A key selling point that made solar energy the fastest growing power source in the world – rapidly decreasing costs – has hit a speed bump.
Solar module prices have risen 18% since the start of the year after falling by 90% over the previous decade. The reversal, fueled by a quadrupling in the cost of the key raw material polysilicon, threatens to delay projects and slow uptake of solar power just as several major governments are finally throwing their weight behind it in an effort to slow climate change.
“The disruption to solar hasn’t been this bad in more than a decade,” said Jenny Chase, lead solar analyst with clean energy research group BloombergNEF. “Developers and governments are going to have to stop expecting solar to get much cheaper quickly.” BNEF slightly lowered its forecast for solar buildout this year in a report last week, citing rising prices of materials including polysilicon as one reason.
Higher prices are affecting demand and may delay some large-scale projects, panel-maker Canadian Solar Inc. said on an earnings call on Thursday. In India, about 10 GW of projects may be impacted, equivalent to more than a quarter of the country’s current capacity, Mint reported, citing unnamed developers. Large-scale projects in the US could also get postponed, analysts at Cowen & Co said.
For the solar industry, the timing couldn’t be worse. Renewable energy finally has a champion in the White House and ambitious climate goals have been announced across Europe and Asia.
Projects that haven’t signed price agreements with utilities that buy the power might get delayed unless the customer is willing to pay a higher rate for the electricity, according to Xiaojing Sun, an analyst at Wood Mackenzie Ltd.
At the center of the crisis is polysilicon, an ultra-refined form of silicon, one of the most abundant materials on Earth that’s commonly found in beach sand. As the solar industry geared up to meet an expected surge in demand for modules, makers of polysilicon were unable to keep up. Prices for the purified metalloid have touched $25.88 a kilogram, from $6.19 less than a year ago, according to PVInsights.
The solar industry is facing “pervasive upstream supply-chain cost challenges,” panel manufacturer Maxeon Solar Technologies Ltd. said in April.
Solar panels are made from sand that’s heated and purified to ingots of ultra-conductive polysilicon that are sliced into razor-thin wafers, wired up into cells and then assembled into the panels that mount rooftops and cover vast fields.
Still, the hiatus in the long-term downward trend in costs is partly offset by a continual improvement in the efficiency of solar panels, said Nitin Apte, chief executive officer of Vena Energy Pte., a leading independent renewable power operator in Asia-Pacific. The company isn’t planning any delays this year at its solar projects across Japan, Taiwan, Australia and India.
Source: Bloomberg L.P