Polysilicon Glut & Cheaper Solar Panels?

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Rethink Energy UK is predicting a glut of polysilicon leading to a fall in the price of the main component of solar cells by 2023.

Nineteen Chinese companies are expanding capacity in order to produce millions of tons "the most likely outcome is another decade of overcapacity and prices bumping along at marginal production costs." According to lead analyst Andries Wantenaar, prices for polysilicon and hence solar modules will continue to rise during 2022 as supply continues to run short of demand. However, then, supply will leap ahead again as new factories go online and prices will drop.

"From January 2023 this will begin to change. Prices will enter a constant decline as new factories come online across China's periphery. Polysilicon production capacity will rise from 800,000 tons today, to 1.1 million tons by the end of 2022, then to between 1.4 million and 1.7 million tons by the end of 2023.

"Wafer thicknesses are being substantially reduced — the switch from 175-micrometer to 155-micrometer means a 12.9% reduction in polysilicon per watt, which explains why the above graph has the peak polysilicon price in late 2022 by the peak module price in late 2021. The polysilicon factories are being run at a very high capacity factor of 97%, at least while prices are high. Combined with the very prompt commissioning of new facilities, we estimate that 216 GW's worth of polysilicon will be produced in the first half of 2023, up from 125 GW in the first half of 2022. That means the polysilicon supply will have mostly caught up with solar demand and the rest of the supply chain."

Module prices are almost entirely guided by polysilicon price. As polysilicon production increases, module prices are expected to drop. Although the disruptive pandemic shutdowns have affected output, they have not led to any significant price increases of non-polysilicon elements such as glass, backsheets, silver paste, etc.

Some Western polysilicon production capacity is being brought back online, but it may not survive without tariff protection and incentives such as those included in the Biden administration's Inflation Reduction Act. If China's solar panels become fully excluded for the US, the EU, or other countries, then India and Indonesia may be able to export to Western wafer factories.

LONGi (the world's biggest wafer maker) expects that 1,000 GW could be manufactured globally each year by 2030. Rethink Energy predicts that "Before long manufacturing solar panels will be overtaken by grid integration as the most pressing constraint on the energy transition."

Featured graph courtesy of Rethink Energy.

David Waterworth is a retired teacher who divides his time between looking after his grandchildren and trying to make sure they have a planet to live on. He is long on Tesla [NASDAQ:TSLA].

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