Price Volatility In The Solar Industry Is Causing A Ripple Effect

Even as solar energy becomes one of the major sources of new energy in the world, its business is experiencing unprecedented instability as the competition for profitability heats up.

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The primary component of solar panels, polysilicon, provides the clearest view of the roller-coaster. Starting in December, prices dropped more than 40% over a short period of time before rising more than 50% in less than a month.

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Although manufacturing behemoths plan expansions to supply the globe with more renewable energy necessary to mitigate the effects of climate change, the instability is reverberating throughout the solar supply chain and placing pressure on them.

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Variable prices are whipsawing the solar industry.

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A crucial panel material experiences a sharp decline and comeback.

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According to Tony Fei, an analyst of BOCI Research Ltd., "the solar value chain has experienced one of the most turbulent two months in history, with major product prices nudging up and down by significant margins." The company said that "intense inter-segment competition for profitability" was to blame for the volatility.

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As additional plants went online, polysilicon costs started to decline at the end of the previous year. In response, major producers have recently reduced sales and increased inventory in an effort to support prices. The volatility was increased by the low trading volume over the Lunar New Year break. 

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The overall solar demand, which increased by a record amount last year and is anticipated to surpass that amount this year, hasn't been affected by the ups and downs thus far. But as they juggle attempting to protect profit margins and market dominance, multibillion dollar solar titans are being forced to swiftly modify their pricing tactics.

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Leading wafer producers Longi Green Energy Technology Co. and TCL Zhonghuan Renewable Energy Technology Co. have only recently increased prices by close to 20% in reaction to the recovering price of polysilicon. Tongwei Co., a leading cell manufacturer, increased prices as a result by as much as 8.5%.

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According to Alex Whitworth, research director at consulting firm Wood Mackenzie Ltd., "volatility is projected to persist in the coming months as polysilicon producers and their clients who make wafers fight to gain advantage in a dropping price market."

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Prices for polysilicon are anticipated to finally reach a stable point before starting to decline once further when new production facilities go online. The Chinese Silicon Industry Association released a statement on Wednesday stating that prices for polysilicon had remained steady this week despite recent volatility, making them a carefully watched industry beacon.

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