L R AS Published on Tuesday 13 September 2022 - n° 415 - Categories:PV Watch
A look at the review of our certainties in photovoltaics
The most serious commentators (INSEE, Banque de France, IFO, Bundesbank in Germany) are very pessimistic. They warn of the consequences of price increases, whether for energy, manufactured goods, food, etc. They warn about the low revaluation of salaries and the significant loss of purchasing power of the population.
This difficult period, which should be over by 2024 at the earliest, or the end of the war in Ukraine, should be used to review in depth the habits, beliefs and objectives that were previously set. This is because the certainties of availability, practicality and economic conditions (interest rates) have changed. It is best to take a moment to study the changes and see how to adapt to them. This is necessary in order to emerge from this approaching crisis in good conditions.
The rise in prices is spectacular in its scale and violence: it is rapid, but wages are not keeping pace; the loss of purchasing power will be significant
It will result in a slowdown in purchases and an economic recession and possibly a social revoltGermany is forecasting a 0.3% decline in GDP in 2023
Preparing for the exit from this difficult periodWe have lived in recent years on a vision of the future. Reality requires us to question it and adapt
There is already a shortage of lithium and battery componentsThe rising price of lithium and battery components is condemning batteries as we know them
Preparing for the futureRising interest rates mean that the attractiveness of large-scale solar power plants must be re-examined
This week, commentators are dwelling on the rising price of gas and its impact on the price of electricity. The latter is determined by the cost of producing the last kWh generated by gas-fired power stations, which are the most expensive and at the same time the easiest to start up when needed. Thus, in August and one year, the price of gas has increased by 42%, that of petrol by 25%, + 17% for fresh fish
Rystad Energy sees a near-certain shortage of energy supplies in Europe
Electricity prices are driven by gas supplies
Commentators this week have been left with this level of observation, as it is the most immediate, the most noticeable, the most dramatic
The price rise is spectacular in its scale and violence
This rise in energy prices affects the most energy-intensive industries, such as steel and glass production, .... They increase the price of manufactured goods by the same amount and are progressively passed on to the economy as a whole, through road transport, products made from hydrocarbons and heating. The price increase is an average that groups together products that have suffered from these energy increases (steel, glass, cement, etc.) with those that are not directly affected, such as services. Thus, the increase in France limited by government aid on energy was limited to 6% in one year in August. In contrast, it reached 7.9% in Germany last month. Above all, this wave has not finished rising, as the Bundesbank is forecasting inflation of 10.1% in December.
The wave of price increases is fast, brutal and violent. In Germany, for example, the price of electricity for a typical household in August had risen by 185% (i.e. a threefold increase) in twelve months. Wages, on the other hand, are not rising as much (by a few percent) because the governments no longer want to make the mistake of the 1970s, when wages were indexed to prices. This had kept inflation going for many years. They prefer to delay the catching up of wages to prices as much as possible, to make their population lose purchasing power, in order to get back to an inflation of about 2% as soon as possible. Thus the Bundesbank's forecast for 2023 is for a "reduction" in inflation to 6%. By then, the purchasing power of households in Germany will be reduced by 3% in 2022 and by a further 3% in 2023.
This will result in a slowdown in purchasing and an economic recession and possibly a social revolt
This reduced household purchasing power will have an effect on the level of business activity. In France, INSEE forecasts stable GDP (i.e. zero growth) in the fourth quarter of 2022, followed by a decline in activity in the first quarter of 2023. In Germany, the Bundesbank forecasts a reduction in gross domestic product (GDP) of 0.2% in the last three months of the year, followed by a confirmation of the recession with a 0.4% decline in GDP in the first quarter, with a 0.3% decline for the whole of 2023. This is a difficult period to get through, especially as energy shortages could force companies to slow down or even stop their activity during the winter if it is harsh. France will suffer the repercussions of the German economic situation, where its main market is located.
Governments can prepare plans to support the economy, distribute money to the "most deprived" (in Germany, a new one is being prepared; in France, the Defence Council has studied the situation!), the social crisis is ahead of us, imminent and violent. An economic crisis is possible, even if economists do not envisage it.
Preparing the exit from this delicate period
What is important is not to be aware of the difficulties ahead, but to prepare the way out of this difficult period.
In the last six months, a lot of hope was placed on the installation of solar and wind power plants. The public authorities were urged to speed up construction and to encourage developers. The French or German government, busy supporting its economy, mitigating the loss of purchasing power of its citizens, cannot, or only partially, afford to do so.The French or German state, busy supporting its economy, mitigating the loss of purchasing power of its citizens, cannot, or can no longer (except in speeches), pay attention to the future because it is too preoccupied with the present and with the threat of a social explosion.
For their part, households will be able to continue with installations because they are the first to be interested in reducing their own energy bills; they will also be able to continue with the installation of a solar energy system.They have the savings to pay for the installation, because it is the easiest. Large-scale plants, however useful and profitable, will be limited by rising interest rates. They have started to rise too (the European Central Bank raised them by 0.75% a few days ago; the US Federal Reserve has already made severalThe US Federal Reserve has already raised interest rates on several occasions and will continue to do so). The pace and conditions of large-scale power plant projects will be more difficult. Will foreign contracts be found that are less constrained by financing? Perhaps, but the European and financial crisis will spread to the rest of the world outside Asia.
There is already a shortage of lithium and battery components
The recent past, with the continuous rise in silicon, the price of panels and the cost of maritime freight (which will have increased sixfold by 2021, cf. P. Artus), means that European panel production must be developed. For the moment, we cannot see the beginnings of this, but the American example with the promulgation of the Inflation Reduction Act on 17 August shows a path to follow for the regeneration of the European industry.
Rising prices are now affecting battery components. The world's leading manufacturers, the Chinese (Recycled battery materials are being sought because primary products are too expensive) are already forced to use recycled metals to reduce costs.
For example, the price of lithium carbonate increased ninefold between the beginning of 2021 and the end of August 2022, and sixfold in 2022 alone. Other battery components are still in demand. No one can foresee an easing of prices as long as the prospect of the electric car seems likely to prevail. Moreover, Patrick Artus points out that if only electric cars were produced in 2035, lithium production would have to be multiplied by 40. But this product is already scarce. We are already resorting to deposits with a lower product content. How would we manage to obtain such a quantity? Similarly, the Chinese are already obliged to recycle as much of the old batteries as they can because the price of primary products is too high. This also means that the need for battery components will become too great and therefore too expensive for the extraction and recycling capacities. This scarcity raises questions about the price of batteries in five or ten years' time, and therefore about the widespread use of electric vehicles. Because of their price, they will be reserved for the rich or for climate advocates
Incidentally, this means that the use of fossil fuels has a bright future ahead of it since there will be no alternative, or rather no alternative in sufficient quantity!
In the face of the economic and social emergency, it is already noticeable that climate concerns are taking a back seat. The advocates of climate protection are now very discreet. Were they heard when the various governments announced the revival of the use of coal to produce electricity? Are they even heard when there is a debate on the variousCO2 productions? At the moment, the urgency is to get through a period of high social and economic risk. The urgency is to find solutions to make purchases at a lower cost, to preserve one's purchasing power, to save one's job!
Preparing for the future
We must take advantage of this period of crisis to prepare for the future. It seems that individual installation of solar panels or wind turbines is the best way to obtain energy that is cheaper than the grid. It makes sense to develop self-consumption, to organise the local pooling of excess energy and energy needs, and thus to encourage a reduction in the use of gas at national level (Intelligent energy management stabilises the electricity grid). As far as possible, the use of batteries should be generalised.
Above all, instead of expecting concrete measures from the French public authorities (in line with the impulses of the royal power), the profession must organise itself to inform, disseminate and give impetus to the development of renewable energies.
The crisis will be violent. Either we want to suffer and the damage will be significant, or we want to emerge stronger from this period of questioning our past model and prepare for the future. We need a strategic vision using the strengths at our disposal.