High Energy Prices And Supply Shortages Are Reason To Lift Solar Panel Tariffs

In San Antonio, Texas, CPS Energy has daily conversations and weekly meetings with its suppliers. It must ensure a stable flow of everything from transformers to gas risers to solar panels — the kind of equipment that keeps the lights on. The utility, though, says that nowadays, delays are the norm.

“We’re seeing delays in our bread and butter equipment,” says Rudy Garza, interim chief executive for CPS Energy, during a webinar hosted by the United States Energy Association in which this writer was a panelist. “It’s all about diversifying our supplier base. We’ve got more suppliers today than ever, although suppliers may not take on new customers because they do not have the stock. In the event of a hurricane, we need to maintain reliability. I’d love to go to Amazon AMZN -3.3% and order a transformer, but you still need a manufacturer willing to supply it.”

Traditionally, there’s been a six-to-10 week lead time to get equipment. Now it takes months, if not longer — a manifestation of the global pandemic; things ground to a halt for a year, and it takes time to get production up and running again. And while the supply chain crunch is hitting every part of the utility business, it has the potential to broadside decarbonization efforts.

All this makes President Biden’s action to remove the tariffs on foreign solar panels entering the country and to invoke the Defense Production Act to encourage domestic production of solar panels appear prescient. The goal is to combat climate change, lower costs, and prevent outages.

If CPS Energy can’t get solar panels, Garza says the utility must keep running other types of electric generation — even coal-fired plants. Reliability is paramount.

Supply chain issues are a significant problem. So is the labor shortage. The one-two punch is causing about a 20% increase in prices — everything from cold storage to solar plants, adds Ray Kowalik, chief executive of Burns & McDonnell.