Supply Chain Cluster Team Report to Solar Summit 2012

Transcription

1 Supply Chain Cluster Team Report to Solar Summit 2012 Background: The solar supply chain and workforce development cluster organized as a result of Solar Summit 2011 is charged with developing a greater understanding of the solar supply chain and the factors inherent in its robust development including its human capital, policy, research capability, and financing needs. Its findings and recommendations are contained in this report for presentation to the Solar Summit 2012 scheduled for March 26/27, The team made up of experts in solar technology, policy and market development, supply chain management, and economic analysis was active on several fronts: It toured and participated in briefings on 2 completed solar photovoltaic projects the 17MW Paloma plant designed and constructed by First Solar and the 17MW Cotton Center project designed and constructed by Solon. The team also toured Abengoa s 280 MW Solana solar thermal plant site still under construction. The team toured and was briefed on ASU s Solar Parasol Project, a large distributed generation project. The team collaborated with Seidman s efforts to map five solar supply chains including a solar hot water installation. Finally, members of the team met with Greater Phoenix Economic Council (GPEC) staff and were briefed on GPEC s cluster efforts. Findings As a result of these interactions and internal discussions, the team reports three major findings: Finding 1. There is a small but significant stream of some solar firms currently operating in Arizona, who are easily meeting current in-state demand with a range of quality products and services. 1

2 The industry as a whole is immature, demonstrated by the number of competing technologies operating under the same solar umbrella; and the supply chains for these firms can vary tremendously, in terms of both local employment opportunities and the sourcing of key components or suppliers. During the course of our conversations with 15 key solar stakeholders, it quickly became apparent that a solar supply chain has to be technology-specific. For example, 65% or more of the supply chain for a CSP utility-scale plant can be sourced in the United States, although not necessarily from Arizona. Solana s U.S. supply chain extended to 29 companies in 22 states, and was worth a total of $730 million, 23% of which was invested in Arizona. Some specialized requirements, such as the salt for Solana s storage tanks, was imported, but this type of technology offers greater potential for localized manufacturing, compared to utility-scale or distributed generation solar PV. This is because the PV panels themselves are almost always imported from overseas, particularly Asia, due to lower labor and production costs. The one local sector to truly benefit from the fledgling solar industry has been construction. Galvanized steel apart, local firms and suppliers have been able to provide a wide range of raw materials and components, including steel, concrete, mirrors, nuts, bolts and electrical supplies; and there have been significant employment impacts in this area. For example, construction at APS two solar plants at Gila Bend took 4 and 8 months respectively, giving a much-needed boost to construction workers during an economic downturn/recession. Utility-scale plants can generate anything from construction sector jobs, dependent on plant size, while a commercial distributed generation project could create construction jobs. These jobs are obviously transient, but their positive economic impact cannot be questioned. 2

3 It is difficult to estimate with any accuracy the actual size of Arizona s current solar industry. One of the most thorough secondary estimates currently available, produced by The Solar Foundation (TSF) is to a significant extent California-biased, and fails to take into account key sectors such as professional services. They estimated 4,786 solar jobs in Arizona in 2011, making it the third largest state for solar employment, behind California and Colorado. Over a third of the jobs were for installation and a quarter sales. The SEIA and Bureau of Labor Statistics are also investigating the size of the solar industry at a state and national level, but are unlikely to place their findings into the public domain until the end of the year. An extrapolation of an online survey issued by The Seidman Research Institute in December 2011 suggests that the industry s direct employment impacts in 2011 could range between 5,500 and 7,400 jobs. However, if this latter employment range is accurate, this equates to only 0.2% or 0.3% of the non-seasonally adjusted, total nonfarm employment for Arizona in That would suggest the solar industry still has a relatively small footprint, directly accounting for less than 60% of the employee numbers currently supported, for example, by Intel alone in the state. 1 Statewide employment average of 2,400, 800 for 2011, sourced from the Arizona Department of Administration s Office of Employment and Populations Statistics website: 3

4 Employment Opportunities in Arizona by Solar Sector (The Solar Foundation, 2011) Of greater concern, perhaps, few people interviewed anticipate any demand growth in the short-term. With energy demand increasing as little as 1% each year and limited inward migration, the demand for solar energy in-state has either already been met, or will soon be met by green-lit utility plans. The current range of residential taxes and incentives available are on a per-household basis, rather than per system installed, despite the fact that households often install rooftop PV panels and pool heating at different times; and far too many new homes are still being built in Arizona within solar ready ordinances (Tucson and Gila Bend the exceptions), which represents a barrier to widespread solar deployment. As a result, many solar companies are diversifying into other related areas such as energy efficiency; and the positive construction impacts emanating from the construction of new utility-scale plants will almost certainly disappear without 4

5 greater in-state demand or the successful implementation of a major export strategy. Finding 2. Arizona s early adoption of solar, and the innovative, pioneering work of its solar firms has helped create a valuable competitive advantage for the state, in terms of construction, operations and maintenance. With learning comes greater efficiencies and lower costs that in turn drive even more projects and expanded policies and a sustainable domestic industry supply chains. The team s site visits provided some evidence key inputs to these drivers. They include: Setting-up front project technical requirements are critical. Electric utility requirements have transitioned from just inviting proposals to request for proposals that now include the precise location and grid connection details thereby allowing bidders to focus solely on the choice, effectiveness and cost of a specific technology. Project time to completion offers a supply chain significant cost reduction opportunities. For example, First Solar was praised for its streamlined, automated, well thought-out and methodical approach to construction. This included the amalgamation of trench digging, cable laying and trench refilling into one step, and module delivery on 18 wheeler trucks straight into the array field for offloading at the point of assembly. The town of Gila Bend s streamlined zoning plan and its fast track project process resulted in reducing zoning approval time from months to weeks and saved hundreds of thousands in costs. It serves as a model going forward including the proposed solar power corridor. Siting on former agricultural land provides water benefits. Current projects led to a reduction in water usage of 75%. Operations and maintenance is a new opportunity for cost reduction and improved efficiencies for the state s utilities. APS has developed a sophisticated monitoring system for the Gila Bend renewable plants with 5

6 central monitoring from its headquarters in downtown Phoenix. With over 3000 data points APS is developing a sizeable database on plant operations. Panel washing times was sited as a data driven operation. Added to this example of learning leadership is efforts by APS to train a power plant staff capable of working at both nuclear, fossil fuel and renewable facilities. Finally, APS is considering how solar plants can be run in conjunction with landfill gas to generate power. These early projects are changing the thinking about solar generation. Instead of capacity as an 8760hr operation capacity is considered as capacity within a specific time frame. This thinking as led to solar plants displacing gas. APS made statement that solar is now ranked before Palo Verde as a must have in the generation source hierarchy. Finding 3. Arizona s solar supply chain has the capability to grow to be a major industry cluster that will generate new wealth for the state. A viable solar cluster drives economic growth in three ways. First, building even one project employees people and creates demand for inputs while the plant is being built. Many of the inputs can be procured locally. Second, building many projects makes it worthwhile for some input suppliers to set up operations locally, creating jobs here rather than elsewhere. Third, building many projects helps local suppliers grow and improve (they learn, get certified), increasing their ability to supply inputs to non-local projects. "Suppliers" here include high-, mid-, and low-tech firms, some of which are solar-specific and others of which are extending into solar. One of the findings from previous work on economic clusters (Silicon Valley, et al) is that suppliers in certain industries gravitate towards concentrations of large and sophisticated customers. This in turn helps them grow and advance. This has two advantages. First, it supports the local development of the downstream industry. Second, these suppliers become more capable competitors and are better able to sell to geographically distant customers. With economies of scale in the solar industry supply chain comes a need for certification of suppliers and significant 6

7 learning curves in building especially utility-scale solar. These characteristics fit well with the clustering phenomenon. This cluster development finding is based first on Arizona s magnificent natural resource the sun. Coupled with this resource advantage is - the emerging industry s ability to learn and to apply that learning, policy and tax incentives friendly to a start up industry, a diverse set of market requirements that allows firms to evolve and grow, and a university research community that provides a stream of innovation as well as a qualified and specialized work force. However, significant barriers exist. Current economic conditions, unavailability of capital investment, lack of political desire to increase the renewable energy requirements and stagnant local demand all currently mitigate against cluster development. The team believes the best way to give the industry a real boost in Arizona is to pursue an effective export strategy. Without an increase in local demand, or an export strategy, there is a fear in the industry that some current solar firms will relocate out of state to new business areas, with clear negative direct and indirect employment consequences. The construction sector in particular could suffer, in terms of both laborers/on-site employees and materials supply staff. The stakeholders interviewed do believe that that California will eventually source at least some renewable generation out-ofstate to meet their aggressive RPS. This could yield significant job creation within Arizona, during the construction of both plants and transmission lines, and give real impetus to the formation of local solar industry clusters. Galvanizing an inter-state dialogue to resolve transmission barriers between states is a high priority for Summit Finally, establishing Arizona as a center for solar R&D would help generate higher paid jobs, and position Arizona as a solar center. Some industry players currently implement R&D out-of-state or even overseas, but there is no reason why this cannot be encouraged to relocate to Arizona. Dependent upon close co-operation and formal partnerships between the state s universities, utilities and private enterprise, this could take advantage of Arizona s favorable environment and solar 7

8 insolation to study the operationalization of a range of solar technologies, and guide future global developments in the industry. In terms of educational courses, the state still has a long way to catch up, illustrated by the following Table which compares the availability of training and courses in California and Arizona. However, First Solar, the City of Phoenix and ASU are currently piloting a solar energy engineering and commercialization certificate program which launches in late April/early May; and a new PSM certificate also available at ASU is the first of its kind nationwide. These show the way forward for Arizona. Comparison of Solar Training & Educational Courses in California and Arizona COLLEGE COURSE TYPE/DESCRIPTIONS California Mira Costa College Entry Level Solar PV Training; Solar Business Strategies and Opportunities; Small Wind Generation Fundamentals (includes hybrid component) Solar Institute Living PV 100 Solar Training Intro to Photovoltaics ; PV 200 Solar Training Design and Installation Intensive; PV 300 Solar Training Advanced PV Systems American Institute of Renewable Energy PV-105 entry level Design and Installation; Solar Sales Training; Photovoltaic Design and Installation; Weatherization Allied Schools Business of Solar; Introduction to Photovoltaic Systems (NABCEP PV Entry Level); Advanced Principles of Photovoltaic Systems Installation (NABCEP PV Installer certification) Applied Professional Solar Photovoltaic Systems Introduction and Installation Training, Inc. De Anza College Introduction to the Fundamentals of Photovoltaic Basics Diablo Valley College AS Degree and Certificate in Photovoltaic Systems; PV Design and Installation; AET 130; AET 230; LEED 8

9 East Los Angeles Skills Center EnerCal Institute Skyline College Solar Seminars, Inc. Solar University Solar Tech Institute Sun Pirate SunPower Corp. SUNY Orange UC Berkeley University in Davis, CA Verve Solar Consulting Preparation; Renewable Energy Technicians; Solar Thermal Photovoltaic Installer: Introduction; Photovoltaic Installer: Certification Preparation Solar PV; Solar Thermal Water Heating Solar Energy Technology Certificate; Solar Installation Career Certificate Solar electric (PV) Installations for HVAC dealers, construction tradesmen, and homeowners (NABCEP and CA C48 certification); PV101 Entry Level PV Installations 5-day Training at an Active Solar Installation Company PV Installation; PV System Design; Estimation Fundamentals of Solar Hot Water Heating; Photovoltaic System Design & Installation; NABCEP Entry Level Exam Solar System Design, Selling and Installation for Sales Personnel Solar Thermal Hot Water System Design; Introduction to PV Systems Basics of PV Technology and Systems; NABCEP Entry Level Certificate of Knowledge of PV Systems Certificate in Energy Resource Management; Renewable Energy Certificate Solar industry seminars, webinars and university-level survey courses Arizona Arizona State University Coconino Community College, Professional Service Masters certificate (12 month renewables course); new solar energy engineering and commercialization certification program Applied Science in Alternative Energy Technology; Solar Home Design; Photovoltaics & Wind Power; Alternative 9

10 Flagstaff erenewable Resource Institute Pima Community College Central Arizona College Building Techniques PV100 Solar Installation and Design; PV150 Solar Installation; PV200 Advanced Solar Design and Compliance Photovoltaic Installation Training; NABCEP PV Installer Certification AAS Renewable Energy Technology transferable to ASU, NAu and UA Recommendation: Our findings point to the fact that there exists in Arizona an emerging solar energy industry with the knowledge, and entrepreneurial skills for success. There is however a need to move beyond an industry perceived as emerging but splintered and dependent on financial supports to succeed. In order to transition into a working viable Arizona based solar cluster with recognized economic power, the envisioned cluster would have strong leadership and participation by a broad array of linked firms and institutions allied with a vision for developing an Arizona into nation s leader in solar energy. Developing an export strategy would provide the critical momentum in creating this cluster. Along with this strategy the cluster should support a research team tasked to identify the following: The enabling infrastructure needed to support the cluster The industries and firms in those industries included as a solar cluster The complete supply chain The key inputs that determine the cluster s economic value The workforce development needs and gaps The technology needs and gaps The priority markets and strategies for capturing these markets 10