Supply Shocks in China 

With Covid-19 lockdown delayed installations and impending price surges of a solar PV system, 2021 has not been kind to the Australian solar industry. But why are solar prices rising so suddenly?

Energy Crisis in China – What is Happening?

At the end of 2020, China halted the purchase of Australian coal, their greatest source of imported coal. Political tension erupted between Australia and China due to Australia’s support of an investigation into China’s management of the coronavirus outbreak in early 2020. 

During the pandemic, Chinese exports grew significantly, factories producing solar panels and many other products were pressing for more electricity to meet this demand. Power rationing was displayed through sudden outages in some regions, critically impacting factory production.

In addition to significant surges in shipping costs and shortages of solar raw materials, the energy crisis in China is looking to critically impact Australian solar retailers and installers. The cost increase is starting to creep through at the retail level, with the potential of a $1000 increase of 6.6kW PV system.

What Does This Mean for Panel Manufacture and Shipping?

The price of overseas panels will ultimately rise 20-30% and eventually make its way down to the customer. Smaller retailers already impacted by delayed installations due to lockdowns, less stockpile of cheap panels, and thin margins will be the most affected by these hikes. 

The latest shock to the solar industry is the 300% soar in the cost of industrial silicon, which is a metal used to produce polysilicon in panels. The top producer of these materials is China, which has lessened its manufacture of industrial silicon due to its increasing energy crisis exemplified by higher coal prices.

Post-Covid shipping costs are also a major factor in price hikes, with a source in the shipping industry stating a whopping increase from $1800 to over $8000 per container of solar materials from Shanghai to Australia.

What Will This Mean for The Australian Market?

The Australian solar market has seen many increases and decreases in solar costs before and will see them again. The supply shocks and price rises will certainly come to pass and eventually stabilise. 

Smaller companies that have not stocked up on panels already at the cheaper rate, will be significantly affected than larger retailers with months of stock readily available to customers. 

Companies will have to pass on these hikes to their customers to make a profit so the customer will go elsewhere. Once lockdowns are lifted and installations can go ahead, the customer is now looking at a 25% increase in cost.

The price hikes will be a blow to the industry for a while, with many small companies unable to sustain themselves under the pressure. However, this seems to be a temporary setback and the market will eventually steady itself out.