REPowerEU solar goal threatened by high raw materials costs - WoodMac

Image by Wood Mackenzie

Achieving REPowerEU’s goal of adding at least 420 GW of solar capacity by 2030 could be handicapped by increasing solar raw material costs, Wood Mackenzie said today and urged fast action to develop a European supply chain.

Wood Mackenzie senior analyst Theo Theodorou said that “as more sanctions are on the way against Russia, and with electricity and fuel prices showing no sign of slowing down, Europe needs to navigate this high price environment and act fast to develop a local solar supply chain to achieve its targets.”

According to Theodorou, after great cost declines in the photovoltaic (PV) sector over the past two decades, module prices have risen more than 20% as a result of last year's “perfect storm” of Covid disruptions, quickly recovering demand for solar installations, growing freight costs and high prices of solar raw materials such as polysilicon, silver, aluminium, copper and steel.

Polysilicon prices have tripled over the last 18 months and are expected to remain elevated during 2022, although new polysilicon capacity in China, delayed by Covid limitations and China’s power crunch, could rebalance the market, the firm said.

While Europe’s main producer, German chemicals company Wacker Chemie AG (ETR:WCH), produces around 60 kilo-tonnes of polysilicon a year, all of it is exported to China as Europe lacks enough downstream capacity. Wood Mackenzie said that to reach REPowerEU goals and create a local supply chain, Europe’s current capacities for polysilicon, wafers, cells and modules, have to expand 3 times, 20 times, 42 times and 6 times, respectively.

The analyst firm estimates that global PV installations will increase at a compound annual rate of 8% between 2022 and 2031 to over 3,500 GW and that Europe will account for over 9% or some 331 GW of installations within the period. It adds that the REPowerEU initiative has the potential to more than double the projected installations.

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