By Andy Klump

Twelve years ago, on December 8, 2008, amidst the worst financial crisis since the Great Depression, I founded Clean Energy Associates (CEA) from my small one-bedroom apartment in Shanghai. Since then, CEA’s team has grown to over 135 professionals across 12 countries and has supported over 65 GW of projects in more than 55 countries.

While I’ve seen a lot of ups and downs in the solar industry over the last 12 years, 2020 has left its impact unlike any others. Although no one could have planned the personal and professional challenges presented this year, I expect fewer surprises and much to look forward to in 2021.

Surprise #1: COVID-19, PV Supply Chain Disruptions, and Our Resiliency

Of course, the earliest and biggest surprise of 2020 was the COVID-19 pandemic. Leading into 2020, we were already expecting supply chain disruptions for US buyers due to significant technology changes and the uncertainty of the ongoing trade case, but certainly not to the level of every factory simultaneously shutting down across China almost overnight.

When the shutdown happened shortly after Chinese New Year, this grim reality impacted everyone working with the supply chain. While COVID-19 appeared to be almost singularly impacting China at the time, I and other CEA team members in China decided to relocate our families to other countries, as many thought that the entire global supply chain would come to a halt. However, almost as surprising as the shutdown, the reopening came much earlier than expected in China, but other international supply chains became more severely impacted.

By March, almost all Chinese factories were starting to ramp back up to standard utilization, but factories in Southeast Asia and elsewhere started to suffer due to travel and logistics restrictions. Many of these facilities wouldn’t ramp back up to higher utilization until later in the year, but still were able to meet the needs of the markets. At the same time, I expected demand would take longer to recover, but once again, the solar and storage markets were surprisingly more resilient than other sectors of the economy.

With the support of governments designating solar and storage as essential services and ongoing demand from many end users, project developers adjusted and continued installation plans. With a decrease in traffic and pollution, China and most other nations saw a glimpse of a less polluted world that solar, storage, and renewables plan to offer as air quality levels plummeted to surprising low levels. With more people working from home and many commercial offices shut down, electrical consumption dropped, and renewables grew as a percentage of overall usage while coal dropped dramatically. Governments and organizations took note and accelerated their renewable energy transition plans, supporting the solar market even further.

Unsurprisingly, the quality of solar and storage deployment still matters, so the rapid adoption of renewable energy requires an increased focus on supply chain efficiency and quality production. Established module suppliers with bankable brands are still being actively sought amid ongoing concerns about supplier viability in the face of oversupply, and the need for independent QA oversight is still paramount to many buyers who can’t visit factories themselves due to travel restrictions.

Surprise #2: Rapid Technology Advancements

Even without the pandemic, 2020 would have been an unexpected year for advancing solar and storage technologies. At the end of 2019, I didn’t expect the rate at which so many new product introductions and innovations would be adopted by manufacturers.

First, 2020 saw many developers embracing bifacial modules at a much faster pace than expected, and many manufacturers introduced products with larger wafers, half cut cells, and cells with multi-bus bars yielding higher power output modules. Even with some oversupply in inventory in the U.S. due to 2019 safe harbor procurement, we saw an increase in bifacial adoption, which was largely due to the unexpected extension of the tariff exemption period until later in the year.

All of these new trends increased the power and size of modules with many tier-one brands entering a virtual solar watt race in the same year. To reduce the costs of larger modules, it's somewhat surprising to see cell manufacturers standardizing wafer sizes at 182 mm and 210 mm sizes. What remains to be seen is how quickly the rest of the supply chain adapts to the new larger form factors.

Surprise #3: Ongoing Adoption of Renewable Energy within the Corporate Segment

Corporate buyers of renewables continued to expand beyond expectations, especially in Asia. While many large multinationals supported their ongoing commitments to renewable energy, the list of RE100 companies expanded by more than 60 new entrants, with nearly half in Asia Pacific. The CEA team has mirrored this trend with a large uptick in our client base in the Corporate segment in 2020 with greater demand in the future. 

Many leading technology companies started programs to bring transparent metrics to their supply chain and drive greater adoption of renewable energy usage even within their subcomponent suppliers in Asia.  As CEA expanded our team in several countries in Asia as well as with the opening of our Changzhou office, we are increasingly seeing more demand from multinationals seeking support with their supply chain needs, and CEA’s team is poised to meet this growth. 

2021 Predictions: Some U.S. Policy Uncertainty—But Certain and Significant Renewable Growth

If I had negative expectations for 2020 after the start of the pandemic, I was pleasantly reminded of solar’s resiliency, and 2021 promises to be an even stronger year. For many reasons, 2021 will be a record-setting year for solar and energy storage deployment in many key markets, especially in the US and China.

First, the world has begun the distribution of several COVID-19 vaccines, so a rapid deployment of the vaccine in the spring will lead to greater mobility among the workforce working on renewable energy projects. Further, with the new U.S. administration, a pro-renewables and climate mitigation platform will enable more legislative support for solar deployment. In addition, traditional energy companies, oil majors, and utilities are new segments supporting further investments in renewables, many for the first time. 

Moreover, the ongoing demand of corporate buyers of energy will continue, as roughly 20% of all new PPAs signed in 2020 came from the US corporate segment, and this percentage is expected to increase over time. Bloomberg New Energy Finance is predicting anywhere from $5 to 10 Trillion dollars of capital invested into renewables, which could equate to as much as $2 Billion of new investments per week, a sizable number. With the plethora of new SPACs and other investors who are entering this industry, we expect that developers and project investors will be able to access a lower cost of capital allowing this industry to expand rapidly in the coming decade.

Analysts expect more than enough global supply to meet new climate goals in the EU, which recently released its European Green Deal. More significantly, China just set aggressive carbon neutrality goals that will likely ensure a boom in 2021 that will be well beyond the previous record of 53 GW in 2017. Even with the temporary solar glass and encapsulant shortages resulting in a rise solar module prices, I’m confident that China will have record installations in 2021, perhaps as much as 70 GW.

Solar Policy Speed Bumps in the U.S.

While the incoming Biden administration will certainly be favorable to renewables, those hoping Biden will eliminate solar module import tariffs will likely be disappointed. China is still seen as a rival to U.S. manufacturing, and while the executive orders mandating tariffs will likely cease, I doubt that current module and cell tariffs will be lifted without a broader U.S.-China trade deal. The two year solar investment tax credit (ITC) extension which was passed in December will be a harbinger of other good policy news to come.

No Forced Labor Legislation

Another speed bump that has had less attention is the bipartisan legislation that may bar the import of any product manufactured with forced labor, which, according to the legislation would target Chinese products from Xinjiang – which accounts for 50% of the world’s polysilicon production. If the final signed legislation blocks all products from Xinjiang, the U.S. may have a temporary module supply constraint while manufacturers source polysilicon from other regions. If the legislation allows Xinjiang imports, but requires an audit of the module supply chain from companies like CEA, we expect fewer supply chain disruptions.

Section 301 Vietnam Case

Third, there has been mounting pressure to advance the outstanding Section 301 case against Vietnam.  While solar has not explicitly been named in the 301 case against Vietnam, there are many concerns about currency manipulation and unfair trade practices in other industry; therefore, a Section 301 case may be decided as early as mid-January before Trump leaves office.

Severe Climate Events

One final potential speed bump for 2021 - as CEA’s Paul Wormser recently highlighted - severe climate events, such as the wildfires and blackouts in California, and severe hailstorms in Texas are increasingly becoming a higher insurance risk. Our industry is just beginning to think about how to address this issue, but one solution may be individually negotiated supply agreements that require stronger supplier standards or a new class of extreme climate event resistant modules for these high-risk regions. CEA’s team continues to remain engaged with many leading developers and IPPs dealing with these elevated risks and develop alternative strategies to increase their confidence in project investment.

2020’s Lessons for 2021: Our Work Matters

Of course, we will always have surprises, whether they are pandemics, trade wars, trade agreements, technology advances, or unexpected product recalls and bankruptcies. 

What has not been a surprise to me during the pandemic is the market’s flight to quality—and the growing need for quality assurance. While tier-one Asia suppliers resumed their manufacturing in the spring, many were forced to source materials from new suppliers in different countries. With all of this disruption, more utilities, IPPs, and large commercial developers looked to CEA for independent factory audits, in-line production monitoring, and pre-shipment inspections, thereby reducing their risks for defects that would affect their investments long after COVID-19 has been neutralized. 

Finally, with all that’s happened this year, I couldn’t be prouder of our entire CEA team. Throughout 2020, they have adapted to the pandemic’s challenges and continued to serve the needs of our clients while providing a WOW! customer experience. As one example, when we couldn’t conduct an in-person factory audit due to a country-wide shut down, CEA team members used our trusted database of supplier defects and technology platform to conduct a remote video inspection of the potential areas of concern while still maintaining our third-party independence from the supplier.

This case is but one example that allows me to assure our clients and partners  that no matter what surprises 2021 has in store, our CEA family will continue to maintain our values and ensure that our work increases the confidence level of our clients to achieve their project returns.  

Wherever you are in the world today and in the new year, all of us at CEA wish you and your loved ones a safe, healthy, and successful 2021.

Happy New Year,

Andy Klump

Founder and CEO

Clean Energy Associates (CEA)