Costs of solar power on the rise
A key selling point that has made solar the fastest growing energy source in the world – rapidly falling costs – has seen a speed boost.
Solar panel prices are up 18% since the start of the year, after falling 90% over the past decade. The reversal, triggered by a quadrupling in the cost of its key commodity, polysilicon, threatens to delay projects and slow the uptake of solar energy just as several major governments finally put their weight behind them to slow climate change.
“The solar disruption hasn’t been this bad in more than a decade,” said Jenny Chase, senior solar analyst at BloombergNEF’s clean energy research group. “Developers and governments need to stop expecting solar power to get much cheaper quickly.” In a report last week, BloombergNEF slightly lowered its forecast for solar expansion this year, citing rising material prices, including polysilicon, as the reason.
Polysilicon is an ultra-refined form of silicon, one of the most abundant materials on earth, commonly found in beach sand.
As the solar industry prepared for an expected increase in module demand, polysilicon manufacturers could not keep up. Prices for the cleaned metalloid have hit $ 25.88 per kilogram, according to PVInsights, down from $ 6.19 less than a year ago.
For the solar industry, the timing couldn’t be worse. Renewable energies finally have a champion in the White House and ambitious climate targets have been announced across Europe and Asia.
In addition to the new financial hurdle, the Biden government’s ambitions in the solar energy space collide with complaints that most of the world’s polysilicon supply could be produced through forced labor in China.
Global industry sources 45% of its supply from Xinjiang, the northwest region, where the ruling Communist Party is accused of mass incarceration of minority groups and other abuses. Other parts of China provide 35%. Only 20% are from US and other manufacturers.
In Xinjiang, more than 1 million Uyghurs and other members of predominantly Muslim ethnic groups have been forced to internment camps, according to foreign researchers and governments. The authorities are alleged to have forcibly sterilized members of minorities and destroyed mosques.
Chinese officials deny abuse allegations, saying the camps are intended for vocational training to promote economic development and prevent radicalism.
The US and some Chinese solar suppliers have made a pledge to avoid suppliers who may be doing forced labor. However, it is not clear whether they can meet the growing demand without Xinjiang, where Beijing does not allow independent inspections of workplaces.
Biden’s climate officer John Kerry says Washington is deciding whether to keep solar products from Xinjiang out of US markets.
According to analysts at Roth Capital Partners, including Philip Shen, polysilicon prices are likely to remain strong through the end of 2022.
And the problem isn’t limited to polysilicon. The solar industry faces “profound challenges in upstream supply chain costs,” panel maker Maxeon Solar Technologies said in April.
Solar panels are made of sand that is heated and cleaned into bars of ultra-conductive polysilicon that are cut into wafer-thin wafers, wired into cells, and then assembled into panels that are mounted on roofs and cover vast fields.
The prices for steel, aluminum and copper have risen, as have freight costs. The solar microinverter supplier Enphase Energy assumes that its shipping volume will be limited by the availability of semiconductor components.
“It’s very painful after polysilicon,” said Canadian solar vice president Xiong Haibo at a conference in China, according to industry publication Solarbe. “Right now, none of the downstream companies are profitable and they are all reducing production.”
However, the reversal of the long-term downtrend in costs will be partially offset by continuous improvements in solar panel efficiency, said Nitin Apte, CEO of Vena Energy, a leading independent renewable energy operator in the Asia-Pacific region. The company has no plans to delay its solar projects in Japan, Taiwan, Australia and India this year.
“I see this as a short-term situation and some projects may affect our contingencies,” Nitin said in an interview at his Singapore office. “We’re not slowing down construction. We’re blocking orders at the best prices we can get.”
Long-term, the bottlenecks are fueling the construction of new polysilicon plants, including the announcement of the world’s largest facility in China earlier this month.
“Any material that exhibits polysilicon growth would be expected to continue injecting capacity into the system,” said Vena’s Nitin. “The challenge is to perfectly match this capacity with growth.”
Information on this article was contributed by Dan Murtaugh and Brian Eckhouse of Bloomberg News (WPNS) and Joe McDonald of The Associated Press.