Shortage of silicon lead to disturbance across the industries. PV module prices are expected to raise drastically high
Silicon is one of the most common semiconductor raw materials used in the production of PV cells, accounting for almost 95% of the solar modules sold till date. During 2020-2021, there has been a major decline in silicon production, thereby affecting the solar industry on a massive scale.
Yunnan province on silicon production
This led to a significant shortage of silicon chips, which, in turn, led to a sudden increase in silicon prices. The silicon metal prices increased by 300% since the start of August 2021, due to orders passed by Yunnan province to not exceed silicon production by 10% of the August output. Polysilicon prices have hit their highest in almost a decade. This, in turn, resulted in a havoc in the solar industry as it is highly reliant on silicon chips. In addition to this, the unofficial ban by Beijing on importing coal from Australia, led to a ripple effect on China’s energy supply, further affecting silicon production.
Around 80% of the price of a photovoltaic module is dependent on the cost of raw materials. The changing price of raw materials had considerably affected the entire PV supply chain. Since the beginning of 2021, there has been a drastic surge in the price of solar PV modules due to a sudden spike in silicon prices.
The solar module prices have increased by 18% since the beginning of 2021 after plummeting by 90% over the last decade. This will result in delayed solar panel installation projects, further slowing down the solar industry growth. As China is the world’s leading producer of polysilicon, accounting for 67% share, which, in turn, creates a high dependency of importing countries on China. Furthermore, the silicon industry is further impacted due to increasing tensions between China and the US.
Tight supply-demand balance by 2022
The supply of silicon is likely to increase in 2022, but if its demand increases at the same pace, then the supply-demand balance is expected to remain tight in 2022. As a result, the prices of PV module is expected to continue to remain high in coming months.