Wind turbines near Assiniboia. Photo by Brian Zinchuk
Just two years ago, executives from a leading renewable energy company boasted they were experiencing the “best renewable energy development environment in history.” But, as of the second quarter of 2022 the renewable energy boom they predicted looks more like a bust.
Renewable energy enthusiasts had reason for doing the happy dance back in 2020. Oil and natural gas prices were climbing relative to renewables, which already appeared to be getting somewhat cheaper. Industry promoters boasted that over the previous ten years the cost of electricity generated by solar and wind had fallen by over 50 per cent.
Climate-sensitive western political leaders, including Joe Biden and Justin Trudeau, were ecstatic – predictions about the end of fossil fuels and the imminent arrival of the net zero utopia might not be magical thinking. During the 2020 US presidential election campaign, Biden promised to spend $2 trillion on combating climate change. Investors responded favourably. In the first three months after Biden’s election victory the market value of renewable energy firms climbed by approximately 60 per cent.
What could possibly go wrong?
As it turns out, just about everything.
Over the course of 2021, it became obvious that the Democrats’ climate change agenda wasn’t going to make it through Congress. It turns out that the principal advantage investors saw in renewables in 2020 was the promise of $2 trillion in government largesse. The loss of investor enthusiasm is reflected in the 25 per cent drop in market value for renewables firms so far in 2022. The S&P 500 index dropped by just 18% over the same period. And, there is more bad news for renewables.
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A near perfect storm of supply chain issues over the past two years have proven to be a major problem and they weren’t all due to the pandemic. Around one-third of the polysilicon used to make the world’s photovoltaic solar panels is produced in Xinjiang, China — home to the Uyghur people, the world’s largest concentration camps and forced labour. When credible evidence appeared showing that polysilicon producers in Xinjiang were using slave labour, the Obama, Trump and Biden administrations all maintained a ban on imports of solar system components from that part of China.
The work-around that western solar companies found for the ban on solar components produced with forced labor in China was to shift their purchases to Vietnam and Myanmar. However, when an American manufacturer of polysilicon for solar panels complained in 2021 that South-East Asian firms were essentially laundering components dumped by the Chinese, imports from those countries were stymied.
The complaint triggered more stringent customs scrutiny which has held up imports to the point many large solar projects in the US have been postponed and cancelled. Among the projects announced in 2020 that have been shelved is construction of a 13,000 acre solar farm in Indiana. NextEra Energy, a major US electrical utility, has shelved the $1.4 billion 2.8 gigawatt solar and battery projects slated for this year. The Economist reports companies that assemble solar systems in the US are sold out for the next three years due to the shortage of polysilicon components.
Solar component supply issues appear to be less urgent for the Canadian government. This country’s largest manufacturer of solar systems, Canadian Solar, happens to operate a solar farm in Xinjiang, but maintains none of the employees are forced labourers from the re-education camps in the neighbourhood. Canadian Solar also denies that any of the polysilicon it obtains is produced by Uyghur slaves. Horizon Advisory, a consultancy, indicates there is evidence showing that Canadian Solar was buying polysilicon in Xinjiang as recently as 2019. Horizon Advisory says Canadian Solar’s denials about purchasing polysilicon from suppliers who use forced labour defy disbelief.
One would surely have to excuse a laid-off pipeline worker if he was less than enthused about taking just any job in the renewables sector. If not careful, he could wind up installing solar systems for a company that honed its human resources expertise at a re-education camp in Xinjiang.
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Indeed, the state of the global solar industry appears consistent with Marine Le Pen‘s contention that, “globalization is when slaves in China make things to sell to the unemployed in the West.”
Apparently, green energy’s claims about becoming more cost competitive with conventional energy were premature. Solar and wind energy firms along with electric car makers are dealing with significant price increases for the basket of metals and minerals referred to as “green metals.” Green metals include conventional commodities such as copper, steel, nickel and cobalt as well as more exotic metals and rare earths like neodymium and praseodymium. Global mining firms concerned about the fractious political environments in many of the developing countries where numerous green metals are mined have been reluctant to invest in new mine projects and supplies have been affected accordingly. Also frustrating is the fact China, a globally important green metals supplier, has been restricting exports in support of its own energy firms. The Economist reports that as a result of these supply pressures the price for a “basket” of green metals jumped by 64 per cent over the past year.
Wind turbine manufacturers have also run into shortages of key inputs like the resins used to make turbine blades. Profits are shrinking for wind energy giants including the Danish firm Vestas and the German-Spanish company, Siemens Gamesa.
Green energy skeptics and people who are opposed to hyperbolic government climate policies that discount the ongoing need for fossil fuels may indeed be enjoying a well-deserved schadenfreude moment at the expense of the renewables sector. How long the moment will last is unclear. One might reasonably assume that given record high crude oil prices, renewables would be capturing a larger share of the energy market. The reality is renewables dropped the ball between 2020 and today, who knows when they might recover the fumble.
Jim Warren is an adjunct professor and lecturer in environmental sociology at the University of Regina.
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