How will the extreme rise in panel prices affect photovoltaic power plant costs in Czechia?

Over the past 15 months, photovoltaic panel prices have risen by an incredible 50%. According to experts, panel prices could rise by a further 20%, due to the current energy crisis in China. How will the sharp increase in panel prices change the costs of photovoltaic power plants in Czechia in 2022?

A response to the pandemic?

The rise in solar panel prices began virtually immediately after the outbreak of the Covid-19 pandemic. First, production was curtailed due to the partial closure of factories in China in spring 2020.  A further negative impact on panel prices came from the increase in sea freight costs between China and Europe to as much as €12,000/container, ten times more than at the start of 2020.

“Photovoltaic panel prices are responding to the current increase in the cost of input materials and the major shortage of electricity at Chinese factories. A further sharp rise in the prices of silicon, solar glass and backsheet films caused panel prices to increase by more than 30% in 2021 alone,” says expert Martin Schachinger, managing director of pvXchange.com, one of the largest B2B trading platforms brokering the sale of PV panels.

Bleak outlook

Panel manufacturers are currently troubled not only by rising input material prices, but especially by their acute shortage. This is particularly true of silicon, the basic raw material used to manufacture solar cells, the price of which has risen by more than 300% over the past 12 months and by a further 10% this September.

Due to the current energy crisis in China, the group of five largest Chinese panel manufacturers (Longi Solar, Jinko Solar, Trina Solar, JA Solar and Risen) recently cancelled supply contracts for the first and second quarters of 2022, invoking force majeure clauses in contracts with importers. This has happened for the first time in the past 10 years. The affected companies include leading importers of panels to the Czech market.

A difficult situation for investors

According to Martin Schachinger of pvXchange, solar panel prices can be expected to rise by a further 15-20% by the end of 2021 due to the current energy crisis in China. “The era of cheap solar panels is over. And a price decline is practically nowhere in sight, which investors in solar power plants will have to get used to,” Schachinger adds.

The increase in the prices of panels, cables and mounting structures will certainly also be reflected in the costs of new photovoltaic power plants (FVE) in Czechia. Most investors expected in their calculations at the end of 2020 that so-called CAPEX (i.e. investment costs) for PV plants with a capacity of 1 MWp would be at the level of 15000-17000 Kč/kWp.

Given the current developments in the panel market and the increase in the cost of so-called BOS (other PV plant components such as inverters, cabling and mounting structures), the actual CAPEX for new 1 MWp PV plants in Czechia will range from 22 000 – 24 000 Kč/kWp in 2022. However, the availability of quality panels from leading manufacturers on the Czech market in 2022 remains a major unknown for investors.

The good news for investors is that future CAPEX increases for new PV plants will be offset by the extreme rise in wholesale electricity prices in Europe, so the economic profitability of PV plants will remain very attractive. Thanks to new subsidies from the Modernisation Fund, the National Recovery Plan and the Just Transition Fund worth hundreds of billions, Czechia is set for a new wave of solar boom.