Cost Insights
by PowerAdvocate

Intelligence for energy companies seeking a data-driven approach to cost management

New Section 301 Tariffs: What Supply Chain Teams Should Know

August 28, 2019 at 1:18 PM / by Steven Eisen posted in Industry Insights, Oil & Gas, Power & Utilities

Summary

  • The US administration recently announced two new rounds of tariffs on $300 billion of imports from China at a rate of 10%, effective September 1 and December 15.
  • This is the fourth round of US tariffs on imports from China, which now covers over $500 billion of Chinese imports, covering nearly all remaining trade with China.
  • China has responded by cutting US imports and by threatening additional tariffs on US goods.
  • The new tariffs largely focus upon consumer products; however, the tariffs also cover numerous steel & aluminum products in both finished and intermediate states that may impact energy supply chain teams. However, the lists will not include products for which China maintains monopolistic market share, such as rare earth minerals and barite.
  • While trade negotiations between China and the US are expected to continue, should the talks fail to result in an agreement, the list 4 tariff rate is anticipated to increase to 25%, in line with lists 1 – 3.
  • Supply Chain teams should evaluate how exposed they are to key commodities such as steel and aluminum and be able to evaluate potential risks to cost structure.

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Section 301 Tariffs: US-China Trade War Worsens

June 6, 2019 at 9:51 AM / by Amrit Naresh posted in Industry Insights, Oil & Gas, Power & Utilities

Summary

  • The US raised tariffs on $200 billion of imports from China from 10% to 25% in early May. China responded with retaliatory tariffs on $60 billion of imports from the US, effective June 1.
  • This is the third round of US tariffs on imports from China, which now affect $250 billion of imports. The US has threatened a fourth round of tariffs on $300 billion of imports, or nearly all remaining trade with China.
  • The new tariffs cover 1,200 chemical and 500 metal products. They are also the first to include consumer products, which raises the prospect of accelerating price increases for US consumers. Neither List 3 nor List 4 includes rare earth minerals.
  • Trade negotiations between Beijing and Washington remain underway. Slowing economic growth in either country would add pressure to advance the negotiations, but supply chain teams must prepare for potential price risks.
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Utility Update: 5 Things to Watch in 2019

January 10, 2019 at 3:45 PM / by PowerAdvocate posted in Cost Reduction, Industry Insights, Power & Utilities

Utilities are in the thick of an industry transformation driven by technological and competitive forces. 2019 shows no signs of slowing down. We have highlighted 5 key trends to stay ahead of in the coming year, so utilities can continue to position themselves for success.

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[Whitepaper] How Segmenting Suppliers Can Help Predict Bidding Behavior

November 26, 2018 at 5:08 PM / by PowerAdvocate posted in Project Estimation, Power & Utilities

The variability of supplier responses to bid events can pose significant financial and operational risks to energy companies, especially as this behavior is prone to change when market and economic conditions shift. Variances in bid responses during the recent economic recession and recovery motivated PowerAdvocate to analyze the impact of macroeconomic factors on supplier bidding behavior. The aim of this analysis was to uncover trends that, when coupled with project and company-specific data, will enable industry leaders to better anticipate and mitigate project and supplier risk. If you missed our introduction of this analysis, you can read our previous blog about it here.

Our team hypothesized that suppliers who offer a diverse range of services, work across multiple industries, and service a wide geographic area respond to macroeconomic circumstances differently than smaller or more specialized suppliers. To measure these differences, and to better understand how a supplier’s profile influences their behavior, the team categorized bid data into two groups: bids from major suppliers and bids from specialized suppliers.

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[Whitepaper] Reduce Supplier Risk by Predicting Bidding Behavior

November 14, 2018 at 6:16 PM / by Michael Sojka and Isabel Schwartz posted in Project Estimation, Power & Utilities

Historically, energy firms have seen uncertainty in their supplier’s behavior as simultaneously unmanageable and a source of severe risk for their operations. This uncertainty can cause major projects to fall behind schedule and can create reputational and financial loss for an organization.

While this risk has always been a concern for energy firms with high exposure to contractors, the volatility of today’s market highlights the need for all companies to be able to proactively mitigate the risk that suppliers pose to major projects and operations.

Leveraging PowerAdvocate’s energy supplier database of $3.3T in energy market spend and 70K sourcing events, we identified and quantified trends in supplier bidding behavior. Using these insights, energy firms can efficiently plan for changes in bidding behavior and mitigate risks during market fluctuations.

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Solar Tariffs Expected to Impact Costs for Solar Projects: How to Mitigate, Plan, and Prepare 

February 26, 2018 at 2:49 PM / by Samantha Walter & Justin Steimle posted in Project Estimation, Cost Reduction, Industry Insights, Power & Utilities

Higher prices are on the horizon for utility-scale solar projects due to tariffs and quotas recently approved by President Trump. This new legislation could seriously impact financial plans for solar projects, but expertise in capital projects, specifically renewable projects, can help utilities, EPCs, and developers mitigate these costs and prepare for future changes.

Why are the rules changing?

In September, the International Trade Commission (ITC) determined that U.S. solar manufactures experienced significant injury due to imports of crystalline silicon photovoltaic (CSPV) solar cells and modules. This investigation stems from the United States’ Global Safeguard law, where an industry representative may petition the ITC to determine if imports are causing “serious injury” and recommend remedies. The petition was filed by the recently bankrupted Suniva and later joined by SolarWorld.

On January 22, the Trump Administration followed through with the recommendations from the ITC and imposed a four-year solar import tariff that will start at 30 percent in the first year and gradually drop to 15 percent. This tariff will apply to all CSPV solar cells and modules that are imported into the U.S. There is a quota specifically for solar panel cells which excludes the first 2.5 GW of cells imported into the U.S. each year, but the details on how the quota will apply remain undetermined. Like the tariff, the quota will last four years.  All countries are included except for Generalized System of Preferences (GSP) beneficiary countries, which account for less than three percent of total imports.

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Section 232 Threatens Steel and Aluminum

February 23, 2018 at 4:49 PM / by PowerAdvocate posted in Industry Insights, Oil & Gas, Power & Utilities

UPDATE: In a surprising move, President Trump announced on March 1 that he intends to impose sweeping 25% tariffs on steel imports and 10% tariffs on aluminum -- the most severe of the potential trade remedies recommended by the Department of Commerce. Details of the plan are still unknown, but the announcement has already driven dramatic steel and aluminum price increases and spooked equipment manufacturers. Register for our March 13 webinar for the latest updates on Section 232.  

Read on for our initial analysis of the Department of Commerce's recommendations.

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What Utilities Need to Know about Energy Storage Cost Drivers

November 27, 2017 at 4:31 PM / by PowerAdvocate posted in Cost Reduction, Industry Insights, Power & Utilities

More likely than not, your utility is already or soon will be procuring battery energy storage as part of its grid modernization strategy. In fact, according to BCC Research, the global market for grid-scale battery storage technologies is projected to reach nearly $4.0 billion in 2025, up from $716 million in 2015.  Battery costs have fallen dramatically over the past decade. However, events in the Democratic Republic of the Congo are putting the brakes on further cost reductions. Here’s a look at what’s happening and how you can approach your battery procurement planning in light of these events.

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Navigating Harvey's Aftermath: How Supply Chain Can Manage Market Risks

September 22, 2017 at 4:42 PM / by PowerAdvocate posted in Cost Reduction, Oil & Gas, Power & Utilities

As the Texas and Louisiana Gulf Coast recovers from Hurricane Harvey, Supply Chain organizations face the challenge of navigating its effects, from chemicals to logistics to labor.

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Why Your Utility Should Do Should-cost Analysis

September 21, 2017 at 7:09 AM / by PowerAdvocate posted in Cost Reduction, Industry Insights, Power & Utilities

Do you manage a utility supply chain, procurement process, or supplier relationships? Or collaborate with and depend on teams that do? If so you know how heavy a lift it can be to effectively manage asset-intensive energy sector costs. Should-cost analysis helps address two key challenges that get in the way of delivering even more value for your organization.

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