Solar Projects Cost To Downfall As Supply Chain Bottlenecks Will Ease

Wood Mackenzie, a Scottish analyst consultancy group, has reported that the supply chain issues that helped drive up the cost of solar generating equipment last year will lessen in 2022.

A senior analyst from WoodMac, Rishab Shrestha stated in a note issued on Monday that though the supply chain challenges have walked up the Levelized cost of energy (LCOE) across the Asia-Pacific region in 2021, these constraints are anticipated to ease in 2022 and beyond, and the corresponding LCOE will restore to a downtrend.

With Chinese polysilicon companies increasing production, WoodMac predicted that easing supply issues and related cost increases would reverse the 9% year-on-year increase in the average cost of solar projects all over the region noted last year, to USD 0.086/unit, the first such upsurge in the region’s solar industry’s history.

A sharp increase in fossil fuel costs last year ensured that despite their unexpected price premiums, Asia-Pacific solar and onshore wind undertakings – the latter costing 2% more, to USD 0.103/unit – gained ground in their economic business case against gas-fired and coal power projects, which became 46% and 19% more expensive in the region in 2021, respectively.

While solar and onshore wind amenities in India, China, and Australia are 12-29 percent cheaper over their project lifetimes than fossil fuel equivalents, “a significant renewables premium” across the rest of Asia-Pacific ensures such clean power plants are 16 percent more expensive over their operating life than gas and coal power generation sites in the region as a whole.

WoodMac stated that by the end of the decade, solar projects, and onshore wind sites will be 28 percent cheaper than coal in the Asia-Pacific market in 2030, and will achieve at least cost equality with gas. 

By that point, solar and onshore wind will be 50-55 percent cheaper than coal in India, China, and Australia, calling into question the effectiveness of the former two countries’ successful push to weaken the global commitment to phase out coal use at the COP26 climate change summit in Glasgow in November.

In accordance with the analyst, with the prices of carbon capture and storage (CCS) technology possibly driving up gas-fired production costs by 70-100 percent this decade, the present 50 percent price premium of renewables with energy storage over fossil fuels might be eliminated by 2030.