For many years, the cost of constructing solar farms has been decreasing, rendering solar power increasingly common, with projects of all sizes springing up all over the world. The tide is now changing, as recent utility PV developments are becoming more costly due to rising module, shipping, as well as labor costs, according to a Rystad Energy survey. Increasing energy prices and transportation costs are weakening utility PV project margins, possibly causing delays in projects that are approaching completion. Modules make up the biggest single capex item in the utility PV programs, but even minor price increases may have a major impact on project economics.

On a dollar-per-watt scale, module costs have dropped by 80% in the last decade, from over $1 for every watt peak (Wp) in 2011 to far less than $0.20/Wp free-on-board (FOB) in the year 2020. Module costs FOB from China, on the other hand, have now risen to above $0.22/Wp this year, overturning a seven-year pattern. A price increase in key materials used to manufacture silicon solar cells, such as silver, polysilicon, aluminum, glass, and also higher shipping costs, caused this growth.

Silver is one of the most important materials used in solar cell production because of its electrical properties, which render it an excellent electrical touch for the cell’s front and back. Between 2012 as well as 2016, the industry decreased the usage of costly silver from more than 200 milligrams for every cell to less than 100 milligrams per cell. The volume of silver utilized has only marginally decreased since 2016 and is now in the region of 80-90 mg per cell, rebutting bullish industry forecasts. The PV sector has reduced the contribution of silver’s expense for every watt from $0.05/Wp in the year 2012 to about $0.015/Wp in the year 2020 by utilizing fewer silver per cell and gaining from the product price decrease.

Silver’s contribution to overall module costs, on the other hand, is rising again, as silver consumption for every cell has plateaued as prices increase. The PV sector accounts for 10 percent of the global silver demand. Simultaneously, the automotive industry’s projected additional growth due to the increase of hybrid and electric vehicles could boost silver demand from this industry up from 51 MMoz in the year 2020 to about 88 MMoz in the year 2025, driving prices even higher.

On the supply hand, mined silver demand has been declining since 2016. Silver’s contribution to the module cost could increase to $0.03/Wp if rates grow above $40 per ounce, an amount last seen in the year 2011. Silver is only one of the main materials used in the production of PV modules, including polysilicon, glass, as well as aluminum, many of that have seen price spikes in the last year.

Historically, the cost of shipping a shipment from China to main markets across the globe has been $0.006/Wp, but it jumped to $0.02/Wp in the year 2021, after Covid-19. Shipping also contributes to just below 10% of the module FOB bill, yet another major cost rise for PV developers (prior to shipping). Just 3% of the population had this status as recently as 2019. Although this uptick could be a one-time consequence of the disease outbreak, Asian-centric module demand implies shipping costs may continue to be a critical element to keep an eye on as the pandemic spreads to other continents.

By Adam

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