As supply chain uncertainty has hampered large-scale solar development in the United States, some companies are looking to secure project materials well in advance of breaking ground. Lightsource bp has developed a strategy of striking multi-year deals with manufacturers for solar modules, inverters and trackers to ensure “supply certainty,” says Stephen Barnes, senior VP of Americas construction for the developer.
In February, Lightsource bp placed an order for 4 GW of advanced, ultra-low carbon thin-film PV solar modules from First Solar to be delivered between 2026 and 2028. This was on the heels of a similar agreement between the companies announced in November 2021, where Lightsource bp ordered 4.4 GW of modules to be delivered between 2023 and 2025, in addition to 2 GW of modules delivered in 2021 and 2022, making the entire volume more than 10 GW between 2021 and 2028.
“The U.S. solar industry is at a pivotal moment, poised to expand at an exponential rate with the Inflation Reduction Act serving as the catalyst,” says Kevin Smith, CEO, Americas, for Lightsource bp. “We are seizing the opportunity by not just growing our 20 GW development pipeline across the United States, but also creating sizeable demand for our U.S.-based partner First Solar, which, in turn, is investing in innovation and manufacturing, and supporting thousands of direct and indirect American jobs.”
The deal includes orders for First Solar’s Series 6 Plus and next-generation Series 7 modules, designed and developed at its R&D centers in California and Ohio.
“Our relationship with Lightsource bp is a partnership in growth,” says Georges Antoun, chief commercial officer at First Solar. “We enable their growth with certainty through long-term pricing and supply commitments, and advanced technology, while they enable ours by providing the certainty of demand we need to invest in manufacturing.”
First Solar is expanding its U.S. manufacturing capacity to meet demand, with a new factory in Ohio and another under construction in Alabama that is expected to be commissioned by 2025. Both factories will produce the Series 7 modules ordered by Lightsource bp. First Solar’s new $1.1 billion Alabama factory and $185 million expansion of its existing manufacturing footprint in Ohio are expected to bring its total investment in U.S. manufacturing to more than $4 billion. The company’s annual U.S. manufacturing capacity is forecast to expand to 10.6 GWdc by 2026.
The manufacturer estimates that its new investments in Alabama and Ohio will add about 850 new manufacturing and more than 100 new R&D jobs, increasing its total number of U.S. jobs to more than 3,000 by 2025.
First Solar being a U.S. manufacturer is an important factor in Lightsource bp’s partnership, Barnes says. While First Solar is among the largest solar module manufacturers in the world, avoiding U.S. Customs delays and qualifying for the domestic content stipulations in the Inflation Reduction Act are major benefits. As noted on p. 19, no other U.S. module manufacturer is close to First Solar’s amount of domestic content.
“We have 14 projects totaling 1.7 GW under construction right now,” Barnes says. “We’re in the planning phase for next year with pre-construction development for another 2.5 GW of projects. Having that supply certainty with suppliers you can count on is critical. First Solar is one of our key strategic suppliers. They’re a U.S.-based manufacturer that we can count on for delivery.”
Multiple years, multiple partners
Barnes explains that Lightsource bp has similar agreements with three or more partners to supply modules, inverters and trackers. In April, for example, the company signed a volume frame agreement (VFA) with Siemens to supply solar inverter stations for a series of projects in the Midwest and Southeast United States. The agreement is for more than 850 MW of Siemens inverters, with an option to add 200 MW more, over the course of the next two years.
“When we’re looking at inverters, trackers or modules, it’s typically a three-year deal,” says Barnes, adding that Lightsource bp leaves room for flexibility. “When we make these multi-year deals, we make sure it’s not going to tie up 100% of our spend. Instead, we’re looking to fill 60%-70% of our need.”
The reason for that built-in flexibility, Barnes explains, is being able to work around permitting or interconnection delays and avoid being tied to one technology for too long.
“With technology, you don’t want to go too far into the future as things can change fast,” he says. “Sometimes we’ll be making a deal for inverters that have not been announced yet. You have to balance the risk. If one partner ends up with advancements in technology or performance, we may end up with three different manufacturers, and one might get better performance or support.”
These multi-year purchase agreements with multiple partners also help make engineering, permitting and logistics management easier during project development, Barnes says.
“I know if I have so many gigawatts of First Solar modules or Array trackers procured, I can pull down that volume for a project,” he says. “I can select the best technology for a specific project location. Working with three different manufacturers, I can determine that this project makes more sense for Nextracker or this other one for Array, for example.”
Risks and rewards
Barnes explains that there are several potential risks involved with these multi-year purchases for components.
“The risks associated with these deals include making too big of a deal with a counterparty at the wrong time, then in the next three years, you’re either saddled with a price that’s too high or equipment that’s not optimally performing,” he says. “Or you might have a counterparty that doesn’t stand behind the contract. But you’re a hero if you time it just right.”
Some of Lightsource bp’s multi-year deals involve price flexibility related to the cost of manufacturing to avoid exposure to the pricing fluctuation in steel, copper, fuel or shipping.
“Having multiple partners for each category helps manage that risk,” Barnes says. “In a perfect world, if I have 1 GW in projects, then I would buy 200 MW from three different partners, so that I have 600 MW confirmed, and I can then spot purchase 400 MW. The key is having those multi-year deals, but not going too big or too long with any of them.”
On the other hand, another advantage of forming strong partnerships with suppliers, like First Solar, is that Lightsource bp then has “a seat at the table talking about technology advancements,” Barnes says. That insight about new products hitting the market gives the company a “technology road map” for future projects.
“We work with our manufacturing partners on innovation and in some cases to deploy new technology before other companies,” Barnes says. “With our suppliers, having a multi-year deal is good for them to have a backlog, knowing they have X number of components to produce per year. It helps with their planning.”
Bradley Kramer is managing editor of Solar Builder.
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