Disruption In Supply Chain Doubles Downtime Days For Solar Developers

Disruption in supply chain has reversed the downward trend in average business interruption (BI) claims for renewables developers, according to a report attributing the disruption in supply to surge in energy prices and the COVID-19 pandemic. The average number of downtime days has nearly doubled in the solar sector globally, surging beyond the renewable sector-wide average rises of 38% on 2016 levels. Besides, a 10% increase has been registered in downtime this year compared with 2019 levels. The surge in downtime days highlight the importance of diverse supply opportunities. The report from Gcube, a specialist provider of insurance services for utility scale providers worldwide has focused more on Australia for this report.

The report explores the impacts of global supply chain disruption and rising inflation on renewable energy developers, manufacturers and insurers amid “a climate of unprecedented demand for clean energy”. Solar has been the worst hit, with a 95% increase in average downtime days, much more than the renewable average. The average increase over 2016 levels has been put at 38%, with most of the extra delays adding on since 2019.

Paying the price for total reliance on Southeast Asia for supply, the solar industry sends a clear message about the importance of diverse supply opportunities. “Without an industry-wide effort to diversify the solar supply chain, procurement delays and cost inflation are set to increase,” it continued. The report described how “public and private sector investment has struggled to support growth within supply chains”, which it said holds back both the creation of new infrastructure and the development of key skills and expertise. It recommends, “cooperation, precise evaluation of insured values and targeted investment in skills and supply chain diversification, in the bid to improve resilience for the global renewable sector.”

An unevenly distributed supply chain concentrated in China and Southeast Asia has been rocked by recurring lockdowns and underscores the importance of supply chain diversification, the report said reading further, “This is a particular challenge for contractors, who face pressures to stretch resources and drive down their rates to capture emerging opportunities,” said GCube as it predicted an increase in contractor quality claims over the coming months.”

In India, we have seen how major EPC contractors like Sterling and Wilson Solar have grappled with client issues caused by delays and module price hikes, with disputes around both encashment of performance bank guarantees and even outright surrender of projects considered unviable at older prices impacting gross margins for over 12 months now.