Solar project funding faces disruptions due to the imposition of tariffs
OCI Energy, a Texas-based utility scale developer of solar and storage projects, is keeping a close eye on major suppliers in countries like Vietnam, Malaysia, and Thailand, as well as considering options in the Middle East, as it navigates the complexities of tariffs in the solar industry.
The current tariff situation has put OCI Energy in a better position than developers who are already locked in contracts. Some potential suppliers could be subject to tariffs of up to 10%, causing delays in the financing process due to the inability to lock in pricing.
Sabah Bayatli, president of OCI Energy's Texas developer arm, acknowledged that tariffs are affecting the company. Developers like OCI Energy need to lock in things like capex, EPC contractors, battery supplies, and budgets as soon as possible to secure financing.
OCI Energy's subsidiary, Mission Solar, manufactures solar panels in San Antonio. Another OCI subsidiary sources polysilicon for solar wafers from Malaysia and Korea. However, the final selection of equipment for OCI Energy's projects may be delayed due to the complexities of tariff considerations and questions about quality and execution.
OCI Energy has two projects currently at the financing stage. One is a 700-megawatt-hour battery storage system, the other is a 350-MW solar farm. Despite the challenges, OCI Energy is still shopping around for suppliers for these projects.
In addition to exploring options in Asia and the Middle East, OCI Energy is also considering PV manufacturing in regions like Turkey and Jordan. Countries in the Middle East region, including Turkey, Jordan, and Egypt, are being particularly considered by solar panel manufacturers for establishing photovoltaic manufacturing due to their strategic geographic location, growing solar markets, and regional energy initiatives.
Once the market settles and understands tariffs, they will be baked into reported capital expenditure (capex) and affect offtake pricing, ultimately leading to higher energy prices for consumers. However, for OCI Energy, the short-term development problem posed by tariffs, particularly in the financing stage, remains a significant challenge.
