Solar project financing faces a hurdle due to imposed tariffs
OCI Energy, a Texas-based utility-scale developer of solar and storage projects, is currently shopping around for equipment suppliers to avoid the impact of tariffs on two upcoming projects in Texas. The company's decision-making process for equipment selection has been delayed until there is more certainty about the tariff situation.
The tariffs pose a short-term development problem for OCI Energy, particularly in the financing stage. According to the company's president, Sabah Bayatli, the tariffs make it difficult for developers to lock in pricing, which in turn causes delays in the financing process.
Despite OCI's solar supply chain being largely independent of China, the company is considering various factors, including tariffs, quality, and execution, before making a final decision on equipment suppliers for its upcoming projects. Some suppliers in certain countries, such as those at a 10% tariff level, are being considered as potential options.
OCI sources polysilicon for solar wafers from subsidiaries operating in Malaysia and Korea. The company is also keeping an eye on the quality and execution of major suppliers in countries like Vietnam, Malaysia, and Thailand. Many developers are considering PV manufacturing in regions like the Middle East, particularly Turkey, Jordan, and Egypt.
OCI Energy's subsidiary, Mission Solar, manufactures solar panels in San Antonio. This in-house capability provides some advantage, as the company has not yet sourced equipment for the two projects when the tariffs came into effect, giving OCI a potential advantage over developers already locked in contracts.
The final selection of equipment for projects is likely to be delayed due to the complex and moving pieces involved in the tariff considerations. OCI is creating a shortlist of suppliers based on the potential impact of tariffs under the worst-case scenario, which is that tariffs go back into effect after the 90-day pause.
The company's two projects currently at the financing stage are a 700-megawatt-hour battery storage system and a 350-MW solar farm, both located in Texas. In the longer term, tariffs aren't generally a major issue for developers, but they can cause delays in the financing process in the short term.
As the tariff situation unfolds, OCI Energy continues to navigate these challenges, demonstrating its resilience and adaptability in the face of industry changes. The company's focus remains on delivering high-quality solar and storage projects to its customers in Texas and beyond.
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