How Are Supply Constraints Affecting The Solar Industry?

While many COVID-19 pandemic restrictions are being lifted across Australia, pandemic-related supply chain issues continue to be felt across many sectors, including the solar industry. Solar equipment manufacturers experienced significant delays because of workplace and travel restrictions. As the pandemic continued throughout 2021 and into 2022, consumer demand largely shifted away from services, such as dining and travel, towards goods, such as computers and televisions, leading to shortages for key manufacturing components. In this article, we’ll cover some of the supply constraints currently facing the solar industry, and how these constraints are affecting solar shoppers.



  • Supply constraints in the solar industry are mainly because of lingering effects of the COVID-19 pandemic.

  • The solar industry is facing material shortages, including polysilicon, solar glass, and semiconductor chips.

  • Shipping constraints because of container shortages and port congestion are driving up ocean freight costs.

  • It’s possible that you could see longer wait times for solar installations due to supply constraints, but the supply chain should largely normalize one pandemic-related shopping subside.

  • Visit Sync Energy to start your solar installation process today.


Material Shortages


One primary driver of current supply constraints in the solar industry is material shortages. In 2021, the solar industry experienced record growth in Australia, despite the COVID-19 pandemic; compared to 2020, installations increased by 43 percent, according to the Solar Energy Industries Association (SEIA). This record demand, coupled with decreased supply, has affected many key materials throughout the solar supply chain, including polysilicon, solar glass, and semiconductor chips.


Polysilicon


Polycrystalline silicon, commonly referred to as polysilicon, is a key raw material used in many solar cells, which capture the energy from the sun and turning it into electricity in solar systems. Polysilicon is largely produced in China, but factory shutdowns related to the COVID-19 pandemic caused the price of the raw material to spike.


Due to too many uncertainties and unpredictable raw material cost rises, many manufacturers have already stopped taking new orders as of today. We expect a significant price increase throughout the year, and there is no evidence that the cost of solar gears will decrease even in 2022, unless the STC (solar rebate) reduces again.


Some solar panel companies, in particular those that outsource manufacturing, cut purchases of solar cells. As demand for solar panels recovered and began increasing in 2020, it left these companies with a small supply of polysilicon solar cells; now, manufacturers of polysilicon solar cells cannot keep up with the demand for solar panels, causing prices of polysilicon to continue skyrocketing. However, the supply of polysilicon will probably stay constrained through 2021.


Solar Glass


Solar panels also include glass casing at the front of the panel, which protects the solar cells. Recently, there has been growing demand for bifacial solar panels, which produce energy from both sides of the panel, requiring glass on both sides of the solar panel, as opposed to just on the front. In 2018, China, the largest producer of solar glass, imposed restrictions on glass production because of concerns about the required energy consumption. With increasing demand for solar panels, and for solar glass specifically, the restricted production of glass could not meet the demand, causing the cost of solar glass to soar.


In December 2020, China’s Ministry of Industry and Information Technology (MIIT) showed that it would ease restrictions on the production of solar glass. While they expect solar glass supply to remain constrained short term, increased capacity because of these eased restrictions should expand supply later this year and reduce prices.


Semiconductor Chips


Semiconductor chips are a key component of inverters, which convert the direct current (DC) energy produced by solar panels into usable alternating current (AC) energy. It also used inverters for battery storage systems to convert storable DC energy to usable AC energy and vice versa. Using semiconductor chips is not isolated to the solar industry; they are also crucial components of many other technologies, including cars, computers, and smartphones.


Because of COVID-19 related factory shutdowns, manufacturing of semiconductor chips decreased in early 2020. As factories reopened, demand for semiconductor chips surged with people capitalizing on low interest rates to purchase cars hoping to avoid public transportation, and with people increasing other pandemic-related purchases, such as computers, smartphones, and game consoles.


While it would have not hit as hard inverter companies as automakers, Enphase Energy, a major producer of microinverters, cited constraints because of the semiconductor shortage, coupled with a record demand for the company’s products. As a result, shares of the company dropped by over 14 percent in April.


Shipping Constraints


Besides material shortages, the solar industry has also faced constraints related to shipping. Pandemic-related spending on goods increased global shipping, leading to shortages in containers and port congestion in Australia, affecting virtually every sector, including the solar industry.


Container Shortages


At the start of the COVID-19 pandemic, national lockdowns restricted both manufacturing and shipping. As a result, many shipping containers–like those used to hold goods such as solar panels–became stranded and piled up in Australia. While China lifted restrictions because of the pandemic, Australia largely remained shutdown and could not send containers back to China. This caused a container shortage in China, where they were needed to continue exporting goods. Production of containers also decreased in 2021, further contributing to the shortage and causing prices of shipping containers to escalate.


Will these constraints impact you?


As of September 2021, the price of solar panels has increased by about 18 percent globally since the start of 2021. However, these cost increases are affecting large-scale solar projects, as opposed to residential solar. Sync Energy saw the lowest prices of solar in history in the second half of 2021, so if you’re looking to go solar, solar supply constraints shouldn’t dissuade you.


It’s possible that you could see longer wait times for your installation because of the supply chain bottlenecks. However, as production of polysilicon and solar glass increases and as consumers shift spending from goods to services throughout 2021, the shortages and shipping constraints should ease.


Get started on your solar installation process today!


Looking to install solar panels on your property? Visit Sync Energy to compare multiple quotes from local installers. You can make easy side-by-side comparisons of solar equipment and installers to find the right option at the right price.


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