The Solar PV Supply Chain

As 2022 arrives, Solarity is reviewing the year of 2021, focusing on the main events and hottest trends of the last 12 months. Based on the observations from Q1, Q2 and Q3, today’s analysis mainly focuses on the impact of price swings and logistic challenges during the fourth quarter. 

Unstable prices for PV equipment and supply chain volatility was present throughout the year, this has been described as a “crisis point” by some major manufacturers in China who tried to secure the resources in order to stabilize the supply, nonetheless they have urged their customers to delay projects.  

The power crisis in China increased the challenges within the industry, the Chinese government ordered manufacturers to reduce their working hours, as a result there was a price increase of 9% in solar-grade polysilicon which eventually led to further increase in prices.

During 2021, the price of polysilicon has recorded a growth of over 200%, alongside a significant price increase in other module raw materials such as copper and solar glass, consequently module manufacturers were forced to increase their prices.  

Moreover, Inverters and trackers are also one of the solar PV components affected by the shortage of raw materials. 

Module manufacturers such as LONGi and Canadian Solar warned that such price increase in raw materials and logistic prices would result in “serious losses” for signed orders and would ultimately have a significant impact on the industry’s sustainable development.   

As a result of declining production operations imposed by the government, part of the Chinese module manufacturers paused the production for smaller size modules and prioritised the larger ones instead. 

Regardless of the negative ongoing events, research and development teams for manufacturers continued to work on new modules, with Canadian Solar launching its HiKu 7 which has a power output up to 655W in mass production, and conversion efficiency up to 21.6%

Rystad Energy released an analysis which indicates that out of 90GW planned utility-scale PV projects for 2022, 56% are under threat due to supply chain volatility. Surely shipping cost had a significant impact on the cost, shipping cost has increased by 300%-400% ever since the pandemic.  

Solar photovoltaic installations are expected to increase by 20% globally in 2022 and overcome the 200GW DC barrier for the first time, which is estimated at around $170bn.  

A study conducted by IHS Markit predicts a double-digit growth for PV installations in 2021.  Hence, continued growth in 2022 would result in a double-digit growth of global installations for the second year in a row in a high price environment. 

Several studies have indicated that the utility-scale segment has been the most impacted in 2021, which resulted in multiple projects being delayed or cancelled. 

“By contrast, the strong growth of the distributed generation i.e., residential, commercial and industrial (C&I) sector has been one of the success stories of solar PV in 2021—boosted by the fuel crisis and surging electricity prices, particularly in markets across Europe” said Josefin Berg, research manager, clean energy technology at IHS Markit.

There is huge demand across worldwide business sectors to invest resources into solar installations, nonetheless the supply chain network is definitely not prepared to fulfil this degree of demand, it needs time to adapt. 

“We have seen this most clearly in the polysilicon market, which will continue to be a bottleneck for solar PV growth into 2022, until planned new capacity is ramped up from 2023 onwards,” said Edurne Zoco, executive director, clean energy technology at IHS Markit. 

Solarity expects continued supply chain tightness which would maintain high module prices until 2023. It will probably take some time for the supply chain to get back on the right track for supply to match the level of demand. We as Solarity always plan in advance in order to ensure that we are able to serve our loyal customers on time. We highly recommend that planning should be done at least 3 months in advance in order to secure availability with such instability in the supply chain.