The increase in the prices of photovoltaic panels will threaten more than half of investments in PV farms

After a decade of systematically cheaper solar panels, 2021 is the first year in which the prices of PV panels have gone up so much so that it poses a serious threat to the realization of many photovoltaic power plants.

Thanks to the approximately 80-90 percent decrease in the prices of panels in 2010-2020, photovoltaics has become a fully competitive technology for generating electricity, and investments in PV dominate the global energy sector in terms of launched capacities and invested money.

This year, however, the global photovoltaic market is facing an increase in the prices of photovoltaic panels, which is a consequence of the more expensive components – especially silicon, as well as the costs of sea transport. The increase is so large that module prices have already returned to the levels last recorded before 2018.

This year’s increase in the prices of photovoltaic modules was observed by the Norwegian consulting company Rystad Energy, which estimated that it threatened the implementation of even more than half of the investments in solar farms, which were to take place in 2022.

While last year the average price of photovoltaic panels with the cost of sea transport was around $ 0.2 / Wp, at the end of the first quarter of this year it increased to about $ 0.25 / Wp, and is now expected to exceed $ 0.3 / Wp – which is largely due to the huge increase in transport costs.

Increase in the prices of photovoltaic panels in 2016-2021, taking into account the costs of sea transport. Source: Rystad Energy.

Shipping costs from China increased from around $ 0.005 / Wp in September 2019 to around $ 0.03 / Wp last month.

However, even without this component, the price of modules in the second half of 2021 is expected to be around USD 0.26-0.28 / Wp, which means an almost 50% increase over the year.

Much higher prices of photovoltaic panels are also the result of an increase in the prices of components used by the photovoltaic industry.

It is true that the price of solar glass stabilized after the increase recorded at the end of 2020 and currently does not differ from the price of the first months of last year, the other raw materials needed for the production of modules have significantly increased in price.

The record holder is the basic component used by the PV industry, i.e. polysilicon, which compared to the beginning of this year has already increased by over 300 percent. While it seemed that in recent months Chinese producers began to keep up with the growing demand for this commodity, stopping the upward trend for a moment, they have recently been hit by restrictions related to access to electricity, which are largely a consequence of China’s strategy of reducing CO2 emissions.

Increase in the prices of basic components of photovoltaic cells and modules. Source: Rystad Energy.

Rystad Energy indicates that one of the consequences of such a large increase in the prices of solar panels may be the suspension of investments in solar farms.

The share of purchasing and transporting modules in the total cost of PV plants is between 1/3 and 1/2, and is the most important component of CAPEX in this type of investment.

The problem is not only the growing CAPEX, which may make it difficult for investors to achieve the assumed profitability – especially in projects where energy prices were offered as low as possible in order to win auctions – but the challenge is also the delay or even cancellation of panel supply contracts by their producers, who in the face of the increase in component prices, the implementation of previously signed contracts ceases to be profitable.

Rystad Energy analysts estimated that due to rising prices and problems with ensuring timely delivery of modules, the implementation of more than half of the investments in PV farms planned for 2022, with a total capacity of approximately 90 GW, is at risk.

The Norwegian company also checked how the last year’s increase in module prices translates into the average cost of energy production from photovoltaic power plants (Levelized Cost of Electricity, LCOE). Compared to last year’s level, it was supposed to increase by 10-15 percent.

– In view of the growing risk, developers have to resort to negotiating higher prices of the energy they sell or take on part of the cost increase by agreeing to lower margins – concludes Rystad Energy.

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About Alex Marcell

He likes dogs, pizza and popcorn. Already a fanboy of Nintendo and Sony, but today throws anything. He has collaborated on sites and magazines such as GameBlast, Nintendo World, Hero and Portal Pop, but today is dedicated exclusively to Spark Chronicles.

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