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Clean energy for EU islands
09 March 2022

What is the impact of increasing commodity and energy prices on solar PV, wind and biofuels?

Wind Power Plant

During the first three months, energy prices kept rising to new levels. Since 2020. prices for goods have been rising due to delivery chain issues, scarcity of resources, and lately rising energy costs. What is the impact of these factors on the renewable energy market? The cost for the production of solar PV modules, wind turbines, and biofuels were effected around the globe. 

This situation has been impacting manufacturers, project developers, and policy makers until today. Rising prices in the clean energy sector have now reversed the cost reduction trend that could be observed during the last decade implying financing for projects already in the pipeline may be delayed. Rising energy and technology costs have already motivated some countries to change their policies regarding their clean energy transition. However, the demand for PV and wind power technologies remains high despite rising prices. At present, it is uncertain for how long prices will keep rising. The impact of rising material costs on the profitability of the renewable energy industry could have long-term implications for the cost of clean energy transitions.

Prices for many industrial materials, and freight costs, have been on an increasing trajectory since Q1 2021, pushing up wind turbine and solar PV costs. Since the beginning of 2020 the price of PV-grade polysilicon has more than quadrupled, steel has increased by 50%, copper by 60% and aluminium by 80%. In addition, freight fees have increased almost sixfold, resulting in additional costs for the geographically dispersed supply chain of renewables. The reversal of the long-term trend of decreasing costs is already visible in the prices of wind turbines and PV modules, which have increased by 10-25% depending on country and region, erasing two to three years of cost reductions since 2018 from technology improvements. The exception, however, is in People’s Republic of China (hereafter ‘China’) where wind turbine costs have continued to decrease in 2021, as demand declined following the 2020 deployment boom driven by the planned phase-out of subsidies.

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