Supply chain bottlenecks
The solar industry didn’t escape the post-pandemic supply chain disruptions, with 2022 marking a second consecutive year of high prices for most solar components and materials.
Two-thirds of the production cost of a solar module derives from materials, including copper, steel, aluminum, and polysilicon, a common form of silicon, itself a material with semiconducting properties.
These commodities suffered from supply chain disruptions which led to higher prices. Polysilicon prices surged more than 200 percent in the two years to August 2022, with supply unable to keep up with strong global demand for solar panels as China, which accounts for approximately 80 percent of global polysilicon production, maintained strict COVID-induced lockdowns. However, after spiking earlier this year, the prices of most metals fell sharply over the summer.
Soaring polysilicon prices have encouraged producers to ramp up capacity significantly and rapidly. BloombergNEF expects a return to a state of oversupply could lead polysilicon prices to drop from the August 2022 peak of $39.19/kg to $15/kg in 2023 and less than $10/kg in 2024. Such a drop in an important raw material would be reflected in the price of solar modules.
Moreover, in the U.S., the Inflation Reduction Act offers generous subsidies for domestic manufacturing. While details are still being ironed out, such support is likely to restart idled polysilicon capacity while attracting new investment for module assembly and possibly wafer production, according to BloombergNEF.
Storage solution?
It is often thought that renewables are too unreliable due to their intermittent nature and that they are not well-suited to meet surging demand early in the morning and again in the evening. Such concerns are understandable given a grid cannot run the risk of blackouts.
Moreover, it has been difficult to add a lot of solar to the existing power grid because there is a limit to how much energy can be put on it—too much solar could overpower it, so excess energy needs to be put somewhere.
Storage can help stabilize the grid, balance energy output with demand, and increase the efficiency of renewables. So far, storage solutions for solar have been cumbersome.
Still, battery technology is improving. Lithium-ion technology is becoming a viable option for storing at least a few hours’ worth of solar energy that is generated in the middle of the day, when demand is low, for use in the evening, when generation declines but demand shoots up.
Batteries aren’t the only way to store energy, but they are the fastest-growing solution for short-term storage. For longer-term storage, a different kind of battery, the flow battery, can be used. In this type of storage, the charge is stored outside of a battery cell, so as to store a greater amount of energy for a longer period of time. But flow batteries remain expensive.
Another method is “gravity drops” in which heavy objects, such as cement blocks or bricks, are hoisted into the sky by, for example, giant cranes. These massive weights are then lowered under natural gravitational force to create electricity.
This method works in a similar way to pumped hydropower but is more practical. Hydropower funnels water uphill before releasing it through turbines to create electricity, and thus necessitate two bodies of water and a hill to function, requirements which are not always at hand. Gravity drops can store energy for between six and 14 hours.
BloombergNEF thinks solar energy storage solutions will eventually evolve into a mix of lithium-ion batteries alongside hydrogen solutions, whereby solar energy generates electrical power that is converted into hydrogen to be used as fuel.
