Squeezing global supply chain, soaring costs threaten solar energy boom
Global solar power developers are slowing project installations due to rising component, labor and freight costs as the global economy rebounds from the coronavirus pandemic, executives say. industry and analysts polled by Reuters.
The situation suggests slower growth for the zero-emission solar energy industry as global governments attempt to step up efforts to tackle climate change, and marks a turnaround for the sector after a decade of lower costs.
It also reflects another industry rocked by supply chain bottlenecks that developed during the recovery from the coronavirus health crisis, which is causing businesses from electronics manufacturers to home improvement retailers to suffer. huge shipping delays as well as skyrocketing costs.
âThe narrative is changing,â said Bruno Brunetti, clean energy analyst at S&P Global Platts, in an interview, citing cost inflation.
One of the main obstacles to solar power is the tripling of the prices of steel, a key component of racks containing solar panels, and polysilicon, the raw material used in the panels.
Soaring ocean freight rates along with higher fuel, copper and labor costs are also weighing on project costs, company executives said.
Research firm IHS Markit warned last week that its global solar installation forecast for the year could rise to 156 gigawatts from a current projection of 181 GW if price pressures do not ease.
Wall Street has also punished the industry in recent weeks, causing the MAC Global Solar Index (.SUNIDX) to fall 24% this year after tripling in 2020.
Project developers in the United States, the No.2 solar market behind China, told Reuters they are struggling to price projects for 2022 given lack of clarity on how long price spikes will last. .
Solar engineering, procurement and construction company Swinerton Renewable Energy said some of its customers have also put “takeovers” on projects slated to start later this year while they wait to see if prices drop. .
“We just got used to such an inexpensive source of power,” said George Hershman, chairman of Swinerton. “Like everything, it’s hard to accept that you’re going to start paying more.”
Contract prices for solar power were already up 15% in the United States in the first quarter compared to a year ago due to higher interconnection and permit costs, according to a quarterly index from LevelTen Energy .
U.S. panel maker First Solar Inc (FSLR.O) told investors in April that congestion at U.S. ports was delaying its module shipments from Asia.
And a US manufacturer of solar mounting systems, Array Technologies Inc (ARRY.O), withdrew its guidance for the year last month due to steel and freight costs.
In Europe, some projects that do not have strict deadlines for when to start supplying electricity are being delayed, executives and analysts say.
“The situation has not been resolved as prices have remained high, so those with the ability to wait are still waiting,” said Jose Nunez, chief financial officer of Spanish solar tracker maker Soltec Power Holdings SA (SOLPW.MC ). Nunez said Soltec is seeing project delays in all of the markets it serves.
Supply constraints could put upward pressure on relatively stable European solar prices later this year as companies seek to preserve already very slim profit margins, according to LevelTen.
In China, the world’s largest manufacturer of solar products, producers are already raising prices to protect their margins, resulting in slower orders.
According to three solar panel makers in China polled by Reuters, panel prices have risen 20 to 40 percent in the past year, following soaring costs for polysilicon, the raw material for solar cells and panels.
âWe have to make the product, but on the other hand, if the price is too high, the developers of the project want to wait,â said Jack Xiao, marketing director of BeyondSun Holdings, a panel maker that exports 60% of its products. .
A state-backed solar cell plant manager who asked not to be named told Reuters production fell because customers were reluctant to fulfill orders at current prices.
Chinese company Canadian Solar Inc (CSIQ.O), a leading producer of panels, said last month that prices for its products rose 10% in the first quarter from the previous three months, an increase that ‘she plans to pass on to her customers.
“We will continue to increase prices and we are prepared to drop some volumes in order to protect margins,” said Yan Zhuang, president of the company’s module manufacturing division, in a conference call with investors in the month. latest.
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