Solar power system prices surge driven by China, high demand

The prices of equipment for solar power generation have soared with the worsening power crisis in China, the world’s main supplier of the photovoltaic industry. According to equipment manufacturers and distributors, the prices of panels, which were already under pressure, have escalated again with occasional shutdowns in factories of silicon, a component that can represent up to 60% of the cost of the panel.

Supplying companies are not working with the possibility of a shortage of products, but say they see a troubled price scenario until at least June 2022. Despite this, the consensus is that the growth of the solar market is not threatened – demand for generation systems, whether for large developments or rooftop solar, has been so strong that the outlook remains positive.

The prices of panels and inverters started an upward trend last year, due to the disruption in the production chains caused by the Covid-19 pandemic, in addition to the increase in demand itself with the adoption of solar technology around the world. At the end of 2020, the sector even suffered from a shortage of glass, and now the big problem is silicon. In the case of Brazil, to this scenario is added the currency depreciation – the main components of photovoltaic systems are imported, and China is responsible for about 80% of the global production of panels.

In the view of the Chinese-Canadian manufacturer Canadian Solar, prices are expected to stay under pressure in the coming months.

“Shortage of material is very unlikely, but we will see a greater need for programming by customers. The uncertainties curb the commercial impetus, companies shift to the safety mode, waiting for the supply to return to normality,” said Pedro Alves, executive director for Latin America at Canadian Solar.

One of the world leaders in the photovoltaic industry, Canadian Solar produced panels in Brazil, but closed down its factory. Today, all the materials it supplies are imported. According to Mr. Alves, the company already has a local stock of 2,000 to 3,000 containers and says it is ready to meet the demand without major difficulties in the coming months.

At Aldo Solar, which supplies equipment for mini and micro solar generation, the third quarter started with a promising prospect, but the crisis in the Chinese market quickly brought a change of course. One of the biggest problems has been the logistical issue.

“The shipowners don’t give shipping guarantees. We are running an average of five to eight weeks late, with containers on the floor. They are skipping the port [of Paranaguá], because there isn’t room in the ships to come to Latin America,” said Aldo Teixeira, the distribution company’s founder.

The executive said supply is guaranteed for what was scheduled in the middle of the year. “If we had the capacity to double the volumes, we would do so. Demand is very high.” Founded in Maringá, Paraná, Aldo Solar was acquired this year by Brookfield Business Partners, the asset management firm’s private equity arm.

From the investors’ side, the increasing cost of the generation systems would tend to slow down the growth of the solar market, but the market is not betting on that. Aldo Solar, for example, predicts doubling its revenue in 2021 to R$3.2 billion in the wake of the expansion of solar generation for residences and businesses.

“The electricity bill has gone up a lot with tariff adjustments and tariff flags, and this has virtually offset the increase in the cost of the solar panel. That’s why the demand continues to accelerate, it’s still a good investment. The payback of the systems has remained unchanged,” said Rodolfo Meyer, CEO at Solar Portal.

According to a survey carried out by Portal Solar, an online power marketplace, the total investment for the installation of a 2 kilowatt-peak power system, for a monthly energy bill of R$250, is R$16,700. The figure is 15% above the level seen in March 2020, before the pandemic.

“In this case, the return on investment happens in a little more than five years. For larger systems, of 52 kWp, for monthly bills of up to R$7,000, the return is in three years, it’s a great investment,” Mr. Meyer said.

The Brazilian Photovoltaic Solar Power Association (Absolar) said the sector is facing “growing pains” worldwide. The head of the entity, Rodrigo Sauaia, points out that the main manufacturers are expanding production capacity, so the supply situation tends to improve in the medium term.

In the case of large solar projects, the increase in capital expenditure can postpone projects. However, Mr. Sauaia understands that, at this moment, generation companies are looking more at other factors, such as higher demand for long-term contracts in the free energy market and the window until the end of subsidies for renewable sources. The trade group predicts that Brazil will reach 12.5 gigawatts of installed capacity of solar power this year, up 60% from 2020.

Source: Valor international