Global Solar Supply and Demand in 2021

In 2021, The Solar market saw a strong growth however, structural shortages remain in the supply chain, with polysilicon supply running short in the face of high demand and forced labor accusations, and a worsening trade war all hitting at once. In Q4 it was predicted that higher prices will create a demand for the modules and force manufacturers to delay the delivery. Figure 1 shows the module demand in different parts of the world in 2021 and 2022.

Figure 1 : Module demand in 2021 and 2022 Source : PV InfoLink

 

These setbacks may only be temporary, with delays in installations expected to be largely resolved by the end of 2022 when new solar factories help ease supply chain issues. Analysts at the consulting firm Rystad Energy estimate rising shipping and equipment costs are threatening to postpone or cancel 56% of worldwide utility-scale solar projects planned for 2022

 

Two main reasons are behind the driving cost of solar panels. The first one is the shipping prices. The majority of solar panels are manufactured in China and distributed all over the world. In 2015 the shipping price of a 20-foot container was around 600 $ but in 2021 it skyrocketed to 4000$ and it has increased roughly six-fold from its pre-pandemic baseline.

 

The second reason is the rise in the demand for polysilicon. Polysilicon is a high purity form of silicon that is an integral part of the supply chain to make solar panels. These conductive materials are largely refined in China using large copious amounts of energy derived from fossil fuels.  To produce solar modules, polysilicon is melted at high temperatures to form ingots, which are then sliced into wafers and processed into solar cells and solar modules. Before the pandemic, there was an oversupply of Polysilicon which forced the manufacturers to stop as countries were going into lockdowns. The economic activity bounced back faster than expected and these manufacturers were struggling to meet the demands and as a result of the demand, the prices increased.  Rising prices haven’t had a big effect on projects underway in 2021, but next year’s projects are more at risk.

Figure 2 : Polysilicon spot price in 2021 Sources: PV InfoLink Image: Activ Solar; Chart: Bernreuter Research

Bloomberg NEF has tracked polysilicon spot prices as having increased from an all-time low of $6.3/kg in 2020 up to $37/kg as 2021 draws to a close which can be seen in figure 2. Among the research analyst community, the polysilicon process will remain quite high for some time through much of 2022 and by 2023, the polysilicon prices will eventually go down.

Chinese polysilicon producers are trying to build facilities outside the Xinjiang region and in other parts of the world REC is trying to bring back its US facility online by 2023.

Beyond polysilicon, there are other materials that make up solar cells and panels that have increased in prices.  Silver, copper, aluminum, glass all make up the other important key inputs where the prices have all gone uphill in the first quarter of 2021. Figure 3   shows the indexed prices of solar commodities in 2020 – 2021.

Figure 3 : Indexed prices for solar PV module, silicon, glass and other commodities, 2020-2021

Despite the numerous challenges facing the large-scale segment, 2021 is likely to be another year of market expansion. According to HIS market’s forecast, 2022 will also see an expansion with more than 200 GW capacity installed. The global average system cost shave increased more has 3 % in 2021. The analysts say that the solar supply chain has not as yet adjusted to a new era of demand, in particular polysilicon makers. Even with the increase in the price hike, solar panels are still cheaper now than they were in October 2018. Amidst all these supply chain problems, solar manufacturers are still trying hard to improve efficiency and implement new technology to drive down the cost further. Till the end of September 2021, 191 GW of solar energy was added but this is not enough to reach our NET ZERO target by 2050. It is estimated that to be on target by NET ZERO in 2050 the world needs to add 455 gigawatts of solar every year through 2030. Despite the global pandemic, the industry is still going in strong so there is still hope that we can reach the net-zero target




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