NEWS CENTER

Research firm Wood Mackenzie pointed out in a research report released a few days ago that Europe must find a way to deal with high raw material costs, while rapidly expanding the scale of photovoltaic deployment.

Photovoltaic systems play a vital role in Europe's energy transition. But to benefit from growing demand, the PV industry needs to rapidly scale deployments while navigating a challenging high-cost environment.

Photovoltaic market demand is heating up

In its latest update on the global PV market outlook, Wood Mackenzie predicts that global PV annual production capacity will grow by 25% in 2022, with total installed capacity exceeding 1,000GW. Following this important milestone, the installed PV system capacity globally is forecast to continue to grow strongly, with a CAGR of 8% over the next decade. By 2031, the cumulative installed global PV system capacity will reach 3,500GW – with Europe expected to account for about 331GW, or just under 10%.

Rising costs put pressure on PV system development

In PV, however, demand is not the only factor rising. The price of photovoltaic raw materials rose across the board last year. Since January 2021, the price of polysilicon, the main raw material for silicon wafers, has tripled. At the same time, the cost of anti-reflective ultra-clear glass for PV module cover sheets has been affected by rising gas and tin prices. In addition, the prices of other important materials such as aluminum, galvanized steel and copper have all risen by more than 30% in the last year.

These rising raw material costs, combined with supply disruptions caused by the Covid-19 pandemic, a rapid recovery in market demand and soaring freight rates, will cause PV module prices to increase by more than 20% in 2021 alone. If the current situation persists, the increase in capital expenditure costs combined with the potential increase in operating and maintenance costs may lead to the delay or cancellation of photovoltaic projects, which will hinder the development of the European photovoltaic industry.

Europe needs to establish an independent photovoltaic industry chain to achieve photovoltaic development goals

Europe's current polysilicon annual production is sufficient to meet about 16GW of capacity, almost all produced by Germany's Wacker, which is less than half of what is needed to meet European PV installation demand. However, the European supply chain is even more affected by the production capacity of silicon ingots and wafers, and the production capacity of these two links is only 1.5-2GW. Therefore, almost all polysilicon produced in Germany in 2021 will be exported to China.

Before the Russian-Ukrainian conflict, the European Union had already planned to decarbonize its economy by 2050. However, the outbreak of the war has made the need for an energy transition in the EU all the more urgent to quickly wean itself off Russian gas. The EU's plan to get rid of its dependence on Russian natural gas, REPowerEU, pointed out that it hopes to install more than 420GW of photovoltaic systems by 2030.

Time is running out as the surge in electricity and fuel prices shows no sign of slowing as EU sanctions on Russia tighten. Europe needs to act quickly to address the supply of raw materials for PV modules and move towards a self-sufficient PV industry chain to achieve the required rapid expansion.