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More than half of 2022’s solar projects threatened by spiking costs, new report finds


Death Valley Solar Farm

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A new Rystad energy report says that rising solar prices, due to price rises and constraints in the supply chain, could lead to more than half of 2022’s utility-scale buildout.

According to Bloomberg, there are 90 gigawatts worth of utility-scale solar projects in the next year. The company also stated Tuesday that 56% of these projects could be affected by an increase in costs. This spike could lead to developers trying to negotiate better power purchase agreements or absorb costs, which would result in lower margins.

Rystad estimates that photovoltaic modules have increased by nearly 50%, from less than $0.20 per Wp (Wp), in 2020, to $0.26-$.28/Wp between the second and third quarters of 2021. Watt peak measures maximum output.

The rise in prices for polysilicon (a crucial component of solar systems) is responsible for a portion of this surging cost. Rystad reported that polysilicon prices have increased by 30% since July 2020. IHS Markit predicts a smaller rise, with polysilicon prices increasing more than 200% from October 2020 to today.

It’s more than polysilicon. There are other solar components, such as aluminum, silver and copper, that are increasing in demand. As the world comes out of lockdown, demand for raw materials increases. This pushes prices up as supplies remain tight.

David Dixon (senior renewables analyst, Rystad Energie) stated that “the utility solar industry faces one of the most challenging challenges” just days prior to COP26. The current bottlenecks won’t be eliminated in the next 12 month, so developers and other stakeholders will need to make decisions about whether to lower their margins, defer projects, or raise offtake prices in order to complete projects on time.

Rystad said that these projects are still in flux and it is unclear if they will be postponed or cancelled.

Additionally, the company stated that shipping delays and increased shipping costs are having a substantial impact on module suppliers and developers. They have seen their prices rise nearly 500% since September 2019, and they continue to climb today. Shipment is “posing significant challenges to developers and module supplier”

Projects are most expensive because of the extra cost involved in making and shipping the modules. This is usually between 25% and 30% of total project cost.

Rystad explained that higher shipping costs have caused the levelized price of electricity to rise between 10% and 15%. This represents a significant cost increase for the majority of projects in 2022. It is used to determine the prices of different energy sources.