Since I started covering energy in 2008, the global average price for a solar panel has fallen more than 90 percent, helping the world switch to clean energy and save money.
But last summer the price flattened and then started ticking up, from a low of 19 cents per watt in July to 24 cents per watt last week, according to BloombergNEF and PV InfoLink. Prices have gone up before, but in percentage terms this is an unusually sharp increase and it doesn’t seem to be going away.
I reached out to Jenny Chase, BloombergNEF’s senior solar analyst, and her main message was “Don’t panic”.
The price increase is due to the rising costs of raw materials such as polysilicon, steel and aluminum as well as an increase in worldwide shipping costs. She expects most of these costs to be balanced out by early 2022.
Also, the United States is not in much pain because its prices are already high compared to the global cost, mainly due to tariffs. The average US price is more than 30 cents per watt and has not increased, likely because manufacturers are absorbing price increases rather than passing them on to US buyers, Chase said.
“This is a headache for an industry that is really used to falling prices,” Chase said of the global solar industry. “24 cents per watt isn’t a lot by historical standards, but it’s enough to freak you out if you’ve offered to provide electricity, assuming you can buy modules for 19 cents a watt.”
But the price hike hadn’t lasted long enough or was big enough to change the notion that solar energy is the cheapest source of electricity in most countries.
Some projects may be delayed and others may be canceled, with Europe and India most likely to be affected, according to Edurne Zoco, executive director, clean energy technology at IHS Markit, for PV Magazine.
“Extreme volatility in raw materials, module prices, and freight costs doesn’t help manufacturers or developers sign contracts with terms that change weekly,” she wrote.
But IHS Markit is sticking to its forecast, updated in March, that the world will install a record solar output of 181 gigawatts this year, an increase of 27 percent from 2020, representing large parts of the world due to the coronavirus.
If you think back to 2008, one of the big stories was the surge to record-high natural gas prices. I spoke to analysts at the time who said volatility was a normal part of the gas market and would continue.
Nobody, or at least nobody I spoke to, thought that the gas market would soon settle into a prolonged phase of low and mostly stable prices due to a boom in US gas production from shale deposits.
Also in 2008 little was known that thanks to the ability of Chinese manufacturers to bring costs down to new lows, solar power was still at the beginning of the transformation from extravaganza to bargain.
I mention this background as a reminder that we often do not anticipate the big changes that are coming and tend to assume that the future will be a continuation of existing trends.
The recent price hike for solar panels is probably not a cause for panic, but I wouldn’t dismiss it as a coincidence either. Last but not least, the recent price hike could lead governments and solar developers to add more uncertainty to their plans instead of viewing the ongoing decline in solar prices as certain.
More stories about the energy transition that you should take note of this week.
Wyoming to be the site of the next generation nuclear power plant: A company developing a new type of small nuclear power plant has selected Wyoming as the location for a 345-megawatt power plant that, according to donors, can go online within seven years. Partners include TerraPower, the Bill Gates-led nuclear power company, and PacifiCorp, a utility company, reports Joel Funk for WyoFile. Proponents of nuclear power hope that TerraPower and other small reactor developers can help transform the evolution of the nuclear industry through projects that can be done faster and more cheaply than previous generation reactors.
The Gulf of Mexico could be another new frontier for offshore wind: The Gulf of Mexico, already a hot spot for offshore oil production, could also have a future as a location for offshore wind energy. Biden’s government now says it will investigate the feasibility and interest in developing offshore wind in the area, Valerie Volcovici and Nichola Groom report for Reuters. “This is an important first step in seeing what role golf could play in this exciting frontier,” Interior Secretary Deb Haaland said in a statement.
Microgrids are a growing and promising part of a reliable network: Places with a history of unreliable electricity find new opportunities in microgrids, systems that enable customer groups to work independently of the larger grid. Justin Gerdes writes for Energy Monitor about the growth of microgrids and the possibilities of using the technologies to reduce costs.
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Biden government wants the US to become a leader in lithium-ion batteries: The Department of Energy has announced new guidelines to help the United States become a bigger player in the world market for lithium-ion batteries – the way that most electric cars and many consumer electronics run. The new measures include a requirement that companies receiving government funding must build their batteries in the United States, Jeff St. John reports for Canary Media. US officials hope to avoid what happened to solar panel manufacturing, an industry in which the United States played a leading role but then lost market share, mostly to China.
Illinois Coal Power Plant Slows Advances In Clean Energy Legislation: Illinois lawmakers were unable to pass a clean energy bill by May 31, but they are optimistic that they will reach an agreement soon. One of the sticking points is that the bill could see an exit from coal-fired power plants by 2035, which would force the closure of the Prairie State Generating Center, a power plant that went online in 2012 and the main source of electricity for about 200. is municipalities in eight federal states. Brett Chase and I got the story in a partnership between the Chicago Sun-Times and Inside Climate News that shows Prairie State was a problematic project from the start.
Clean Energy Reporter, Midwest, National Environment Reporting Network
Dan Gearino covers the American Midwest and is part of ICN’s National Environment Reporting Network. His coverage is on the business side of the clean energy transition and he writes ICN’s Inside Clean Energy newsletter. He joined ICN in 2018 after nine years at The Columbus Dispatch, where he covered the energy business. Prior to that, he worked in politics and economics in Iowa and New Hampshire. He grew up in Warren County, Iowa, south of Des Moines and lives in Columbus, Ohio.