Rise in Chinese solar PV module price: The implications on global solar growth story

Rise in Chinese solar PV module price: The implications on global solar growth story

Rising prices may force state-owned power giants in China to push projects into 2022; delays may make 2021 first year of negative growth in global solar installallations in 17 years

A group of Chinese manufacturers in the first decade of the 21st century demonstrated themselves as global leaders in the solar photovoltaic (PV) manufacturing industry.

These young manufacturing firms — such as Suntech Power Holdings Co Ltd, Yingli Green Energy Holding Co Ltd, Trina Solar Co Ltd and LDK Solar Co Ltd — have scaled up rapidly. They cut costs faster than competitors from other countries and substituted American, European and Japanese industry leaders as dominant suppliers to the world solar PV panel market.

The rise of China’s solar PV industry has intensely reshaped the global landscape of solar energy generation, evidenced not only by the tariff wars and industrial reorganisation, but also in the increasing use of solar panels worldwide.

China’s solar PV manufacturing accounts for around 71 per cent of the world’s total capacity: It grew to 106 gigawatt in 2019 from 10 GW in 2010. The country is also a leading producer of silicon wafers with a 97 per cent share of the global market, 79 per cent share of PV cells and 67 per cent share of polysilicon.

Countries' share of solar PV module production

Global solar PV module production share. Source: IEA PVPS Annual Report, JMK Research and Analytics

The PV industry has experienced several rounds of price increases since the second half of 2020, from polysilicon to materials such as steel, aluminium, copper, PV glass and films.

Between July 2020 and February 2021, prices quoted for 3.2 millimetre and 2 mm glass surged by more than 60 per cent per square meter.

Prices for EVA (Ethyl Vinyl Acetate) and POE (Polyolefin Elastomer) encapsulant films rose by more than 40 and 10 per cent, respectively. Prices for silver paste also rose 7 per cent and have since remained high.

Escalating prices for freight and transportation due to supply chain bottlenecks developed under the novel coronavirus disease (COVID-19) regulations is another reason for the rise in PV prices.

Rapid construction and industrial recovery from COVID-19 lockdowns outpaced underutilised production capacity, thereby further increasing price. One container now costs almost $10, compared to $1.5-2.0 per container earlier this year.

Prices for silver, which is mainly used in manufacturing silver paste, have remained stubbornly high. Since silver has many industrial uses and is a precious metal used as an investment, it is subject to changes in supply and demand as well as market speculation.

Price fluctuations

Silver prices surged at the end of January as investor frenzy swept the markets. iShares Silver Trust (SLV) — the largest exchange-traded fund that tracks silver — recorded a price as high as $26.70 per ounce.

Silver futures prices also rose to $29.90. The retail craze also caused the silver spot price of London Bullion Market Association’s (LBMA), an international trade association representing the global over-the-counter bullion market — reach nearly $30.

London Bullion Market Association Silver spot price curve

Source: LBMA

The LBMA silver prices are now the index for silver paste suppliers’ purchase of silver.

Silver paste prices have changed along with the LBMA silver spot price curve. Increases in silver paste price in the second half of 2020 not only pushed the costs of cells up, but also the share of silver paste in the non-silicon costs of cell production. (see below):

Chnages in silver paste prices 

Non-Silicon module costs (72 cells, 440W mono PERC module, glass-back sheet). Source: PV InfoLink

At the center of the crisis is polysilicon, an ultra-refined form of silicon, one of the most abundant materials on Earth that is commonly found in beach sand. As the solar industry geared up to meet an expected surge in demand for PV modules, makers of polysilicon were unable to keep up.

Prices for the purified metalloid (silicon) have touched $25.88 a kilogram — from $6.19 less than a year ago. 

Changes in price of silicon

Polysilicon prices have soared to the highest in nearly a decade. Source: PVInsights

PV demand may increase due to the pandemic: Some countries have launched ambitious climate targets and postponed projects are getting off the ground. An estimation by PV InfoLink, a solar PV market intelligence and research company, expects module demand to reach 153.8 GW this year — up 10 per cent compared to 2020.

Rising prices may force state-owned power giants in China to push projects into the next year. The delays may be large enough to make 2021 the first year of negative growth in global solar installations in 17 years.

Global projects that have not signed price agreements with power utility companies that buy the power may get delayed unless the customer is willing to pay a higher price for the electricity.

For the solar industry, the timing could not be worse. Renewable energy finally has a champion in the White House and ambitious climate goals have been announced across Europe and Asia.

Down To Earth