BEIJING (Bloomberg): The world's biggest solar power company says a shortage of glass is raising costs and delaying production of new panels, throwing a wrench in China's plans to accelerate its shift to clean power.
Prices for glass that coats photovoltaic panels have risen 71 per cent since July, and manufacturers are struggling to produce it fast enough to keep more than a week's worth of sales in inventory, according to Daiwa Capital Markets.
The shortage comes as the solar industry turns toward bifacial panels, which increase both power output and glass requirements.
Solar panel producers like Longi Green Energy Technology have asked the government in China, home to most solar manufacturing, to address the situation by approving new factories. Otherwise price hikes risk making solar power too expensive and halting the industry's momentum.
"If solar power generators see solar projects as uneconomical, they will delay investing in new projects and that will drag down solar demand," said Charles Jiang, general manager of the supply chain management center at Longi, the world's biggest solar company by market capitalisation.
"Solar power plant profits will drop below acceptable levels without government subsidies if glass makers go on to push up the costs."
In 2018, with the energy-intensive and polluting glass industry facing overcapacity issues, China's government forbade companies from adding new production capacity. Longi and five other major solar companies on Tuesday (Nov 3) met government officials and appealed for them to remove the restrictions, at least for solar glass.
Bifacial Panels Glass demand has also been rising within the solar industry because of the increasing prominence of bifacial panels, which coat both the top and bottom with glass, allowing for a slight uptick in power generation from sunlight reflected off the ground.
Such panels are expected to make up half the market in 2022, up from about 14 per cent last year, according to analysts at Sunwah Kingsway.
Solar glass manufacturers have soared this year, with Xinyi Solar Holdings more than doubling and Flat Glass Group nearly quadrupling in market value in Hong Kong.
Shares plummeted Wednesday on speculation that capacity controls could be lifted and as a Democrat sweep in the United States elections failed to materialise.
They rose on Thursday along with other manufacturers as a win for Joe Biden and a greener agenda in the US became more likely. Flat Glass gained 14 per cent while Xinyi added 7.4 per cent.
Flat Glass declined to comment. Xinyi didn't respond to requests for comment, although company officials told Citigroup analysts the company could defend its market share with faster capacity expansion than others if restrictions are lifted.
For panel makers, glass now accounts for about 20 per cent of the total cost of production, up from about 10 per cent, Longi's Jiang said.
Because glass factories take so long to build, the solar industry could be 20per cent to 30 per cent short of the glass it needs next year, with the market not being back in balance until 2022, he said.
The shortage is coming at an inopportune time as solar developers are rushing to finish projects by the end of this year to secure government subsidies.
It also threatens to halt momentum just as the Chinese government considers increasing renewable power additions as the country aims to rein in pollution and become carbon neutral by 2060. -
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