The cost of solar power hit an all-time low in 2020, with the price of residential installations falling 64% since 2010, according to the National Renewable Energy Laboratory. Still, the cost of solar panels increased by 20% within the last year. What’s responsible for this increase? An unstable Supply chain. Supply chain issues have the power to disrupt many worldwide utility-scale projects.
Cost in Materials
The increasing cost of materials to make solar panels is also an issue. Steel, used in the racks that modules are attached to, has risen 215% in price since March 2020. Polysilicon, the main component of PV cells, has increased by 175% and become more expensive due to the bullwhip effect. Before the pandemic, there was an oversupply of polysilicon, which led to manufacturers halting production when the pandemic hit. When economic activity bounced back faster than expected, manufacturers and miners of the material could not catch up with the demand, thus leading to an increase in price.
The rise in shipping costs is problematic, specifically with goods leaving from China, which holds more than 80% of shares in solar panels manufacturing stages. Although China was crucial in the significant price drop of solar panels over the past decade, it is now six times the pre-pandemic cost to send a shipping container from Shanghai to other ports around the world.
Supply Chain impacts utility companies far more than homeowners and businesses.
- Shipping & materials account for a much higher percentage of the overall cost of a solar utility project, compared to residential or commercial one.
- The increase in trade restrictions and bottlenecks slowed the deployment of solar, triggering a delay in utility-scale Solar. However, residential solar installation continues to increase.
Supply Chain vulnerability
The demand for solar equipment will increase with countries working hard to reach IEA’s Roadmap to Net Zero Emissions by 2050. Price increases and supply shortages may occur as a result. The variability of the Solar PV supply chain net profitability leads to uncertainty in the market —therefore, fewer investors and, on occasion, bankruptcy. But a sustainable Solar PV supply chain is necessary for a clean energy transition. US policies like the IRA and GGRF aim to encourage investors to develop low-risk and long-term financial security in the solar sector.
Diversifying Solar PV Supply Chain
Diversifying manufacturing and imports can improve supply security. China has almost a 95% share of manufacturing equipment in global polysilicon, ingot, and wafer. This high solar PV global supply chain concentration creates vulnerability for countries outside China. It requires adherence to changing costs and conditions.
Recent events like the energy crisis in Europe reveal the vulnerability of a highly concentrated supply chain. Moving Solar PV manufacturing to domestic manufacturing can help reduce emissions if a country’s electricity is more renewable energy and less carbon-intensive. But China’s cost-competitive market makes it difficult to diversify. Costs in the US are 20% higher than in China. But the US could compete by manufacturing with renewable energy onsite, recycling Solar, and low energy costs. Seed offers Made-in-USA solar panels; contact us today to learn more about the solar industry.
~By Camryn Iftiger, Intern at Seed solar, Electric and Engineering. Camryn is a 2021 graduate from UVM with a major in Environmental Studies and English