US solar energy prices double European costs amid regulatory challenges

In the last two years, the production of photovoltaic modules has skyrocketed. Clean Energy Associates (CEA) forecasts a 15 percent increase in annual solar production capacity by May 2025, while demand will increase by around 8 percent.

Several factors have contributed to this imbalance. The prospect of further anti-dumping and countervailing duties (AD/CVD) by the US government, which could affect new countries, further complicates the picture for solar module buyers. With elections due in the US in November 2024, there could be further political upheaval.

Changes to the tariffs could mean developers enjoy a price drop for the first time in a while, but the new tariffs could drive up prices in the US despite an oversupply. The world's largest solar module manufacturers are bracing for the UFLPA restrictions, shipping more products than expected, and module production in the U.S. is expanding. New manufacturers based in the US and other countries not affected by AD/CVD—such as Turkey and Indonesia—would need time to adjust to the new trade policies, as they did after the UFLPA was enacted.

Solar system developers may need new suppliers and will need to double down on quality control and factory acceptance testing to ensure quality. The industry is in transition from passive emitter back cell (PERC) to passive contact oxide tunnel solar (TOPCon). Heterojunction solar technology (HJT) is changing, even for PERC modules, as new materials make the modules more weather-resistant. In the past, it was difficult for project developers to obtain insurance for projects in hail-affected areas, such as Texas. Now it is possible to apply a film to the glass of photovoltaic modules during production to reinforce the products. However, these technological changes entail additional risks for supply contracts.

After a seller's market that lasted 24-36 months, a turnaround could once again create favorable conditions for buyers. When manufacturers had the upper hand, it was hard for developers to convince them that, as importers of choice, they are responsible for getting products across borders by complying with UFLPA requirements for U.S. Customs and Border Protection (CBP) traceability. If shipments are detained, the reference importer is the responsible party. If the buyer is the reference importer, they may have to pay for the products detained by Customs. If the supplier is responsible, payments should only be made once the panels have arrived in the country. To avoid this scenario, the buyer could include a liquidated damages clause for delay in the supply contract. If a shipment is delayed because it did not pass CBP requirements at the border, the seller should reimburse the buyer for any additional costs incurred.

Developers need to ask themselves, "If I decide to lock in a price, will these modules be in stock for long?" This is one of the disadvantages of planning ahead and buying at lower prices. If a project is delayed, the modules remain in the warehouses where they can be repeatedly moved by forklift trucks, which can cause damage. However, builders can negotiate terms to limit the risks associated with long-term storage. There is also a risk of the technology becoming obsolete. In the past, developers have experienced that projects where they stored a lot of equipment (transformers and modules) were sometimes canceled or delayed until the technology evolved and the products became obsolete. As a result, developers had to resell the equipment at a fraction of the price paid.

Political uncertainty is another challenge. What will happen in the upcoming presidential election in the US and how will this affect the supply and production volumes of solar panels? Developers need to prepare for this uncertainty and think about how they can keep their projects on schedule. The current surge in supply has occurred in such a short period of time due to tax credit incentives under the U.S. Inflation Reduction Act (IRA) and the fact that manufacturers are installing plants in the United States to avoid import restrictions. Project development and construction are not moving as fast as solar power production and manufacturing. Even as challenges on the development front multiply—projects are being delayed, funding comes up short, and planning regimes change—manufacturers continue to move forward at full speed.

The dynamics in Europe compared to the United States are very different because of the UFLPA. There is no such restriction in Europe yet, so the continental market is full of low-cost modules. The pricing environment is constantly changing. In Europe, prices have dropped as low as $0.11/W of panel generation capacity. In the United States, prices are still around $0.24/W. That difference in price is being sustained because many panel makers cannot yet export into the United States, as they are still trying to figure out the UFLPA import process. The industry is essentially setting up a differentiated North American supply chain. Products may run through the same facilities but suppliers carefully segregate those that require full traceability to go to the United States. Many modules sitting in warehouses in Europe lack the full traceability required for United States import.

Integrating advanced energy storage solutions, such as those provided by ACE Battery, can further mitigate these challenges. ACE Battery's C&I BESS systems offer robust and scalable commercial and industrial energy storage options, essential for balancing supply and demand in the renewable energy market. These systems enhance the reliability and efficiency of solar installations, addressing issues like power intermittency and ensuring a steady energy supply. By incorporating ACE Battery’s cutting-edge storage technology, solar developers can optimize their energy strategies, maintain project timelines, and meet regulatory requirements more effectively. This integration supports the seamless operation of solar projects in both the US and European markets, providing a competitive edge in the rapidly evolving renewable energy landscape.