The biggest clean energy surprises in 2023 and what they mean for 2024

(Image by Markus Spiske from Pixabay.)

Contributed by Jake Edie, Vice President, Marketing, Clean Energy Associates

Aggressive policies in the U.S. and Europe are starting to have an impact on clean energy supply chains, even as on-site quality and safety audits reveal a shocking increase in solar panel defects.

Such defects, coupled with a surprising level of safety issues, should raise red flags for the entire industry.

In the past year, Clean Energy Associates (CEA) supported dozens of supply agreement negotiations, performed in-factory quality assurance oversight at over 100 solar and energy storage factories, executed hundreds of on-site quality and safety audits, and advised many of the largest clean energy developers and investors on their most strategic questions.

Here is what we found most surprising and what clean energy developers and buyers will be watching most closely as 2024 unfolds.

1. The shocking increase in solar panel defects found post-installation

CEA has performed electroluminescence (EL) testing of more than 300,000 modules over eight years and across 16 countries. We found microcracks in more than half of the modules we analyzed through mid-2023, up from around 20% in 2022 (see Figure 1).

Microcracks are an underappreciated challenge because you can’t detect them with the naked eye, only through electroluminescence testing (akin to an X-ray for solar panels). A pristine-looking panel can be riddled with microcracks. Such cracks may start small but will grow over time, potentially leading to significant reductions in power generation and even safety concerns.

Developers and system owners can take several steps to protect themselves from this risk:

• Include stringent manufacturing quality requirements in supply agreements. 
• Adopt the procurement mantra, “You don’t get what you expect, you get what you inspect.” 
• Put your own (or 3rd party) quality assurance personnel into supplier factories to observe your equipment being manufactured. Take EL images of every panel at the end of the manufacturing process, providing a benchmark for later comparison. 
• Perform on-site EL testing on a statistically significant set of modules after both shipping and installation to identify potential damage and hold the responsible party accountable. 

2. System integration is the biggest source of quality issues in Battery Energy Storage Systems manufacturing

When it comes to sourcing and long-term quality and safety concerns, most energy storage buyers put the lion’s share of attention on the battery cell, and for good reason: It is the most expensive single component, and widespread cell failures are catastrophic for any project. Even so, 47% of the problems our inspectors found while auditing over 30 GWh of battery energy storage system (BESS) manufacturing processes were system integration issues.

Issues included critical areas such as fire suppression, thermal management, and battery management systems (BMS). Cell-level defects were the second most common issue, accounting for 30% of quality concerns. Module-level issues accounted for the remaining 23% (see Figure 2).

System integration problems can be especially challenging to diagnose. As a start, buyers can address the problem by thinking differently about quality assurance for BESS systems versus PV systems.

BESS systems are much more complicated, which makes system integration more difficult. In solar, selecting high-quality modules, racking systems, and inverters typically results in a high-quality project. By contrast, energy storage must be managed more closely.

The BESS factory acceptance test (FAT) is critical. Buyers should negotiate detailed and clear requirements in the supply agreement and have an experienced auditor, armed with an exhaustive checklist, on-site to witness the FAT.

3. Aggressive new policies in the U.S. and Europe began fundamentally changing the geographic mix of global manufacturing

Aggressive policies in the U.S. and Europe–such as the Inflation Reduction Act and net-zero manufacturing initiatives–have transformed the calculus of where new factories are being built.

Suppliers worldwide quickly reacted to new “onshoring” incentives. For example, announced new capacity additions for U.S. domestic module production represent 10X growth vs. current capacity; if even half of the announced capacity is built (a reasonable expectation based on past experience), then domestic module capacity will exceed expected 2030 demand (see Figure 3).

GO DEEPER: Check out the Factor This! manufacturing playlist, including episodes on the U.S. solar manufacturing boom, thin-film manufacturing, and more. Subscribe wherever you get your podcasts.

While it is impossible to know how much of the planned capacity will be built, several manufacturers are already beginning to import the manufacturing equipment needed to equip the new factories. Significant domestic manufacturing capacity additions are already underway.

Greater geographical supply diversity and stronger public policy support should be good news for buyers and developers. But complexity lies beneath the surface. It is important to pay attention not just to the final assembly plants (PV modules, ESS cells/modules), but also to the rest of the supply chain.

In most cases, the domestic capacity for upstream materials significantly lags behind the final production capacity. This means many domestic manufacturing operations will continue to depend on overseas supply chains for key inputs, which can impact import tariffs and tax credit eligibility.

It is, therefore, essential for buyers and developers to carefully evaluate tax incentives for domestically produced components and tariffs for imported components; track other potential sources of supply chain disruption (such as trade barriers, shipping bottlenecks, and future changes to policies and regulations); and understand what the domestic manufacturing landscape will look like after the Inflation Reduction Act provisions expire in 2032.

4. Green hydrogen suppliers are rapidly ramping up capacity

Fueled by new policy support and continued demand for clean energy options, production capacities of electrolyzer manufacturers grew by 103% from 2022 to 2023 and are expected to grow another 143% by 2025 (see Figure 4). Despite this eye-popping growth, the market remains young and the dominant electrolyzer technology may not yet be locked in.

Alkaline, the most mature technology with the lowest costs, currently leads with 66% of the market. Competing technologies (proton exchange membrane, anion exchange membrane, and solid oxide electrolysis cell) have technical advantages, but face higher costs and other disadvantages today.

As a point of comparison, when the energy storage market was at a similar level of maturity, very few grid storage projects used lithium iron phosphate (LFP) chemistry, which has recently become the dominant technology.

As this exciting new market matures, what is the best approach for developers and buyers? Three tips:

• Closely track developments among technologies and suppliers alike. The history of the solar and energy storage industries suggests the potential for important changes in costs and efficiencies, not to mention the arrival and departure of suppliers as the industry scales.
• Monitor public policy developments to find attractive opportunities and gain real-world project experience early on that is critical for long-term (and large-scale) success.
• Watch manufacturing quality very closely. Young technologies, new manufacturers, and new factories often experience inconsistent production quality.

5. Safety problems are uncomfortably common in commercial-scale rooftop PV

We found major safety concerns found in more than 97% of the 600+ rooftop PV systems that we audited. That’s a surprising percentage, even to many industry veterans, and should be a concern for the entire industry (see Figure 5). Rooftop fires are dangerous and can disrupt the businesses that operate underneath the roof. A single day of disruption to a big box store, distribution center, or data center can cost millions of dollars.

Few safety concerns that our auditors found stem from design or manufacturing defects. Instead, the primary underlying causes were incorrect installation and/or insufficient maintenance practices.

Many of the safety risks, including damaged modules, cross-mated connectors, and improper terminations, are relatively inexpensive to fix compared to replacing major pieces of equipment, and the risks could have been easily avoided with proper installation and maintenance.

The steps to avoiding rooftop PV safety risks are straightforward.

First, begin by carefully selecting and vetting your service providers. This includes reviewing the training requirements and experience levels of the installation teams that will be working on your roof. It is not uncommon for the crew on your roof to be your contractor’s contractor’s contractor. This may lead to misaligned incentives, to say the least. Make sure the crew is experienced, well-trained, and properly accountable.

Second, create detailed and stringent specifications and standards for your suppliers and installers to follow. Providing a clear definition of what “correct” looks like minimizes disputes once work is complete.

Third, conduct post-installation safety audits and hold all stakeholders accountable for any deviations from your specifications.

These big market trends that first emerged in 2023 will continue to shape the clean energy sector throughout 2024 and into the future.

About the author

Jake Edie is Vice President, Marketing at Clean Energy Associates, and an Adjunct Professor in the College of Engineering at the University of Illinois Chicago.