4 Weak Links in Renewable Energy's Global Supply Chain

Many raw materials required to support renewable energy's supply chain are in short supply, especially those related to solar energy. These include:

• Polysilicon. The main material used in solar cell production.
• Metallurgical-grade silicon.
• Silicon wafers and ingots. Used in the solar cell manufacturing process.

When raw materials like these aren't readily available, their prices can rise. In turn, the prices of other supply chain materials that depend on them also increase. These materials often include aluminum, silver, copper, glass, steel and oil – all critical supply chain materials for renewable energy.

The COVID-19 pandemic exacerbated ongoing shortages of raw materials, but that's not the only factor causing supply chain issues. Beyond the ongoing pandemic backlog, other developments contribute to diminishing the supply of raw materials. These may include things like forecasted demand increases and geopolitical conflicts.

Throughout the early 2020s, COVID-19 responses and regulations spurred temporary factory closures across the globe. These closures led to manufacturing backlogs, resulting in higher prices and longer shipping times for key equipment coming from overseas. When the lingering effects of COVID-related factory closures will dissipate is difficult to discern.

While the pandemic demonstrated an extreme case, it's not the only reason factories shut down. Factories may temporarily close because of events such as extreme weather, civil unrest, strikes and geopolitical situations. Factory closures can disrupt global supply chains.

The early 2020s have also seen unprecedented transportation slowdowns thanks to a perfect storm on several snarled fronts:

• Clogged ports worldwide, including both U.S. coasts, from Oakland, California, to Los Angeles and New York to Savannah, Georgia.
• Shipping backlogs resulting from the 2021 Suez Canal blockage. About 12% of the world's trade moves through the canal, making it one of the busiest global trade routes.¹
• Labor shortages of skilled transportation workers, including drivers, rail workers and maritime workers. Trucking, for instance, faced a deficit of 80,000 drivers in 2021.²
• A global shortage of shipping containers related to clogged ports and the transportation industry's skilled labor shortage. When containers can't be moved and unloaded quickly, fewer are available at any given time to continue shipping other goods.
• Cargo theft at alarming rates, peaked in 2020 and remained higher than pre-pandemic levels. In 2021 alone, the total loss value neared $58 million in the U.S., with California, Texas and Florida being the most targeted states.³

While some of these factors may be one-time events, such as the blocked Suez Canal, others may not be resolved for years and will continue to threaten the renewable energy industry's supply chain.

Warehousing and manufacturing practices have adapted in response to growing challenges and threats, and the resulting changes have the potential to cause even further slowdowns in the supply chain.

Many warehouses are no longer stocked with parts because the manufacturers have slowed down their production or, in some cases, even stopped making parts to store. Now, many parts are made to order, which tends to increase lead times.

On top of their low inventory, manufacturers continue to struggle with labor shortages while trying to catch up after pandemic shutdowns. Those who are able to staff even somewhat appropriately are very busy trying to make up for lost time.