- Panel prices advance on surge in Chinese and global demand
- Some projects have been canceled or delayed due to high cost
Bloomberg News
June 15, 2022
The cost of a key material for solar panels in China is nearing its highest level in a decade, squeezing profits even as companies ramp up production to meet the world’s growing renewable power needs.
The average price of the most expensive grade of polysilicon reached 268.5 yuan ($40) a kilogram on Wednesday, according to the China Silicon Industry Association. Last year, it soared threefold to as much as 272.2 yuan, the highest since 2011, as demand outran supply.
The higher prices are rippling through the solar supply chain, much of which is centered in China, raising the cost of solar panels and hurting profits at manufacturers and developers. Certain projects have become unprofitable and installations have slowed in some locations, even as global demand remains elevated amid efforts to meet climate targets and reduce dependence on fossil fuels.
The renewed rise in polysilicon prices has caught many in the industry off guard after new and expanded plants opened late last year, temporarily easing tight supplies. Global demand for panels has risen more than expected amid a massive build-out in China’s interior and Europe’s urgent need to reduce reliance on Russian gas.
“I’m honestly still surprised by the polysilicon price rise,” said Jenny Chase, lead solar analyst at BloombergNEF. “It is tough on developers who have signed power purchase agreements at low prices in 2019, 2020 and early 2021, and are now trying to actually build projects which make little economic sense.”
More polysilicon capacity is expected to come online in the fourth quarter this year, which should lead to a fall in prices, Chase said.
But some rooftop solar projects in China have already been canceled or delayed, according to Yin Yeze, an analyst with Beijing-based Solarbe. Rooftop solar accounted for more than half of China’s new capacity last year, and Yin said developers tend to be more profit-conscious because most of them are private rather than state-owned companies.
“When more developers have to consider whether to cancel or postpone projects due to low profitability, that will lower installation capacity,” Yin said.
— With assistance by Luz Ding, and Dan Murtaugh