Several executives in the power generation space weighed in for POWER’s recent report on supply chain issues in the sector. Sourcing of equipment also was a hot topic in POWER’s 2023 forecast for the industry.
It’s no surprise. The power sector is not exempt from the problems that have impacted business and industry worldwide, from postponed construction of power generation projects, to delays in power plant maintenance, and more.
Paul Marushka, president and CEO of Sphera, a global provider of environmental, social, and governance (ESG) performance and risk management software, data and consulting services, provided POWER with his insight on supply chain issues. Sphera was recently recognized as a market leader in the 2023 Green Quadrant EHS Software report by Verdantix, an independent research and advisory firm. The 2023 report highlights Sphera’s comprehensive offerings, and points to the company’s experience serving large multinational firms and functionality across EHS (environment, health, and safety), ESG, operational risk management and product stewardship.
Sphera was awarded the highest score among the 23 vendors assessed for ESG and sustainability management. The company also has been recognized in the area of greenhouse gas (GHG) emissions management; Sphera in the recent Verdantix Carbon Management Green Quadrant report received a perfect score for its software that facilitates data collection and data checks for Scope 1, 2 and 3 emissions data.
“We are very honored to be continually recognized by Verdantix as a leader in EHS software” said Marushka. “Sphera is committed to enabling businesses globally to manage and mitigate risk and achieve their ESG ambitions.”
Part of Sphera’s ESG work is helping clients reduce risks to their goals by quantifying and efficiently managing the environmental and other impacts of their supply chain, which also can be used as part of a decarbonization strategy.
POWER: How much of the current supply chain issues can be attributed to the COVID-19 pandemic?
Marushka: According to the U.S. Bureau of Labor Statistics, at the start of this year, the U.S. had more than twice as many manufacturing vacancies than it did before the pandemic and was experiencing higher unplanned turnover than any other industry.
The COVID-19 pandemic had—and is still having—an impact on global supply chains. Just consider its effects on the labor market. A recent article in The Guardian highlighted findings from MIT and Stanford experts who note that, in addition to the deaths of 250,000 working-age Americans from COVID, employers in the U.S. witnessed the permanent departure of 500,000 workers from the workforce. Businesses and consumers saw how these losses affected the production and distribution of goods. Consumers certainly felt the immediate impact in shortages of key consumer goods like toilet paper and cleaning supplies, and that impact is still being felt today, more than two years later, with long lead times for appliances and building supplies, for example.
The pandemic brought increased demand for a variety of goods that would have been hard to meet under ordinary conditions, but the additional labor and supply chain challenges made it even harder to meet that demand. Consumer demand continued to rise once COVID-related restrictions eased, although for different types of products. This demand has put pressure on already strained supply chains that have not yet fully recovered from the pandemic.
POWER: Are supply chain issues more of a problem for thermal power generation (coal, natural gas, nuclear) than for renewable energy? Or are these issues a bigger problem for renewable energy providers (solar, wind, energy storage)? Or are these issues a major problem regardless of fuel type?
Marushka: The more efficient and reliable supply chains are, the better everything runs. Supply chain issues impact all sectors, including energy. They create problems for energy suppliers who can’t get the equipment and parts needed to maintain operations. With respect to renewable energy, these problems delay the construction of renewable energy projects.
Consider the disruption in the flow of goods from China. China’s share in the key manufacturing stages of solar panels currently exceeds 80% and may rise as high as 95% for key elements such as polysilicon and wafers, according to the IEA Special Report on Solar PV Global Supply Chains. China also plays a key role in the manufacture of wind turbines and in the rare earth production of materials needed for EV batteries. This flow of goods’ example highlights why we need to shorten the supply chain, diversify our energy resources, and decrease our reliance on any one country or source of energy, so that supply chain challenges don’t impede progress in renewables.
But the immediate challenge is the energy crisis sparked by the invasion of Ukraine, which affects the supply and cost of energy and consequently affects distribution networks. Climate change and extreme weather events—such as heat waves, sea-level rise, drought, and more severe storms—are creating problems for energy suppliers and putting enormous pressure on electric grids and hydropower supplies. Energy challenges lead to supply chain issues and supply chain problems give rise to energy problems; it cuts both ways.
POWER: How are supply chain issues contributing to cost increases for power generation equipment?
Marushka: Several factors are contributing to cost increases for power generation equipment. China dominates the production of components for solar, so the disruption of supply chains makes it harder for the U.S. to get these components. The Uyghur Forced Labor Prevention Act (UFPLA) signed by President Joe Biden in 2021 puts more scrutiny on how these components are produced and creates additional challenges for the execution of renewable power projects in the U.S. Additionally, you need thermal energy (coal) to produce renewable power generation equipment, and as the cost of thermal energy goes up, so does the cost of producing equipment for solar and wind. And longer and slower supply chains could contribute to future price increases.
POWER: What could government (federal, state, local) do to help ease supply chain issues in the power generation sector?
Marushka: One of the ways to address domestic supply chain issues in the power generation sector is to re-shore the development of clean energy technology, and the government has already taken steps in this area. The Clean Energy for America Act will help by providing incentives for investment in clean electricity, clean transportation, clean fuel production and energy efficiency. And the Inflation Reduction Act will develop U.S. supply chains for solar, wind, carbon capture and clean hydrogen.
POWER: How much could the U.S. power generation be helped by policies that would spur more domestic manufacturing of equipment?
Marushka: The Executive Order 14017 on American’s Supply Chains and the Inflation Reduction Act will promote more domestic manufacturing of equipment. Both will contribute to shortening the supply chain, enhancing supply chain resilience, and encouraging greater sustainability. While implementation will take time, both represent steps in the right direction where power generation is concerned.
POWER: What else should our readers know about the impact of supply chain issues on the power generation sector?
Marushka: We need to consider power in the wider context of ESG goals such as GHG emissions reductions and the challenge of addressing Scope 3—or supply chain—emissions. But time is also a factor: We need to meet our goals for cleaner energy as quickly as possible. Legislation and regulation can only go so far in markets where fossil fuels and thermal energy are dominant.
Businesses need to act, and the incentives that have been introduced will help. But as companies adopt new technologies that help them become more sustainable, they also need to keep a watchful eye on operational risk and supply chain risk and mitigate those risks, so they don’t turn into liabilities. There are software solutions that can give them the visibility they need to effectively manage these risks. Smarter, insight-driven supply chain management coupled with the adoption of green technologies will result in stronger supply chains that enable faster progress toward our sustainability goals.
—Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).