Solar Panel Prices Have Soared?

Sudden and steep rise of prices of solar panels may have impacted severely the solar power industry. For decades the trend had been the lowering of costs which explained the rapid growth of solar power in the world. But new solar panels or module prices have risen by 18% since January 2021 (Starbizweek, 5 June 2021).

A recent report said that the higher prices may be due to Joe Biden’s Infrastructure Plan. The price of components – polysilicon, copper, iron and aluminium have soared with the recovery of some economies from the pandemic. Price of polysilicon, for example, has jumped from USD 6.19 per kg to USD 25.88 per kg in less than a year.

Malaysia’s installed solar power capacity has had an annual growth of more than 50% over the last five years. This is according to a Kenanga research report. By 2025, the country is targeted to achieve 31% RE in the power capacity mix, higher than 20% - which was the earlier stated goal. This capacity mix is to increase to 40% by 2035. (Peninsular Malaysia Generation Development Plan 2021-2039, Energy Commission).

To achieve the 31% goal, 1,178MW of new RE capacities will be developed in Peninsular Malaysia from 2021. The additional capacities will consist of 1,098MW of solar and 80MW of non-solar.

Currently, RE contributes 15% of the energy mix in Peninsular Malaysia or 22% for the whole of Malaysia.

Tariffs have dropped from LSS1 to LSS4 (awarded in April 2021).

	Tariffs (Lowest/Range)   [Sen per kWh]
LSS1	39
LSS2	33.98
LSS3	17.78
LSS4	17.68 to 24.81

 

For LSS4, expectations are IRR to be in the mid to high single digits with capex at RM3 mil to RM4 mil per MW. The beneficiaries of LSS4 include:

1.     Tan Chong Consortium;

2.     TNB;

3.     Ranhill Utilities Bhd;

4.     Uzma Bhd;

5.     JAKS Resources Bhd;

6.     Gopeng Bhd;

7.     KPower Bhd;

8.     Solarvest Holdings Bhd;

9.     Advancecon Holdings Bhd; and

10.  MK Land

Many see the price hike as a temporary phenomenon and conditions may improve by 2022/23. All the LSS4 projects are scheduled to come on stream by 2022 or 2023. So, is the price rise just a temporary phenomenon? May not be if economies recover substantially and demand outstrips supply on panel components. Then there is greater awareness of RE as a solution to carbon neutrality and governments provide incentives for RE projects over thermal ones. So, in the medium- term price maybe higher and will hold until supply side matches-up.  What do you think?

Reference:

Gurmeet Kaur, Making cents out of solar, 5 Jun 2021, Starbizweek