Reason Why Solar Modules Price rising in Global market?

The price of all commodities mainly which are used in solar industries is rising in the year 2022. Due to this total solar project cost will be around 1.25 times to 1.5 times from the last years. We will understand why solar module prices are rising globally since the start of the year 2022. There has been a solar surge in the last ten years. Global annual solar installations climbed from around 18 GW in 2010 to 185 GW in 2021, and they are anticipated to reach 334 GW by 2030. Similar to China, India has seen a significant increase in installed solar capacity, going from 161 MW in 2010 to 42 GW as of December 2021. Solar energy's low cost is one of the main factors behind its widespread adoption. Solar energy has surpassed other main electricity generation sources in terms of Levelized Cost of Electricity (LCOE). In India, utility-scale solar tender prices dropped from INR 10.95/kWh in 2010 to INR 1.99/kWh in 2020. This is a considerable decrease from the INR 5-7/kWh prices for new solar installations

.

Why are solar module prices are rising in India?

In the last few months, domestic solar panel costs have increased by more than 50%, peaking at more than Rs 30 INR/watt. The price of solar panels has increased even further with the implementation of a baseline customs tax of 40% on solar modules and 25% on solar cell imports as of April 1.

If we see the market trend, we will find that the price of a solar cell is roughly equal to the price of a solar module. This implies that the cost of the solar module as a whole will increase if the price of solar cells is increased. Due to a 15% increase in the price of solar cells, which make up around 50% of the cost of solar panels, the price. of solar panels has increased by 15% since the start of 2022.

According to MNRE's official news, India has a 3GW annual capability for producing solar cells. However, India cannot produce polysilicon, wafers, or ingots.

India is heavily dependent on imported solar cells due to several problems, including a lack of local cell production capacity and a reliance on imported raw materials like polysilicon and wafers. 

Due to a lack of manufacturing resources in India, China supplied up to 85% of the country's solar energy needs. They gave the manufacturers raw materials like ingots, polysilicon, and cells. 

However, the taxes have increased domestic manufacturers' input costs, raising local panel prices along with rising raw material prices. Chinese panels have become exceedingly expensive for solar developers or EPC players as a result of the 40% tariff.

Indian solar panel producers have been forced to increase panel prices due to the sharp rise in input costs. The cost of the panel is equal to 12.5% of the 25% tariff on cells. 

This price increase is also a result of higher commodity prices, greater shipping expenses, and a longer supply timetable. 

Lack of demand is one element the sector is missing, and this has a big impact on marketing. There is little demand on the market, and developers have stopped working on their projects. These expensive PPAS are causing hesitation among solar developers.

Although Indian businesses now have sufficient manufacturing capacity and cutting-edge technology, they still need a healthy domestic market. 

Solar developers or EPC players may request a remedy in the form of a decrease in GST on projects if the import tariff on panels cannot be lowered. 

The main causes of the price instability of panels are the impact of the Approved List of Models and Manufacturers (ALMM) legislation, the increased goods and services tax (GST), and limited local production capacity.

Main reasons for increasing solar module prices-:

Supply chain disruptions -: The primary raw material used in the production of solar PV is polysilicon. The primary cause of the fall in solar module prices has been its price reduction over time. But from July 2020, the price of polysilicon on the international markets rose from $6.8/kg to $43/kg in November 2021. (six times increment). The impact and influence of the increase in polysilicon price over the module price are evident when examining the entire price trend of modules and polysilicon together. Price increases for goods like glass and metals, a lack of containers, and other variables can also affect the PV supply chain. These interruptions were made worse by several lockdowns caused by COVID-19 that occurred around the world and stopped manufacturing.

Rising demand for Solar-: The mismatch between supply and demand is yet another important element driving up the cost of solar modules. Solar has had a massive increase in popularity during the past two years. With businesses establishing worldwide decarbonization and Net Zero targets, the demand for less expensive and cleaner energy sources is further boosting the expansion of the solar industry. When demand exceeds supply in a situation like this, the price of the commodity in question rises.

Impact of basic customs duty (BCD) and Approved List of Models and Manufacturers (ALMM)-: From April 1, 2022, the import tariff on solar modules is 40% and on solar cells is 25%. Additionally, the government required solar developers to only use ALMM enlisted modules for projects that were funded by the government, assisted by the government, covered by government schemes and programs (such as Component A of the PM-KUSUM scheme), and that were also open access and rooftop net metering projects. ALMM only includes domestic manufacturers at this time. Due to the aforementioned reasons, the top domestic solar producers have raised their prices by 3-4 cents (or 3-4%) between February and March 2022 in anticipation of an increase in demand for domestically produced solar modules.

Energy Crisis Impact -: 

Several nations, particularly China, experienced an energy crisis in Q3 of CY2021. The main causes were a lack of coal and the resulting interruptions in the coal supply system. The government-enacted rolling blackouts of the energy-intensive industries had an impact on the solar manufacturing sector, which is still mostly concentrated in China. This

issue made an already challenging situation even worse and contributed to a short-term surge in module pricing.

Therefore, this obstacle to Chinese solar production may have an impact on solar module pricing, at least temporarily.

The most important element that is directly or indirectly causing an increase in module costs is the mismatch between supply and demand. Right now, demand vastly outweighs supply (especially poly-Si). The stability of solar module pricing depends on the proper balance of supply and demand. COP26, which was convened in Glasgow in November 2021, set challenging RE targets for each nation. The necessity for energy security and self-sufficiency has also been brought to light by the ongoing turmoil in eastern Europe. Therefore, it is unlikely that the need for solar will decrease any time soon.

To keep solar module prices stable, supply needs to catch up with the rising demand. However, it takes a lot of money and effort to build up new poly-Si production. Construction of a new poly-Si production facility typically lasts 18 to 24 months. In 2021, several new projects have been announced as a result of the sharp increase in poly-Si pricing. Through its Production Linked Incentive (PLI) program, the Indian government is likewise aiming

to promote a vertically integrated solar industry. At the earliest, production at these new facilities is anticipated to begin in the middle of 2023.

With domestic BCD, ALMM implementation, geopolitics, and supply-demand imbalances all taken into account, it can be said that solar module costs are not anticipated to decrease any time soon. All things considered, it is anticipated that the price of solar modules would likely start to decline once more from late 2023 or Q1 2024.