ARKANSAS, Nov 16 (Future Headlines)- Developers of renewable energy projects and grid power storage in the United States are facing significant challenges in procuring critical components, leading to increased costs and project delays. The tight supply chain particularly impacts the availability of high-voltage transformers crucial for connecting wind and solar farms, as well as batteries, to the grid. This scarcity of components is hindering projects vital to the energy transition and posing risks to the timelines and economic viability of ventures across the renewable energy sector.

A shortage of high-voltage transformers, essential for connecting renewable energy projects to the grid, has emerged as a critical bottleneck. The transformers, often custom-built and the size of large trucks, are facing extended delivery times, with the lead time growing from 50 weeks a year ago to 150 weeks at present.

Developers are experiencing the consequences of longer lead times, as they are compelled to order equipment before finalizing commercial agreements to sell power from their projects. The risk of ordering equipment without guaranteed power sale agreements and the escalating prices of components are creating uncertainties and financial pressures for developers.

Higher prices for transformers and associated equipment are forcing developers to make significant financial commitments without certainty about all the necessary deals and approvals being in place. This situation has led to increased project costs and financial risks for developers.

Some large developers opted to stockpile transformers and associated equipment before the implementation of measures like the Inflation Reduction Act (IRA), which aimed to accelerate renewable energy deployment and triggered a surge in demand. However, developers without pre-ordered equipment are now facing higher costs and extended lead times.

The industry acknowledges that the supply chain challenges were predictable, but measures like the IRA accelerated an already ongoing process. Some developers took proactive steps, such as Silicon Ranch, which spent over $100 million stockpiling transformers and switchgears.

Large-scale battery projects designed to store energy on grids and mitigate the variability of wind and solar power are experiencing longer lead times. These projects are taking around 12 to 18 months to complete, approximately six months longer than under normal supply conditions.

The procurement of transformers and other essential electrical engineering equipment has become a major bottleneck for battery storage projects. The delays in securing these components have contributed to longer completion times and challenges for developers.

Despite a record addition of 1,510 megawatts (MW) of grid-scale battery storage in the second quarter, the supply chain problems have resulted in lower-than-anticipated deployment. Developers added fewer MW due to challenges associated with procuring critical components.

Some developers, like Silicon Ranch, took proactive measures by pre-ordering and stockpiling transformers and switchgears. This strategy helped them secure critical components ahead of supply chain disruptions.

Energy Vault, a Swiss-based company providing equipment and services to U.S. power producers, has incorporated longer timelines and higher costs into its planning for storage projects. Strategic planning aims to minimize the impact of delays caused by supply chain challenges.

Utility AES Corp has adopted a proactive approach by stockpiling supplies needed for building battery storage projects through 2025. This measure helps ensure a stable supply of essential equipment.

The shortage of raw materials, particularly electrical steel, has contributed to delays in transformer production. Tight supplies, exacerbated by factory shutdowns in China during the pandemic, are expected to persist. Export restrictions imposed on Russia following its invasion of Ukraine have further aggravated shortages in critical components, affecting the supply-demand balance in the industry.

U.S. manufacturers have been slow to expand production capacity, citing the associated expenses. The industry is grappling with the need to catch up with the rapid scale-up of wind, solar, and storage projects, which has outpaced production expansion.

Reporting by Kevin Wood; Editing by Sarah White