l'Actualité du Solaire

The world is in a deceptive calm! Price increases in the energy sector (gas, electricity, hydrocarbons) are visible, while other sectors such as maritime freight, steel, industrial and agricultural raw materials are increasing in various proportions and are not visible to the general public. As a result, the changes taking place in the various economies are not perceived. Yet these changes are profoundly altering the situation of the various sectors. This is the case with photovoltaics

Summary

Multiple price increases in recent quartersIn the last few quarters, there have been multiple price increases in the last few quarters: Producer prices have varied significantly in many sectors, particularly in the energy sector

Photovoltaics have also experienced price increasesSilicon has tripled in price, leading to a 25% increase in panel prices

The economic situation is becoming more difficultThe economic situation is becoming more difficult: some companies are finding it difficult to pass on the increases in materials that they have experienced. Others have not passed on the increase and have less purchasing power.

What about photovoltaics? The cost increases for developers were not foreseen in the contracts. They are draining the profitability of all operations already signed but not yet built

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The text

Multiple price increases in recent quarters

The increase in the price of gas on the international markets is reflected in a new rise in regulated prices of 12.6% on¹ October. This brings the increase over the past year to 57%. The price has reached a seven-year high.

Electricity is also affected by the rise in energy prices. Despite the 75% nuclear power production, 25% is produced with gas and the European network organisation of the energy sector also brings the kilowatt-hour in France above €100 per kWh (€110 on 23 September).

The price of oil (Brent crude) reached $80 on Tuesday 28 September, the highest level since 2018

In one year, sea freight rates have doubled between Asia and North America, increased tenfold between Asia and Europe

Semiconductors are in short supply, penalising a large number of economic sectors including the automotive industry

And it's not over yet. The price of certain grades of steel has risen by half. The prices of raw materials have soared; the prices of agricultural products have not been left behind, with a summer that was too wet to allow for normal harvests.

Photovoltaics also suffered from price increases

Even the photovoltaic industry has not been spared, as the price of silicon has tripled. The production price of the panels increased by 25%. In addition, there was the increase in the cost of sea freight. Voltalia, which has just published its accounts for the first half of the year this week, has suffered a quadrupling of the item 'purchases and subcontracting' in one year. The company has increased this item from 14% of turnover last year to 34% this year. This has contributed to a decrease in the EBITDA margin of 4.4 points from one year to the next, a difference that is reflected in the net margin, the last line of the profit and loss account!

Thus, we are barely out of the pandemic (even if it is said that a number of countries are still facing this disease, hampering their efforts to return to normalcy) when an upheaval affects the economy of all countries. Large energy consumers are affected first by the increases. They see this item swelling and absorbing profit margins. They try to raise their prices to survive, but buyers are not always understanding.

The economic situation is becoming more difficult

French manufacturers, who had approached the last three months with confidence, are gradually changing their point of view. They consider that the economic situation is becoming more difficult and that exports are no longer what they were. It is true that it is necessary to equalise the 57% increase in gas prices in six months, the tenfold increase in sea freight, and the smaller increases in other products. Setting new prices becomes more difficult.

In France, inflation in August has just been announced at an annual rate of 3%. It is higher in Germany,

Some professions already want to make themselves heard, either because of their own situation, or because of the additional costs they incur, or because of the proximity next year's presidential election, which opens up a boulevard of demands from the various categories (e.g. home care doctors). The only thing missing is the employees and civil servants to put some wage demands in this tense context.

Above all, the different origins of the price increases of the products make it impossible to circumscribe the price rises. All sectors are affected to varying degrees by the cost of energy (gas, electricity, fuel). Each sector uses its market power, either with suppliers or with its customers. The price increase is not homogeneous, whereas the opposite would allow to act to stabilize... We are in an economic mutation in which many sectors will suffer considerably or even go bankrupt, whereas others will be able to benefit from the current crisis.

What about photovoltaics?

It is suffering from two concomitant factors: The second China's desire to fight against the United States. This movement has two facets: on the one hand, it mobilises American installers to put pressure on the Biden administration to let Chinese products enter freely (without customs duties); on the other hand, it shows its capacity to cause harm if the United States does not fall in line behind the Chinese monopoly. This is reflected in a°) a rise in the price of silicon more than a year ago, since the Americans mentioned the forced labour of the Uighurs, and b°) a measure that has just been announced and that will have significant effects within a month or two: there will be a restriction on silicon production in the producing regions in the name of energy savings, but which aims to make photovoltaic panels, and therefore production facilities, more expensive

Because the issue is there: if there are fewer agricultural products, prices rise, but we adapt our consumption to what we find. This is not the case for panels: if their price goes up, either you buy and the cost price of the installation increases and may no longer be profitable, or you do not buy. The lack of installation limits the savings that could be made from the production of energy not linked to gas and hydrocarbons. Ultimately, not buying limits the modernisation of the economy and also its competitiveness with countries (China) that will have the opportunity to install many panels. In both cases, China wins. It knows that it is not enough to install panel assemblies to master the panel production chain. It knows that it takes many years before a production complex of different components is able to contribute to the production of a single panel. Provided that everything has been planned and organised. In the meantime, China is testing the reaction of European and American countries.

Overland's view that high energy prices are more of a threat than an opportunity for renewables is sobering. Unfortunately he did not elaborate on this. This is a pity. He argues that politics and the public do not always react rationally and that the installation of panels could be delayed or even abandoned. This would be the case if, like Voltalia, the additional cost of the panels cannot be passed on in the electricity selling price because of the signing of contracts before the construction work. In this case, the selling price fixed at the time of signing is lower than the final cost price per kilowatt-hour, which is known several quarters after signing.

More generally, the winners of the latest calls for tender will find it difficult to make the constructions profitable with a price set several quarters before the increased purchase of the panels. Either the profession will suffer, or there could be a revaluation of the price per kilowatt-hour produced...

It is the scheme of power plant development that is affected by these price increases. Until now, the profession has benefited from the regular fall in panel prices, which allowed it to take advantage of the fall in costs. Now it is facing a reverse process! While waiting for the interest rate hikes that will certainly occur between now and the end of 2022 to increase the construction costs of power plants... The situation is deteriorating for the profession.

To go further: : High energy prices are more of a threat than an opportunity for RE

Voltalia in the first half of the year: strong growth, lower margin, 2021 targets confirmed