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| Author | Alan Tu |
| Updated | March 31, 2022 |
Russia’s invasion of Ukraine has caused oil and natural gas prices to surge. This put renewable energy in the spotlight again. European countries, being aware of their dependence on Russian oil and natural gas, are rolling out plans to diversify energy sources and facilitate the transition to renewables.
Germany’s Economy Ministry proposed on Feb. 28 a new legislation that aims to generate almost all the country’s electricity from renewable sources by 2035. The proposed law includes the expansion of solar and wind power. In addition to onshore and offshore wind capacity target, solar capacity addition is set to increase to 20 GW annually by 2028.
Before the Russia-Ukraine war broke out, the new government set a target of raising the share of renewable energy electricity to 80% by 2030, with 200 GW of cumulative solar capacity and 15.6 GW of annual solar capacity addition. With significantly increased capacity target in the draft law, Europe is expected to see demand-led growth in the short, medium, and long-term.
In response to the global energy crisis triggered by Russia’s conflict with Ukraine, the International Energy Agency (IEA) also published the 10 Point Plan, proposing actions to reduce Russian natural gas imports. The ten points include accelerating the deployment of new wind and solar projects to curb reliance on natural gas.
Although only Germany proposed a clear plan, other European countries are working to slash their reliance on Russian gas. At present, the European market saw increasing order requests and higher acceptance of local module prices, which have come in at US$ 0.27-0.285/W or even US$0.29/W in the region, a 1-2% price difference compared with module prices in China. It’s expected that demand in Europe will remain stable throughout the year, without noticeable high or low season, with outlook looking optimistic for the long term.
Polysilicon supply increases on last year’s level, but shortages still exist, given better-than-expected demand around the globe. Polysilicon production capacity is still coming online this year, as longer times are required for which to run at full capacity. Some polysilicon manufacturers scheduled line inspections, bringing down production volumes. Meanwhile, wafer production capacity comes online, and utilization rates rise in the first quarter. Against these backdrops, strong inventory draws from the wafer sector make it difficult for polysilicon prices to see fast declines.
The black swan event sent up prices for raw materials, such as aluminum, precious metal, and EVA, piling up module production costs. Still, as raw material prices are quickly affected by wars, their influence on module prices will only last for the short term. In the long run, module prices are mostly contingent on prices of upstream sectors.
Supply chain prices can hardly drop this year. Declines are not likely until the fourth quarter when polysilicon production capacity come fully online. Striking a balance between robust demand and elevated prices is the most imperative this year.