Here Comes The Sun... But Not Cheaply

While the escalation in solar panel material costs has plateaued over the last couple of months, the increase has been enough already to reverse the decline in solar module pricing as we have noted previously (see charts below). While the increase in module pricing is not that significant there are three points to note:

Source: EIA Daily, Blomberg, C-MACC Analysis, July 2021

1. Module sellers have not yet recovered the costs of rising raw materials this year and their margins are compressed
2. Strong and growing demand for modules, while good for the producers is likely not enough to offset the higher costs with volume. At the same time, it puts increasing upward pressure on raw material demand and pricing. Also given the strength in demand, panel makers have more pricing power today and consequently, we could see panel prices go higher
3. All of the forecasts around renewable power costs and value in use (especially for hydrogen) are assuming that solar (and wind) generation costs will continue to fall. As costs fall (mainly around production scale and efficiency) raw materials become a larger share of total costs and higher raw material prices will support higher panel prices and higher power costs.        

Source: EIA Daily, Blomberg, C-MACC Analysis, July 2021

Assumptions around renewable power cost and availability are one of the core points of focus in our proposed Carbon Abatement study. So many plans associated with hydrogen initiatives – using electricity for direct heating applications and decarbonizing the power sector have assumptions of very low priced and readily available power and, likely, they are all betting on getting the same share of new power installations and assuming that power costs can keep falling.