And this market correction is not the only hurdle for clean energy projects in 2021. The explosive growth of the sector has outpaced the entry of newly qualified candidates to the workforce, causing a “war over talent globally” in the words of clean energy CEO Miguel Stilwell, of the Portuguese renewables firm EDP Renovaveis SA. On top of the heightened competition for qualified employees, the rapid rise of the renewables revolution has also caused demand to outstrip supply for many industry essentials.
“Global supply chain squeeze, soaring costs threaten solar energy boom,” a recent Reuters headline proclaimed. Around the world, solar power producers, developers, and installers are slowing down their operations as soaring costs make projects undesirable or untenable. Prices have skyrocketed, not just for labor, but also for components and freight as the global economy gets back on its feet in the wake of the major recession caused by the novel coronavirus pandemic. These newly pricey components include steel, which has tripled in price compared to pre-covid times, as well as sky-high rates for copper and polysilicon, a raw material that is integral to the construction of solar panels. In addition to the skyrocketing prices of these crucial components, it has also become prohibitively expensive to ship these panels and parts of panels.
The recent uptick in solar installation costs is a surprising reversal to a now decades-long pattern of falling costs for the sector. Just as falling costs have been integral to the increasingly widespread adoption of solar energy technologies, the recent rise in prices threatens to seriously slow down that growth trend of solar power around the world. “Market expectation was that production costs would decline from the second quarter of 2021, dropping module quote prices, but we have seen just the opposite,” solar-focused new outlet PV Tech reported earlier this month.
Ironically, this comes at a time when there is more investment and incentive in renewable energies, including solar, than ever before as governments around the world back major green stimulus plans and spending bills that feature clean energy as a key part of the plan to recuperate their domestic post-covid economies and fight climate change.
The research firm IHS Markit has threatened to lower its projections for global solar installations for the year of 2021. If price pressure and industry squeezes stay steady, the firm says that they will lower their standing forecast of 181 gigawatts to 156 gigawatts. This lowered forecast would still represent a 9% growth rate for the industry but is a considerable blow compared to the runaway growth that was expected and which will be necessary to stay on track for global decarbonization goals.
In order to avoid the worst effects of climate change, as a global community, we need to keep the Earth from rising more than 1.5 degrees Celsius above pre-industrial averages, according to the Intergovernmental Panel on Climate Change (IPCC), the premier body of experts on the topic, and the 2015 Paris Agreement on climate change. Meeting this goal will necessitate reaching net-zero greenhouse gas emissions by 2050, a goal that will be all but impossible without urgently and consistently ramping up installation of solar panels and other carbon neutral and renewable energies.
By Haley Zaremba for Oilprice.com
