The prospect of significant increases in the cost of installing solar panels on the roof in Australia is once again threateningly large, with the recent headwinds on the market — an energy crisis in China — threatening to deliver a “knock-out blow” to companies already on the ropes.
The Australian solar industry on the roof terrace warns that the power crisis in China, on top of huge increases in shipping costs and a global shortage of solar panel raw materials, is starting to get through at the retail level, potentially adding up to $ 1,000 to the cost of a 6.6kW system.
And while the 20-30% increase in the cost of imported panels will ultimately penetrate customers, the impact on the industry threatens to be much more damaging, as companies hang in the balance between Covid-delayed installation pipelines, low inventories of cheaper panels and slice-thin margins.
As Bloomberg reported in late September, the latest blow to the global solar industry has been delivered by the rising price of industrial silicon, the metal used to make polysilicon.
Prices have risen by 300% since August after China – the world’s best producing region for industrial silicon – limited production in response to a growing power crisis, underlined by high coal costs.
Such has been the impact on production, with some component suppliers limited to 70% production, that a handful of the world’s largest solar manufacturers took the “unprecedented” step of publishing an open letter, urging customers to delay purchases and slow down installations.
“This imbalance will break the supply chain and seriously jeopardize the healthy and sustainable development of the industry,” companies including Longi Green Energy Technology and Trina Solar said in a statement on 30 September.
“This plea is unprecedented and indicates how much stress supply chains for Chinese goods are,” said Jenny Chase, a solar analyst at BloombergNEF.
So what does this mean for the local market? As Solar Analytics’ Nigel Morris points out in this week’s Solar Insiders podcast, this is not the Australian market’s first rodeo – it’s been through ups and downs in PV prices before, and it will again – not least due to fluctuations in the value of the Australian dollar.
“So this is not the end of the world, it will go, and things will stabilize … but it’s very uncomfortable when it happens.” However, the degree of discomfort will be far worse for some in the industry than others.
“If you have not secured your panels and do not have a good inventory that you bought at the old price, you will pay more. And then you will pass on these costs or you can take it out of your margin, ”Morris said.
“And at some point,… in fact, it’s already happening… the cost of the system will increase. So we are already starting to see retail prices start creeping up on customers. [And that is] will mean that there will be some winners and some losers. ”
Andy McCarthy, who has been CEO of RACV Solar since acquiring its own hugely successful regional Victorian business, Gippsland Solar, believes the energy crisis in China will deliver a “knock-out blow” to many companies in Australia.
“It really is a perfect storm,” he told One Step on Thursday. “You have a pipeline of jobs that have gotten really big due to delays caused by Covid lockdowns, and just as the shutdowns are being lifted, you have panels that are 20-30% more expensive.
“We have hundreds of jobs in our pipeline at the moment, but we have secured the stock and we have made sure to maintain healthy margins.
“It would be very hard for companies that have not stored panels that have not been able to invest millions of dollars [cheaper panels], and which do not have the ability to absorb some of the price increases.
“They will say to customers, ‘I’m sorry you waited five months for your installation, but now it’s getting a lot more expensive.’
“There are times like these when it becomes so obvious why you need to maintain realistic margins,” McCarthy added. “You have to put it away in a rainy day. They do not call it solar shipping for nothing. ”