Price of polysilicon, the main raw material used to make solar equipment, has surged by 343% since July 2020 and by 148% since January, industry estimates show.
Solar panel prices, which have been rocketing since last year, will continue to soar at least till the second quarter of 2022 due to high input and freight costs as well as supply chain issues in China, domestic and international manufacturers said.
Price of polysilicon, the main raw material used to make solar equipment, has surged by 343% since July 2020 and by 148% since January, industry estimates show.
This has resulted in module prices jacking up by 35%, putting more than 50 gigawatts (GW) of solar projects in India under strain, industry insiders said. The module prices have increased 15% so far this calendar year.
Experts attributed the spike in polysilicon prices to a fall in production in China.
“Polysilicon shortage has stemmed from the increased safety checks in China (especially on smaller and more unorganised markets), explosions over the course of last year in the facilities of two Chinese polysilicon producers, and closing of manufacturing units in China due to financial stress caused by the pandemic,” said Hetal Gandhi, director at credit rating agency Crisil Research.
“This was coupled with a surge in commodity prices such as copper and aluminium (used in mounting structures and other components, accounting for 5-10% of overall cost for solar projects) which also added to the price increases,” she said.
The prices of solar glass, another important component used to manufacture solar cells, has also risen by nearly 130% since June 2020.
“Currently, majority of the solar energy capacity in India has been built on imports,” said Gyanesh Chaudhary, managing director of Kolkata-based solar energy firm Vikram Solar.
“One of the world’s largest glass makers is in India, but we import glass from China, Indonesia or Malaysia,” he said. “Similarly, even though India is one of the largest aluminium producers in the world we import aluminium frames.”
Vikram Solar currently has a manufacturing capacity of 1.2 GW, and plans to expand this to 4.2 GW in the coming years.
Prices of raw materials such as silver and aluminium have gone up due to the global commodity super cycle, while shipping and freight costs have been high due to the pandemic.
Over 80% of Indian solar equipment is imported from China that has been facing supply chain disruptions for a year now.
Chinese manufacturers that ET spoke with said the price of polysilicon started rising in July 2020 when an explosion took place at a factory of GCL Poly, one of the largest polysilicon producers in the world. Shortly thereafter, another major player Daqo New Energy faced a fire in its factory as well.
This hampered production at these sites for up to six months, while an outbreak of Covid-19 further dented production in China.
“Xinjiang, where almost 50% of Chinese polysilicon capacity is located, was suffering an outbreak of Covid-19,” said a spokesperson of Jinko Solar, one of the two biggest suppliers to Indian developers with a market share of over 10%. “Now, concerns about forced labour in Xinjiang could make matters worse.”
The only solution for bringing down the prices is expansion of manufacturing capacity, especially in China, industry insiders said. However, this will not take place at least until mid to late 2022, they said.
“Overall, the polysilicon prices are expected to show a downward trend around Q2 2022 when the planned capacity expansion is completed and running at full utilisation rate,” the Jinko spokesperson said.
Crisil’s Gandhi said, “The supply side constraints are likely to moderate only with planned expansions in polysilicon capacity, which are likely only by end of calendar year 2021 and first half of CY2022.”
FIRMS RESORT TO HOARDING
With rising prices and an impending import-tax free period beginning from August this year, several manufacturers and developers have begun hoarding solar panels to sell or use for their projects at a later date.
“Fear of shortage has led to the increase in prices of polysilicon, as buying frenzy started and entities started hoarding the material — just to sell it at a high price at a later point,” a leading domestic solar equipment manufacturer said on the condition of anonymity.
Currently, a safeguard duty of 14.5% is imposed on foreign solar imports. The government had earlier announced a basic customs duty that would be levied from April 2022.
The Directorate General of Trade Remedies (DGTR) is currently investigating a complaint which would plug in the eight-month gap till then with an anti-dumping duty, but no decision has been made yet.
Source: Reuters
