Mitigate Supply Chain Risk

In today's complex solar project management environment, selecting supply chain partners is just as important as executing project construction. Renewable energy projects require a multitude of materials from a variety of manufacturers and suppliers.

One key element of large-scale PV installations – racking and support systems – should not be an afterthought when it comes to vetting suppliers. Whether the project developer selects the aluminum extruded racking system supplier or leaves that decision up to the engineering, procurement and construction (EPC) contractor, choosing the best supplier to support your PV panels is vital to project success and helps avoid costly overruns and delayed installation.

Project developers – and the EPC managers who serve them – should give careful thought to how to mitigate their supply chain risk and avoid costly, last-minute changes during installation out in the field, often in remote locations. The process of screening and selecting the supply chain partner that best fits the project is not as time-consuming as you might think.

Once you select your racking support system supplier, make sure you meet with the developer, EPC and supplier to discuss project details. A discussion about the component manufacturing timeline, shipping and delivery schedule, and on-site assembly can go a long way to mitigate risk and help to ensure your solar field installation goes as smoothly as possible. Thinking through these decisions show stakeholders that, as the project developer, you have a plan in place to reduce supply chain risk while supporting project success throughout construction.

Step 1: Racking and support selection

According to the Solar Energy Industries Association's 2013 Solar Market Insight Year in Review report, PV installations increased 41% over 2012. As the solar market grows, so do the varieties of racking and support structures. Regardless, if the racking and support structure technology has been selected by the project developer before the EPC comes on board, or if the EPC chooses the supplier, knowing which type of system – fixed tilt, single-axis or ballasted – to use for the job site is the first step in choosing the best racking and support structure supplier for the job.

Developers need to factor in power generation needs, site terrain and location climate when choosing a racking system. The geographical location and site design will define the need between tracking systems or fixed-tilt structures to crease the best solution for capturing the most energy. An installation site with inclement weather, such as in the Midwest, can affect a racking system with moving parts to track the sun and may require more maintenance than a fixed-tilt system. If you need a PV panel support structure for a carport roof system in the Southwest, a fixed-tilt system may be a good solution.

Photos by: Tony Gambino www.tonygambinophoto.com

The road from the warehouse to the customer's site is much clearer – and less stressful – with some basic supply chain due diligence. Photo courtesy of Unirac.

Step 2: Due diligence

While very few suppliers still exist that manufacture entire racking systems in-house, the number of suppliers that outsource much of their component manufacturing needs has increase significantly.

Due to the exponential growth of racking system suppliers and their component manufacturers, developers and EPCs can mitigate their risk by investigating the manufacturing capabilities, capacity and financial health to prevent a potential breakdown in the supply chain. Issues that can increase risk include product manufacturing defects, shipping delays and having too much product shipped at once, all of which can prolong site preparation and extend installation time. Getting together with everyone for a quick meeting to discuss the project needs, timing and deliverables can help mitigate end-of-the-line risk for your solar project.

To ensure solar projects are installed properly, on time and within budget, project developers and/or EPCs need to analyze the costs for each racking system, along with the supplier offerings, to choose the best supplier for their needs.

Step 3: Cost analysis

Critical aspects of analyzing cost in the solar supply chain need to go beyond purchase price. Developers and EPCs should fully understand their component manufacturing needs and work closely with the suppliers that perform them.

It is important to know if additional fabrication processes, such as machining, finishing or welding, will be performed by the supplier's partners or in-house. If requiring outside services, these added manufacturing processes can increase shipping costs, timelines and handling, which allows more opportunity for damage. Having multiple manufacturers in your supply chain can unknowingly cause project delays and cost overruns. To maintain better control over the supply chain, consider working with a supplier's manufacturer that offers multiple services to meet your project needs.

It is also critical that the EPC or developer determine the shipping schedule in advance. Will the components be shipped all together, or will they be delivered in sets of smaller shipments that are easier to manage on-site as the installation progresses? A staggered delivery schedule may be preferred to ease off-loading and installation timing at the job site. Components shipped all at once need to be stored on-site or close by until the racking systems can be installed. In addition, having someone on-site to manage delivery and assist in off-loading the support structures can ease site installation issues.

Step 4: Risk assessment models

It is helpful for developers to plan for unforeseen problems within the supply chain. Make sure to have back-up plans in case the component manufacturer can't get the raw material they need to make your racking components. You should also have a back-up component manufacturer in mind if yours goes out of business – it's happened – or if a severe weather event such as a tornado or flooding affects its manufacturing facility. Check to see if the manufacturer has additional facilities to supply your racking components. A risk analysis model can be as detailed or as simple as you choose. Just make sure you have taken the time to develop one.

To make an informed decision when selecting your supplier, learn as much as possible about its quality processes, delivery performance, and successes and failures. Ask for references. Ask about the component manufacturer's relationship with its raw material supplier. Project developers pay suppliers millions of dollars for racking systems, so it is good business to gather solid facts about the viability of your supply chain.

Also, determine how committed the manufacturing supplier is to the solar market and how long it has been working in the industry. Determine if the supplier has the resources to support your project as well as in-depth knowledge of the renewable energy market. It is important to know in advance if the supplier's work in other market segments could dominate its manufacturing capacity, to ensure your project isn't delayed.

Step 5: Supplier choice

The high cost of managing a solar installation project can be attributed to outsourcing component manufacturing from multiple suppliers. Managing these complex relationships can be a difficult challenge, taking a heavy financial and logistical toll on the project developer, slowing time-to-site-readiness, and driving up the costs.

Instead of having different suppliers doing specific things, project developers and EPCs should select a partner who offers a vertically integrated supply chain solution, adding extra value to the developers' needs by doing more of the component manufacturing for them.

That means project developers and EPCs should evaluate suppliers based on industry expertise as well as total-cost-of-purchasing criteria, instead of the cost of the parts. They should work with a component supplier who combines manufacturing expertise with value-added services like ease of purchasing, engineering assistance, production, finishing and shipping.

Mark W. Turley, solar market leader, Alexandria Industries, can be reached at (623) 565-3356, or mturley@alexandriaindustries.com.