The prospect of significant increases to the cost of installing rooftop solar systems in Australia is once again looming large, with the latest market headwind – an energy crisis in China – threatening to deliver a “knock-out blow” to companies already on the ropes.
Australian rooftop solar industry insiders are warning that the China power crunch, on top of huge hikes in shipping costs and a global shortage of solar panel raw materials are starting to come 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, make its way through to customers, the impact on the industry threatens to be much more detrimental, as companies hang in the balance of Covid-delayed installation pipelines, low stockpiles of cheaper panels, and wafer-thin margins.
As Bloomberg reported at the end of September, the latest blow to the global solar industry has been delivered by the surging price of industrial silicon, the metal used to make polysilicon.
Prices have soared by 300% since August after China – the world’s top producing region for industrial silicon – has constrained production in response to a growing power crisis, underscored by high coal costs.
Such has been the impact on production, with some component suppliers limited to 70% output, that a handful of the world’s largest solar manufacturers took the “unprecedented” step of publishing an open letter, calling on customers to delay purchases and slow installations.
“This imbalance will break the supply chain and seriously endanger the healthy and sustainable development of the industry,” the companies including Longi Green Energy Technology and Trina Solar said in a statement on September 30.
“This plea is unprecedented, and indicates how much stress Chinese manufactured goods supply chains are under,” said Jenny Chase, head solar analyst at BloombergNEF, in response.
So what does this mean for the local market? As Solar Analytics’ Nigel Morris points out in this week’s Solar Insiders podcast, here, this is not the Australian market’s first rodeo – it has 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 pass and things will stabilise… but it’s very uncomfortable when it happens.” The degree of discomfort, however, will be far worse for some in the industry, than others.
“If you haven’t secured your panels, and don’t have a good inventory of stock that you bought at the old price, you’re going to be paying more. And so you’re going to pass those costs on, 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 is going to go up. So we’re already starting to see retail prices starting to creep on customers. [And that is] going to mean there are going to be some winners and some losers.”
Andy McCarthy, who has been the CEO of RACV Solar since it acquired his own hugely successful regional Victorian business, Gippsland Solar, believes the China energy crisis will deliver a “knock-out blow” for a lot of companies in Australia.
“It really is a perfect storm,” he told One Step on Thursday. “You’ve got a pipeline of jobs that has gotten really big due to delays caused by Covid lockdowns, and just as the lockdowns are lifted you’ve got panels that are 20-30% more expensive.
“We’ve got hundreds of jobs in our pipeline at the moment, but we’ve got the stock secured and we’ve made sure to maintain healthy margins.
“It’d be very rough going for companies that haven’t stockpiled panels, that haven’t been able to invest in millions of dollars of [cheaper panels], and that don’t have the ability to absorb some of the price rises.
“They’ll be saying to customers: ‘I’m sorry you’ve waited five months for your installation, but now it’s going to be this much more expensive.’
“It’s times like this when it becomes so obvious why you have to preserve realistic margins,” McCarthy added. “You have to put it away for a rainy day. They don’t call it the solar coaster for nothing.”
This post was published on October 14, 2021 12:50 pm
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