made cells to qualify for the additional 10% domestic content bonus adder, or be willing to pay a significant premium. The problem is that there is no silicon-based solar cell manufacturing currently operational in the US. As of 2021, 85% of photovoltaic cells were made in China, with a further 12% manufactured elsewhere in APAC.
For energy storage, US-made battery cells and modules may be more expensive than imported modules even with the domestic content bonus adder applied. What’s more, initial production won’t be available until late 2024 at the earliest, and will only meet a small fraction of demand. However, despite the cost and long waiting times, the security of supply provided by domestically-produced equipment means the next few years of US manufacturing capacity are already accounted for.
2. Supply chain constraints are still top of mind, but solar module pricing should decline
While US solar manufacturing capacity will be oversubscribed and supply chain constraints are still an issue, it’s not all gloom for asset owners. Additional solar module and polysilicon production capacity should reduce module prices and translate to lower overall system pricing (polysilicon is the raw material used in the manufacture of solar cells). We expect system costs for distributed solar generation projects (both residential and commercial) to start declining this year, while utility-scale solar costs should fall in 2024.
3. Interconnection is the next big challenge for grid-scale solar and storage
As well as delays caused by supply chain constraints, interconnection queues are a major issue for grid-scale solar and storage. Application backlogs mean some developers will wait years for facilities to become operational – with obvious implications for project economics.
The boost to new project development provided by the IRA only exacerbates the issue – particularly the Investment Tax Credit for standalone storage systems. This is encouraging developers to explore opportunities that weren’t previously economically viable, and to overbuild now rather than augmenting projects later.
Concerted effort will be needed to reform interconnection processes so grid operators can approve applications more quickly. Proposals are underway at the Federal Energy Regulatory Commission and at the Integrated System Operator (ISO) level. However, a one-size-fits-all approach may not work across varying geographies and market structures.
Don’t forget to fill out the form at the top of the page and download your complimentary copy of the full insight, which includes further analysis of these themes and the way forward for solar and energy storage in the US.