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Solar’s biggest risk? Too few workers to deliver the massive project pipeline

Solar’s biggest risk? Too few workers to deliver the massive project pipeline

Blue Ridge Power CEO Chris Dunbar joined Episode 49 of the Factor This! podcast to share how one of the industry’s leading utility-scale solar and storage EPCs is navigating a chronic labor shortage and a tumultuous market plagued by supply chain constraints, trade disputes, and the interconnection slog. Subscribe wherever you get your podcasts.

Praise for the solar industry’s meteoric growth often focuses on developers and their multi-gigawatt project pipelines and portfolios. Seldom do the accolades extend to the construction crews putting steel in the ground.

But clean electrons aren’t generated by hope, targets, and schematics. It’s the engineering, procurement, and construction firms that are executing the vision for a clean energy transition.

Therein lies a largely overlooked problem: There simply aren’t enough qualified EPCs to meet the booming demand for solar projects. And rich incentives in the Inflation Reduction Act only stand to magnify the shortfall.

“The first holistic problem is that there are just not enough skilled workers to perform all of the work,” Chris Dunbar, CEO of Blue Ridge Power, a leading utility-scale solar and storage EPC, said on the Factor This! podcast.

The Brightside Solar Facility features 147,732 of First Solar’s 440-watt thin-film solar modules with single-axis trackers. (Courtesy: Burns & McDonnell)

Top-tier developers still receive “healthy” competition from the five or so EPCs jockeying to build their projects, Dunbar said, and there’s enough work to go around. These projects have a buildable site, realistic timelines, a clear path to financing, and at least a portion of the feasibility and engineering work completed.

But for projects lacking in one or more of those critical areas, developers likely will have a tough time securing a qualified EPC in today’s solar market.

And maybe the biggest red flag of all? Development projects that have been bought and sold several times over, passed from developer to developer, as each hoped to find the bankability that eluded previous owners.

“There’s probably something wrong with that project,” Dunbar said.

Blue Ridge Power passes on far more opportunities than they pursue—a function of the supply and demand imbalance that is allowing qualified EPCs to be picky.

That could spell bad news for developers who are, thanks to the Inflation Reduction Act, trying to execute a higher volume of projects, many of which didn’t pencil out before the legislation substantially changed the clean energy industry’s trajectory.

Another EPC, Burns & McDonnell, is being similarly selective.

Adam Bernardi, director of renewable sales and strategy for Kansas City-based Burns & McDonnell, said the firm is asking pointed questions of developers: Is the project’s targeted location in line with where Burns & McDonnell wants to build? Does the developer have a history of sourcing the major owner-furnished equipment? Do they have a history of successful project development and execution, including successful offtake arrangements? Do they have a pipeline of utility-scale projects?

“As the pool of EPC resources shrinks even further, we are closely examining projects we’re chasing,” Bernardi said. The Inflation Reduction Act and tax incentives will undoubtedly spur more renewables projects to help meet decarbonization goals, he said. “But the first few years may be a little bumpy as we continue dealing with supply chain issues and labor shortages.”

Tackling the labor shortage

Blue Ridge Power isn’t immune to the chronic labor shortage facing the EPC segment. But they may have found early success in an in-house upskilling program designed to elevate entry-level employees into critical employment gaps.

Last year, the company launched its Power Up Program, which has already contributed 200 employees to its 1,000-person workforce. The program could also support apprenticeships that are a key component in receiving the full value of incentives in the Inflation Reduction Act.

“Getting them (new employees) to the next stage where they can be electricians, site supervisors, and managers is where we are now,” Dunbar said.

Engineering, procurement, and construction firm Burns & McDonnell said it has received federal approval for a new open-shop apprenticeship program to support utility-scale solar projects. (Courtesy: Burns & McDonnell)

Burns & McDonnell already has received federal approval for a new construction craft labor and heavy equipment operators program in Texas to support utility-scale solar projects.

Provisions of the IRA offer bonus credits to projects that comply with the federal prevailing wage provisions of the Davis-Bacon Act in using registered apprentices on project teams.

Apprenticeship programs allow workers to get paid while they train for highly-skilled jobs that are in demand across numerous construction sectors. The Burns & McDonnell program is intended to fast-track skilled labor into the workforce with an emphasis on safe work practices.

“With the energy transition taking place in the U.S., solar projects and programs have a demand for workers unlike anything the country has experienced before,” said Jeff Allen, Burns & McDonnell vice president of construction.

A changing dynamic

Numerous headwinds over the past two years — supply chain constraints, trade disputes, and the interconnection slog — have forced EPCs like Blue Ridge Power and Burns & McDonnell to reevaluate their partnerships with developers.

In years past, a cost estimate could generally be expected to remain good through much of the project construction cycle. Not anymore.

“You would try to understand the cost of a project one day and I would say within 90 days you were probably wrong about the estimate,” Blue Ridge Power’s Dunbar said. “That was happening before and after the IRA.”

EPCs are seeking partnerships with developers that understand the shifting landscape, which includes the likelihood that estimates and timelines are likely to change quickly and often.

Bernardi of Burns & McDonnell said the EPC is having “much different conversations” with developers regarding pricing and timelines.

“In instances where owners either want to move very quickly or want to try and lock in capacity out years, it may make sense to use a progressive EPC delivery method as opposed to a more conventional fixed price execution,” he said.

Both Blue Ridge Power and Burns & McDonnell said they encourage developers to engage with EPCs as early as possible in the development process.

Dunbar said the ideal window for engagement is as the developer is finalizing engineering plans and beginning to select equipment as part of their interconnection application. He said previous predictions that EPC work would one day be commoditized failed to acknowledge the institutional knowledge that EPCs bring to the process.

“What we look for in partners are people that are willing to talk to us about their pipeline two, three years out, because those are the projects that we can bring a lot of value to,” Dunbar said.

Developers weigh in

A 7.1 MW community solar farm has been completed in York, New York. Standard Solar funded the construction and will own and operate the project, which was developed by SolarPark Energy. Catalyst Power will handle subscriber acquisition and customer service. (Courtesy: Standard Solar)

Green Lantern Solar, a Vermont-based developer of distributed and community solar projects, has so far been insulated from much of the EPC sector strain, given that most of its projects are under 1 MW.

Interconnection delays and costs, not construction, ranks as Green Lantern Solar’s harshest pain point. But Geoff Sparrow, vice president of development, said he has heard of developers diversifying their EPC partners due to bandwidth limitations.

“The implementation of the IRA will likely compound the existing labor shortages and extended equipment lead times that EPCs are facing, further straining their bandwidth,” Sparrow said.

Sparrow said he anticipates the emergence of new EPC players aiming to meet the growing demand for solar project construction. That could also lead to consolidation in the space, he predicted.

Standard Solar, also a developer of community solar projects, is proactively working to recruit those potential contractors to the solar industry.

Rick Berube, the company’s chief operations officer, said his company is “working diligently to qualify other established contractors in the solar industry to broaden our resources.” The hope, he said, is to prevent delays and ensure the firm can handle “any potential pressure from the IRA.”