Turmoil Ahead In Solar, As Key Suppliers Continue To Raise Solar Input Prices

Consider this. The price of Polysilicon, the earliest processed input in the solar supply chain, averaged CNY (Chinese Yuan) 76/kg  in 2020. In 2021, thanks to a series of incidents at key manufacturing plants and rising demand, prices averaged CNY 117/kg. However, prices as of July 24 have climbed to well over CNY 260/kg, after a 3% hike during the month by key manufacturers.

That has had the obvious cascading effect on wafer and cell prices, with the cost of both being hiked by 3-4 percent during the month so far. This will eventually show up  on final module prices by early next week, especially for fresh purchase contracts. These price hikes have maintained a rising trend for over 3 straight months now, taking most market watchers by surprise.

What this means is a serious risk to returns on many projects in the pipeline, where developers may not have anticipated the extent of the price rise, or even bet on a moderation or price stability.

Worse, now some industry experts claim that polysilicon prices could yet breach the   CNY 300/kg barrier before any moderation, as fresh capacities that were planned in 2020 will come online only in 2023. And even that extra supply will hit a market that is hungry for solar, with massive pipelines in key markets, from the US, to India to Europe and even China, for that matter.

The price hikes by key industry suppliers like Tongwei and Longi will also test the ability of the solar market to absorb higher costs. there is no doubt that before the Russian invasion of Ukraine, these levels of prices or price increases would have been rejected by large swathes of the markets. However, much like gas supplies, European demand and higher tolerance for high prices seems to be propping up these prices for now, as seen in the rising shipments to Europe from China. Within China itself, which added record solar capacity in the first half of the year, resistance is building up for the government to step in, like it did for the solar glass market in 2021 when it was on a tear.

In India, some industry experts we spoke to indicate that the dreaded Rs 3/unit plus costs  for large utility scale projects might make a comeback in future tenders,  if the price rises do not moderate soon.