Supply Chain Issues Likely To Linger All Through 2021 And Beyond For Manufacturers

The news from inverter manufacturer SMA Solar Technology of a miss on its guidance for 2021 on the back of undersupply of electronic components has not surprised anyone. The news is especially worrying for an industry that has otherwise been remarkably resilient in the wake of disruptions ever since Covid hit in early 2020.

SMA’s disclosure follows earlier warnings by Enphase Energy about disruptions in the supply chain causing a delay in the launch of its IQ8 microinverters.

Switzerland based Meyer Burger has cited delay in components for missing key deadlines for its new plant openings in German. Ditto for Maxeon Technologies, which has again cited supply chain issues to inform about delays in deliveries.

The industry has been hot by three primary issues. One, the global semiconductor supply chain shock, which has already impacted almost all electronic devices manufacturers, besides the auto sector and more. Even Tesla has pushed back manufacturing of its PowerWall storage devices to divert its own chip supplies to the more profitable auto division.

The second shock has been the rise in polysilicon prices emanating from China, which continue to rule at highs, impacting module prices down the line. Key cell manufacturer Tongwei, which supplies solar cells to some of the largest module players in China, has already hiked prices twice since August.

Finally, there has been the twin blow of higher commodity metals prices, and freight costs. With most solar module shipments being done in containers, the global surge in container costs, which have moved up 500% this year, has hit margins or forced price hikes finally. Helped along by a rise in prices of key input metals ranging from copper, to silver to aluminium (for frames ) and more. It’s almost the perfect storm, when one considers that all this is happening at a time of a sharp demand recovery in solar at least.

SMA Solar CEO Jürgen Reinert said that as a result of delivery cancellations, the situation has “worsened significantly” for the company in the short term.

In India, where auction prices have been surprisingly tight despite all the hiccups, industry observers have been warning of risks since June this year. “Most projects won this year will see orders placed only next year, so the duty impact is going to be there. More importantly, firms seem to be hoping against hope that prices will correct naturally after such a steep rise. If that doesn’t happen at all, and current prices are the new ‘normal’, then we could see a fresh pushback against the planned duty increases from next year”, says an analyst at a large broking firm, on condition of anonymity. The analyst tracks key energy majors with a major solar play, from NTPC to Adani Green Energy and Tata Power.

“Every single input other than land seems to have grown in double digits this year, and the odds of most of these changes staying well into 2022 are very high at this stage”, he adds. Even land costs, while not going up, are complicated by a longer process of acquiring land, one reason many state agencies are trying to take care of that before opening up auctions.

The only bright spot might be the continuing drop in storage costs, which will open up higher potential in the rooftop segment, besides off grid solar.