US needs to standardize enforcement of anti-forced labor law: Clearway CEO

If the solar industry is going to help the nation meet its climate goals, the US government needs to establish a "more practicable" enforcement regime behind the new federal law designed to prevent Chinese imports of goods manufactured using forced labor, Clearway Energy Group CEO Craig Cornelius said Nov. 2 during the company's third quarter earnings call.

The Uyghur Forced Labor Prevention Act, a bipartisan law signed December 2021 by President Joe Biden, created a US trade policy where all goods manufactured in the Chinese province of Xinjiang – where high levels of forced labor have been alleged – are presumed to be made with forced labor.

The raw materials and components manufactured in the Xinjiang region are a part of supply chains for a wide variety of products, including solar panels. According to Bernreuter Research, about half of the world's polysilicon, a key raw material in the solar photovoltaic supply chain, is sourced from Xinjiang. And four of America's top solar panel suppliers source polysilicon or other components from Xinjiang during the fourth quarter of 2020, according to research firm Panjiva.

The law, which took effect June 21, caused a bottleneck of import holds at ports as the US Customs and Border Protection sought to confirm compliance with the act. According to ROTH Capital Partners Managing Director Philip Shen, between nine and 12 GW of solar modules could be held up by the end of the year.

'We're doing fine'

As the fifth-largest US renewable energy firm, Clearway Energy would likely be one of the many US solar companies caught by the import snag. But thanks to the company's suppliers, that's so far not the case, Cornelius said.

"We're doing fine with it," he said. "Compliance with the UFLPA is something we felt pretty well positioned around in particular."

Clearway told investors Nov. 2 that he anticipates that the company's future assets – five wind, solar and battery projects totaling 1,408 MW – will be able to comply with the act and meet their targeted funding dates in 2023 and 2024.

"There's the possibility that there'd be some temporary confirmatory holds at the border for industry participants broadly, but we think it's a pretty manageable risk just because of the fact that we have modules coming in freely today because of who we bought from and where their supply comes from," he said.

Nonetheless, Cornelius said the government's enforcement of the law, which has caused backups for the industry at-large, needs improvement.

"The leadership across the applicable governmental bodies just needs to put our ports in a position where they can be successful just because of the quantities of equipment that are going to be coming into the country to meet the needs of the power grid and climate goals are dramatic," he said.

In particular, the documentation the US Customs and Border Protection requires to ensure compliance needs standardization and clarity, he said.

Earnings

Clearway Energy reported a net income of $62 million in Q3, during which it closed on the acquisition of 413 MW of wind assets. In September, TotalEnergies finalized the purchase of a 50% stake in Clearway's sponsor, Global Infrastructure Partners.

The TotalEnergies acquisition will allow Clearway to "further enhance its ability to grow its renewable energy pipeline," CEO Christopher Sotos said in a statement.

In May 2022, the company also announced the final sale if its thermal business to KKR for $1.3 billion. Sotos said the company's future renewable assets will be financed using $750 million of proceeds from the sale.

"With this unprecedented visibility, Clearway remains on track to deliver at the upper range of its dividend growth target through 2026," he said.