Since I started covering energy in 2008, the global average price for a solar panel has fallen more than 90 percent, helping to build a case that the world could switch to clean energy and save money.
But last summer, the price flattened and then began to tick upward, going 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 risen before, but this is an unusually large increase in percentage terms, and it doesn’t seem to be going away.
I reached out to Jenny Chase, the lead solar analyst for BloombergNEF, and her main message was, “Don’t panic.”
The price increase, she said, was due to the rising costs of raw materials like polysilicon, steel and aluminum, plus a surge in global shipping costs. She said she expects most of those costs to settle down by early 2022.
Also, the United States isn’t feeling much pain because its prices are already high compared to global costs, mostly because of tariffs. The average U.S. price is more than 30 cents per watt, and it hasn’t increased, probably because manufacturers are absorbing price increases rather than passing them on to U.S. buyers, Chase said.
“This is a headache for an industry that is really used to prices coming down,” Chase said, about the global solar industry. “24 cents a watt isn’t a lot by historical standards, but it’s enough to have you freaking out if you’ve bid to supply power assuming you can buy modules at 19 cents a watt.”
But the price increase has not yet lasted long enough or been large enough to cause a shift in the idea that solar is the least expensive source of electricity in most places.
Some projects may be delayed, and some may be canceled, with Europe and India the places most likely to be affected, according to Edurne Zoco, executive director for clean energy technology at IHS Markit, writing for PV Magazine.
“Extreme volatility in raw materials, module prices and freight costs are not helping manufacturers nor developers to close contracts whose terms change on a weekly basis,” she wrote.
But IHS Markit is sticking with its forecast, updated in March, that the world will install a record 181 gigawatts of solar this year, up 27 percent from 2020. Some of the increase in projects is making up for a slowdown that happened last year in much of the world because of the coronavirus.
Thinking again about 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 with, thought that the gas market would soon settle into a prolonged period of low and mostly steady prices, due to a boom in U.S. gas production from shale deposits.
Also, there was little awareness in 2008 that solar power was in the early stages of transforming from an extravagance to a bargain thanks to the ability of Chinese manufacturers to cut costs to new lows.
I mention this background as a reminder that we often don’t anticipate the big changes that are about to happen, and we have a tendency to assume that the future will be a continuation of existing trends.
The recent price increase for solar panels is probably not a reason to panic, but I wouldn’t dismiss it as a fluke either. If nothing else, the recent run of higher prices may make governments and solar developers build more uncertainty into their plans, rather than view the continuing decrease of solar prices as a sure thing.
Other stories about the energy transition to take note of this week.
Wyoming to Be Site of Next-Generation Nuclear Plant: A company developing a new kind of small nuclear power plant has selected Wyoming as the location for a 345-megawatt plant that backers say can be online within seven years. The partners include TerraPower, the nuclear plant company led by Bill Gates, and PacifiCorp, a utility, as Joel Funk reports for WyoFile. Supporters of nuclear power are hoping that TerraPower and other developers of small reactors can help change the trajectory of the nuclear industry through projects that can be carried out more quickly and less expensively than the previous generation of reactors.
Gulf of Mexico May Be Another New Frontier for Offshore Wind: The Gulf of Mexico, already a focal point for offshore oil production, may also have a future as a site for offshore wind energy. The Biden Administration is now saying it will explore the feasibility and level of interest in developing offshore wind in the region, as Valerie Volcovici and Nichola Groom report for Reuters. “This is an important first step to see what role the Gulf may play in this exciting frontier,” Interior Secretary Deb Haaland said in a statement.
Microgrids Are a Growing and Promising Part of a Reliable Grid: Places with a history of unreliable electricity are finding new opportunities in microgrids, which are systems that allow groups of customers to operate independently of the larger grid. Justin Gerdes writes for Energy Monitor about the growth of microgrids and the opportunities to use the technologies to reduce costs.
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Biden Administration Wants United States to Be a Leader in Lithium-Ion Batteries: The Department of Energy has announced new policies to help the United States become a bigger player in the global market for lithium-ion batteries—the kind most electric cars and many consumer electronics run on. The new actions include a requirement that companies receiving financial support from the government must build their batteries within the United States, as Jeff St. John reports for Canary Media. U.S. officials are hoping to avoid what happened with solar panel manufacturing, an industry in which the United States was an early leader but then lost market share, mostly to China.
Illinois Coal Plant Slows Progress on Clean Energy Legislation: Illinois lawmakers were unable to pass a clean energy bill by a May 31 deadline, but they are optimistic that they will soon reach an agreement. One of the sticking points is that the bill may include a phaseout of coal power plants by 2035, which would force the closing of the Prairie State Generating Center, a power plant that came online in 2012 and is the main source of electricity for about 200 communities in eight states. Brett Chase and I have the story in a partnership between the Chicago Sun-Times and Inside Climate News, showing how Prairie State has been a troubled project from the start.