Solar Panel Costs Rise in Emerging Markets Amid Supply Chain Disruptions

Solar panel costs are rising in emerging markets due to high energy prices and supply chain disruptions, according to recent reports. The cost of solar photovoltaic (PV) panels has risen worldwide, primarily due to the increasing cost of solar-grade polysilicon in China.

The polysilicon spot market prices rose from less than $7 per kg in July 2020 to $39 in August 2022, subsequently falling to as low as $18 in January 2023, but prices rose again to above $30 in early February. China accounts for more than 80% of all manufacturing stages of solar panels, including polysilicon, ingots, wafers, cells, and modules.

This price increase is causing difficulties for many emerging markets looking to expand their renewable energy infrastructure. Utility-scale solar and onshore wind are currently the two cheapest forms of renewable energy generation in most countries worldwide. Global solar PV capacity is expected to rise by nearly 1500 GW in the 2022-27 period, surpassing natural gas by 2026 and coal by 2027.

While analysts expect the price of polysilicon to fall further as more supply comes onto the market, with a forecast of $10-$15 per kg, continued access to critical minerals will be key to building enough renewable energy infrastructure to support the energy transition.

In this context, the Gulf Cooperation Council (GCC) is an ideal test case for solar in emerging markets, given the region’s high solar yield, abundance of available land, and clear government interest in increasing clean energy. Saudi Arabia and the UAE have already generated 100% of their clean energy from solar, and both countries have public-private partnership frameworks to tap into global capital markets and issue green bonds for climate-related projects.

The GCC countries are diversifying their renewable energy strategies to include green hydrogen, which can be generated from clean solar. The region’s policymakers and businesses are increasingly looking to the potential of green hydrogen as a clean, sustainable, and potentially cheaper alternative to fossil fuels.

Despite the current challenges, there is hope for the future of renewable energy in emerging markets. The International Renewable Energy Agency (IRENA) reported that renewable energy investments in emerging markets hit a record $143 billion in 2021, with over 170 GW of new renewable energy capacity added in the same year.

IRENA’s Director-General, Francesco La Camera, commented that “Emerging markets are leading the energy transition, and are now the destination of more than 70% of global investment in renewable energy. This investment is driving the economic, social, and environmental benefits of the clean energy transition across the globe.”

In conclusion, while rising solar panel costs pose a challenge to emerging markets, there is still a great potential for the growth of renewable energy. The GCC region’s commitment to solar power and the expansion of green hydrogen production is a clear example of this. Continued investment in renewable energy infrastructure and innovation will be crucial for the transition to a sustainable, low-carbon energy system, which will ultimately benefit everyone.

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