How We’ve Committed to Ensuring No Forced Labor Ever Touches our Projects
Company News |
By Dan Diamond
At Sol Systems, we are committed to a just equitable energy transition and to ensuring this commitment flows through our entire business. In the past year, the production of polysilicon has been linked in many ways to forced labor in the Xinjiang region of China. Sol Systems is taking steps to ensure our solar projects are free of products produced with forced labor and we have signed onto industry-wide commitments to ensure we all work towards and commit to this goal together.
Companies like Sol Systems, that acquire, develop, finance, build, own and operate PV projects, and that both procure modules and contract with companies that procure modules, have a responsibility to their customers to ensure that the procurement and installation of solar modules is done responsibly and without unintended negative consequences. This means that we must tackle this issue systemically and through policies and procedures that ensure we are not contributing to the human rights abuses occurring in the Xinjiang region or any other region.
The American solar industry is strongly united in this mission, and Sol Systems was proud to help develop the Solar Energy Industries Association (“SEIA”) Solar Industry Forced Labor Prevention Pledge, of which it was a founding signatory. Along with the Pledge, Sol Systems developed and implemented a procurement strategy for modules for both direct procurement for issuance to EPC Contractors for utility-scale projects, and indirect procurement for distributed generation (DG) projects through EPC Contractors.
In development of our procurement strategy, we surveyed the leading module manufacturers to ensure we understand the market supply, dynamics, and constraints. We learned about the module manufacturers’ allied approach to ensure the commitment to avoid all exposure to products that are in any way sourced from the Xinjiang region, due to forced labor concerns. Manufacturers supplying the US market are tracking the complete supply chain from polysilicon production, to ingots, wafers, cells, and modules.
The module manufacturers supplying the US and EU markets are all aware of and actively reacting to the market demands for forced-labor free products, and they all have implemented supply chain execution plans to address this. To proactively facilitate these manufacturer’s commitments, Sol is working with SEIA to apply the recently issued Traceability Protocol and Buyer’s Guide that establishes guidelines for traceability protocols and documentation, supply chain security, enforcement, and auditing. We also intend to incorporate specific provisions in our Module Supply Agreements (MSA) that contractually prohibits any part of the supply chain from being sourced from the Xinjiang region. These restrictions include products from specific suppliers, the Xinjiang region generally, and any other country or region known or supposed to use forced labor. This restriction is passed through to their suppliers, and they are required to declare their supply chain origins.
These measures will help us ensure our work in the solar industry reflects the collective goal of the solar industry to catalyze positive change and fight climate inequities.
How to Deliver Solar Safely, Soundly, and Successfully during COVID-19
Technology |
By Sintia Torres
In any scenario, the construction phase of a solar energy project brings with it a slew of logistical challenges and decision points for the delivery team. During the COVID-19 crisis, that list has understandably grown. COVID-19 has impacted all aspects of construction, both administrative and in the field. Where solar construction activities have been allowed to continue, thinking about and planning for procurement, permits and interconnection, host considerations, construction on site, and commissioning are all key to minimizing project delays.
Below are a few considerations to keep in mind during COVID-19 to help maintain schedules while implementing protocols that minimize safety risks for those involved. Note that this list of considerations is non-exhaustive, but it provides some of the most pertinent concerns the Sol Systems team looks to address.
Procuring
Equipment
Procurement
can be a challenge because once a purchase order is issued, there is not much a
buyer can control. Despite needs and changes that arise on the developers’ end,
manufacturers almost always run on their own schedules. However, the buyer (in
most cases the contractor building the PV system) can ask several questions to
better understand timing for material delivery. There are two important
questions to ask of manufacturers.
Where is the
material coming from?
At what capacity
are plants running?
Responses
to these key questions will provide the buyer with a sense of expectations for
delivery. Material coming from overseas raises a red flag, as it may not be
allowed to enter the Unites States. If plants are only operational at a certain
percentage, the plant may be backlogged and material delays may be expected.
The manufacturer should provide expected timelines for deliveries and provide
feedback when delays are expected, but it is the responsibility of the buyer to
check in on these constantly to adjust plans and have alternatives if delays
are expected.
Utilities
and AHJs
COVID-19
has caused a great deal of uncertainty around Authorities Having Jurisdiction
(AHJs), the
county or local offices that review and approve designs/applications for
project permits, and utilities.
States
and localities have approached COVID-19 in varying forms: reduced hours,
reduced personnel, or closures. It is the contractor’s responsibility to know
if the local AHJ is operational. If so, at what capacity is the AHJ operating?
The AHJ’s availability will determine if permit applications will be reviewed
and approved in a timely manner, therefore maintaining the project schedule. As
projects near completion, AHJ inspections are required. Are inspectors willing
to go on site and if so, are there special considerations for in-person visits
like safety masks and gloves, requirement for reduced personnel on site,
restricted times and dates for visits? A project cannot close until the project
receives the final sign-off from the AHJ inspector. Contractors must
accommodate these needs.
Utility
considerations are similar. Utilities remain operational because they are
essential businesses, but COVID-19 may be affecting their solar operations. Are
they allowing teams to go on site for system interconnections, witness testing,
and installation of net metering (where applicable), or are restrictions in
place? An interconnection, especially at a facility that operates full time,
requires coordination between multiple parties. Understanding where the utility
stands on this topic will minimize delays. Lastly, how does an interconnection
or meter swap scope differ for activities inside buildings versus outside? It
is the contractor’s responsibility to ask these questions in advance and
prepare.
Hosts
Another
important consideration is the system host. Whether the PV system is a ground
mount, a canopy, or a rooftop, the contractor must understand the host’s
requirements. Is the host allowing construction at its site? If the host is
allowing construction, has that party issued special considerations or
protocols to take while on site? For example, they may require temperature
checks and sanitizing stations, limiting the number of construction employees
allowed on site, and limiting or restricting deliveries to the site. These
protocols impact construction activities and contractors must find ways to accommodate
these into the schedule. A limitation on the number of deliveries allowed on
site may require an adjustment in the sequence of activities. Close
communication with the host to coordinate these activities is essential to
project success.
Construction
Understanding
the external variables around construction is only a part of the planning
phase. Once the construction team is ready to go on site or resume its activities,
there are several considerations to take into account. Are there activities
that require close contact with others, for example module installation and
racking torqueing? If so, how should these activities be treated to ensure
everyone’s safety? The contractor should consider taking additional safety
precautions such as morning and evening safety check-ins, staggering lunches,
requiring the use of masks and gloves, requiring each employee to have and use
its own tools, and requiring each employee to clean machinery like lulls and
cranes after each use. Nothing should come before the safety of workers.
Commissioning
and Testing
The
last phase of construction is commissioning and testing. While some contractors
perform this in-house, others require third parties to perform testing. If so,
is the preferred testing company willing to have their employees travel to the
site? These same questions are applicable for manufacturer commissioning. Are
there company travel restrictions preventing or delaying personnel from
performing these activities? The contractor must consider how this impacts the
schedule and plan for alternatives, like hiring a certified third-party
commissioner who is available and willing to travel to the site.
In these uncertain times, solar energy contractors are responsible for ensuring the safety of their teams and all those who visit their project sites, while maintaining the agreed upon construction schedule and adhering to host, utility, and AHJ requirements. Clear communication, attention to detail, proper precautions, and keeping up with evolving health recommendations can ensure clean energy is put into the ground today safely and successfully.
ABOUT SOL SYSTEMS
Sol Systems is a leading national solar energy firm with an established reputation for integrity and reliability across its development, infrastructure and environmental commodity businesses.To date, Sol has developed and/or financed over 850 MW of solar projects valued at more than $1 billion for Fortune 100 companies, municipalities, counties, utilities, universities and schools. The company also actively shapes and trades in environmental commodity and electricity markets throughout the United States. The company was founded in 2008, is based in Washington D.C, and is led by its founder. Sol Systems works with its team, partners, and clients to create a more sustainable future we can all believe in. For more information: www.solsystems.com
Commencing the Rush to Construction? Your Horizon Just Got a Little Longer
2018 |
By Lauren Miller
At the end of June 2018, the Internal Revenue Service (IRS) released its much-anticipated guidance on commence construction requirements for solar projects claiming the investment tax credit (ITC). The guidance, Notice 2018-59, is a rare win for the solar industry in a year of a number of federal policy losses, chief among them the tariffs on solar panels and steel. The IRS notice provides safe harbors that allow solar projects to secure the ITC rate of the year in which they commence a significant amount of construction or incur 5 percent or more of the total systems costs, even if the system places in service in a future year when the ITC rate is lower. However, regardless of when construction begins, systems must place in service before January 1, 2024 and meet continuous construction requirements to maintain their safe harbored status.
Given the positive news, how is the industry reacting; and, who will benefit most?
Who is Benefiting Most?
Although the ruling is positive overall for solar, some in the industry are better positioned to take advantage of the new rule. The ITC does not begin stepping down until the end of 2019, so near-term projects are not affected. Instead, the ruling will benefit systems in the earlier stages of development that successfully safe harbor in a year with a higher ITC rate – up to the full 30% - even if they place in service in 2020 or later.
Notice 2018-59 also provides an avenue for riding out module price increases due to section 201 tariffs. Some projects may now have the option to secure more favorable ITC rates by purchase of non-module equipment (though module purchases are the most common way to incur costs, other equipment qualifies as well), while holding off on construction until module prices drop.
Pursuing a Safe Harbor: Be Careful Not to Run Before You Walk
Given this newly opened door, we expect to see a rush to begin construction or to procure equipment to meet safe harbor minimums prior to each year of the step-down. The rush is likely to be heaviest at the end of 2019 and the end of 2021, when the first and the most extreme step-downs occur. Procuring equipment in order to incur the 5% minimum on some future project is the safest way to achieve safe harbored status. Because safe harboring a project by beginning construction requires construction continuity once underway, we expect to see this option used overwhelmingly for those projects that have already secured permanent financing.
Developer/investors with large balance sheets may have the luxury of buying up modules to put towards future projects that may not even be identified at the time of equipment purchase – however, there are two risks in doing so. First, developers must be careful to consult tax counsel to ensure they appropriately document and maintain safe harbor status on the purchased equipment (and avoid missteps that could result in losing the safe harbor). Second, developers must take a view on what equipment will cost (and how productive modules will be) in the year in which they intend to build the project. Hypothetically, one could purchase modules in 2019 to put towards a project placing in service in 2023 in order to use a 30% ITC on that project. But, any gains from the higher ITC rate could be eroded by 1) lower equipment pricing or efficiency gains over the intervening four years, 2) artificially higher pricing in 2019 as a result of tariffs or demand from others also safe harboring modules, and 3) the carrying cost of the purchased equipment. Nevertheless, given that only 5% of a project’s cost must be incurred to achieve the safe harbor, we will no doubt see companies making this play, similar to when the 1603 cash grant program expired with a safe harbor.
Thanks, IRS
Overall, the ruling is a net positive to the industry. It likely will not change the outcome for projects well on their way to development, but it provides opportunity for earlier stage deals to preserve economics during the step-down. The guidance provides breathing room for projects and certainty on the timeline of requirements to maintain qualification for higher ITC rates. There is indeed still space to navigate how best to utilize these rules to each project’s advantage, and it is not a one size fits all solution. Notice 2018-59 overarchingly provides forward momentum to the solar industry and is a much-appreciated outcome of IRS rulemaking. Who thought we would ever say that?
This is an excerpt from the July 2018 edition of The SOL SOURCE, a monthly electronic newsletter analyzing the latest trends in renewable energy based on our unique position in the solar industry. To receive future editions of the journal, please subscribe.
ABOUT SOL SYSTEMS
Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.
Over the last ten years, Sol Systems has delivered 700 MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.
Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com.