With the sunset of the investment tax credit (ITC) approaching at the end of 2016, the rush to get solar projects completed before the deadline is requiring a new approach to supply-chain planning. Thus, ‘just enough’ may take precedence over ‘just in time’ (JIT) philosophies.
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By examining mounting, racking and associated products manufactured out of aluminum galvanized steel or other materials, we see capacities strained by demands both within and outside of the renewables market. The onset of 2016 will most certainly bring more stress to those manufacturers as they strive to service all markets.
With all of the action in the market, suppliers of manufactured goods for mounting and racking may well be faced with an odd situation: extremely high demand throughout the first three quarters of 2016 followed by a drop in demand for the fourth quarter and the first quarter of 2017.
Specifically, suppliers are already stressed by increasing demands from outside the renewables market, and supply chains are stressed. The emphasis on JIT performance was a key driver for developers and engineering, procurement and construction (EPC) firms making decisions on technology. However, in the rush to get things done, JIT ratings – a key indicator of performance for the past few years – may soon be replaced by a metrics aimed squarely at available capacity and its associated cost models.
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It is difficult to definitively state the amount of aluminum and metal manufacturing capacities currently allotted to the renewables market, but over the years, there has been a hesitation for these types of manufacturers to offer anything but a conservative percentage of available capacities. One reason for a cautious approach to the renewables sector is that, from a manufacturing viewpoint, renewables are considered an emerging market in the U.S. Manufacturers normally feel far more comfortable when capacities are spread over a diverse market mix, and they especially try to avoid a concentration of capacity bound for an emerging market.
As a result, just as solar project developers and EPCs need reliable access to product and materials, mounting and racking suppliers may find that their suppliers have other priorities. What, then, can professionals in the renewables sector do to head off the potential manufacturing capacity shortages for racking and mounting in 2016? Consider the following actions:
- Establish or confirm their relationships with suppliers prior to the end of this year;
- Forecast properly as the year ends and 2016 gets into full swing – manufacturers appreciate timely and accurate forecasts to plan their production requirements;
- Monitor demands both short- and long-term; and
- Develop a robust dialogue with key primary and secondary manufacturing suppliers.
With these practices in place, as well as a strong commitment to the customer-manufacturer relationship, you can identify potential capacity issues and handle them before they turn into crises. Manufacturers and producers have a similar responsibility to their partners, as well. However, a well-prepared customer is more likely to be looked upon more favorably in the competition for in-demand resources.
Mark W. Turley is the renewable energy market leader for Alexandria Industries, an Alexandria, Minn.-based short-lead time producer of engineered products for a wide range of industries. Turley has 15 years of experience supplying the renewable energy sector with manufactured products. He can be reached by email at mturley@alexandriaindustries.com.
