Renewable energy, often known as nature’s infinite power buffet, is the outcome of earth’s natural elements collaborating to provide us with an ever-replenishing, guilt free energy source. Renewable energy is important to keep climate change at bay, reduce the dependence on fossil fuels, improve air quality, and lower overall costs.
Despite all the positive things that come with renewable energy, renewable energy also has its downsides. In this article we will explore some of the common issues related to renewable energy supply chain management and potential solutions.
What Is The Role Of Renewable Energy Within The Supply Chain and What Are The Benefits?
Before we get into the top challenges of renewable energy within supply chain management, let’s dive into the key benefits of renewable energy and how it works within the supply chain. We put together a chart so you could see each aspect in an organized fashion.
| Supply Chain Aspect | Renewable Energy Applications | Additional Benefits |
| Procurement | Partner with suppliers using renewable energy. Purchase sustainable raw materials and components. | Strengthen brand image. Encourage sustainability in the supply chain. |
| Production | Power facilities with renewable energy (solar, wind, geothermal). Implement energy-efficient equipment. | Reduce operating costs. Lower greenhouse gas emissions. |
| Warehousing | Power warehouses with renewable energy. Implement energy-efficient lighting and temperature control systems. | Improve energy efficiency. Reduce energy costs. |
| Transportation | Utilize electric or hybrid vehicles. Partner with eco-friendly shipping and logistics providers. | Decrease carbon footprint. |
What Are The Top Challenges When It Comes To Renewable Energy Supply Chain Management?
Shortage Of Resources (Raw Material Scarcity)
For efficient renewable energy, you need important metals and minerals (lithium, cobalt, and other rare earth elements). These minerals are required for the production of electric cars, solar panels, wind turbines, and other renewable energy products.
This shortage of resources makes it complicated for companies to source the materials needed to produce green energy. The result is price hikes and longer production times which could affect the entire end-to-end supply chain. Here is a list of examples.
- Limited lithium deposits: Necessary for electric vehicle batteries, leading to competition for resources and higher prices.
- Cobalt scarcity: Crucial for battery production, with the majority of global supply coming from the Democratic Republic of Congo, leading to supply chain risks.
- Rare earth metals: Used in wind turbines and solar panels, with China dominating production, creating potential supply disruptions.
- Increasing demand for raw materials: The growing popularity of renewable energy sources drives up demand, exacerbating resource scarcity issues.
- Geopolitical factors: Resource-rich countries may use their control over raw materials as leverage in international relations, leading to supply chain disruptions.
- Environmental concerns: Extracting raw materials can have significant environmental impacts, which may lead to stricter regulations or public backlash, affecting resource availability.
- Long lead times for new mining projects: Expanding the supply of raw materials can take years, leading to short-term supply constraints and potential delays in renewable energy projects.
Increased Costs
Transitioning to renewable energy is a journey full of challenges and opportunities as many of the supply chains are in their infancy. Over time, as the supply chain infrastructure move ahead and demand increases, costs will surely be lower. At the moment when it comes to getting started, costs could be higher with renewable energy production than those of traditional sources. This is because there are:
- Costs involved in hiring and collaborating with experts to design new systems, policies, and protocols (more on how to do that efficiently later on)
- Cost of implementing more quality control measures and procedural processes within the workflow
- Companies want to make sure they are adding in vetting protocols and taking all necessary steps to ensure that the products being produced are of high quality. This comes with costs as well.
- Investing in the monitoring of new metrics as companies try to produce with renewable energy
- Cost of installing renewable energy systems, such as solar panels or wind turbines, can mean high initial upfront capital investment
Availability And Consistency Issues Of Renewable Energy
To rely on renewable energy you need natural resources such as sun, wind, water and so on. These resources are not always available or consistent. This inconsistency can cause issues in the supply chain as you need to be able to measure availability and predict demand fluctuations due to changing weather conditions in order to properly plan resources and delivery schedules.
Space Constraints
Installing solar panels or wind turbines may require a significant amount of space, which may not be readily available at all facilities. This can be a challenge for urban locations or facilities with limited space for expansion.
In the context of the supply chain, these space constraints can impact the efficiency of operations, as the necessary infrastructure for renewable energy generation might compete for space with other essential functions like storage, loading docks, and transportation access points. Moreover, limited space availability might require supply chain facilities to explore alternative renewable energy solutions or invest in off-site renewable energy generation, which could lead to additional costs and complexities in managing energy procurement and distribution.
Laws and Regulations That Limit Renewable Energy Use
Many of the laws are still not in favor of renewable energy producers. This may make implementing renewable energy systems difficult due to the fact there are local regulations, permitting processes, and zoning restrictions.
This could impact the timelines and budget for integrating renewable energy into the location in which you’re trying to set up operations (warehouses, distribution centers, or manufacturing plants).
Coming back to the costs, getting approvals for these systems may incur additional costs which you may not have accounted for in the initial budget. Here are some things that may get in the way.
- Setback requirements: Minimum distance rules between renewable energy installations and property lines could restrict the implementation of renewable energy projects.
- Permitting Process: Obtaining permits can be cumbersome and the complexity of the process can create delays.
- Building Codes: Strict building codes can make installing renewable energy systems more challenging and expensive to build.
- Interconnection rules: Interconnection is the process of connecting a solar or wind system to the electrical grid. Rules and regulations around interconnections could limit the ability to connect renewable energy systems to an existing facility.
- Community Opposition: Believe it or not, some people still aren’t on board with renewable energy. This isn’t a law or regulation, but it can be a hurdle all the same.
How Can You Solve These Problems?
Some of these problems will be solved over time, as renewable energy becomes more accepted and regulations change. While those things take time to coalesce, you can take steps to ensure you are prepared for any issues that arise.
Develop Long-Term Relationships With Suppliers
Establishing long-term relationships with suppliers of raw materials and components can help secure a more stable supply of resources. These relationships can help you better understand the risks and challenges faced by your suppliers, and allow you to work together to find solutions and mitigate potential supply chain disruptions.
Diversify Your Supply Chain
Diversifying your supply chain can help mitigate the risks associated with resource scarcity and geopolitical factors. By sourcing materials and components from multiple suppliers and regions, you can reduce the impact of disruptions in one area on your overall operations.
Invest in Research and Development
Putting money into research can help you discover creative ways to tackle renewable energy supply chain issues. This could mean looking into different materials, boosting the effectiveness of renewable energy systems, or creating new technologies that lessen the environmental effects of extracting resources.
Adapt to Changing Regulations
Stay informed about changes in laws and regulations related to renewable energy, and be prepared to adjust your operations accordingly. By proactively adapting to new requirements, you can minimize the impact of regulatory changes on your supply chain and maintain a competitive advantage in the marketplace.
Collaborate with Industry and Government Stakeholders
Working together with other industry stakeholders and government agencies can help address common challenges and facilitate the development of supportive policies and regulations. Working together can also lead to the sharing of best practices and the pooling of resources to tackle issues such as resource scarcity and supply chain disruptions.
Implement Energy Storage Solutions
To address the availability and consistency issues of renewable energy, invest in energy storage solutions, such as batteries or thermal storage systems. These batteries and systems can store excess energy generated during periods of high renewable energy production and release it during periods of low production, leading to a consistent flow of energy.
Optimize Space Utilization
To overcome space constraints, consider creative solutions for integrating renewable energy systems into your facilities. This could involve things like installing solar panels on rooftops or walls, incorporating vertical wind turbines, or using modular renewable energy systems that can be easily change as your supply chain needs change.
Work With Us
Although these solutions sound pretty simple, it’s actually a lot of work. Especially when you have to run a business.
At PLG, we excel in supply chain design, market analysis, due diligence, logistics procurement, business strategy, assessment/optimization, site selection, and cutting-edge technology to optimize your supply chain for renewable energy.
We can implement and support you with every solution mentioned above, helping you transition to a more efficient and sustainable supply chain, all without facing a steep learning curve on your own. Click here and get in touch with us now for more information!
