Freight delays hit solar module supply

Ongoing freight disruptions and rising raw material prices are prompting solar equipment manufacturers to halt deliveries and solar developers to postpone projects into 2022.

Covid-related closures and quarantine rules at Chinese ports, as well as a shortage of workers and facilities at international ports such as in the US, have created backlogs and delays causing disruptions throughout various industry supply chains. The global ocean freight market faces ongoing congestion at ports, a lack of container availability, low schedule reliability and high fuel costs. The delays are expected to persist well into next year, as China faces its largest outbreak since the start of the pandemic in 2019.

Combined with power supply restrictions in China that have reduced output of polysilicon and other raw materials, the logistics delays are driving up costs for solar equipment producers and slowing the pace of solar panel deployments.

US-based FTC Solar, which produces inverters for solar energy systems, revised down its expectations for fourth-quarter revenues this week, "due to an abrupt delay of customer purchase order decisions from the fourth quarter into 2022, driven primarily by module pricing and availability uncertainty, on top of already elevated commodity and logistics pricing in the marketplace."

The company added that underlying demand for solar products remains strong, with the business set to be delayed into next year rather than lost. The company reported continued growth in its contracted and awarded orders, with its overall project pipeline at record levels.

The International Energy Agency forecast that global solar capacity additions would rise by 145GW in 2021 and 162GW in 2022, up from a record 23% increase to 135GW in 2020. Solar installations have been growing rapidly, as a fall in equipment costs over recent years has made solar generation cost competitive with coal and gas-fired generation. And governments have ramped up support for renewables to meet carbon emissions reduction targets. But the rise in costs and delay in deliveries could see the industry fall short of those targets, as solar developers postpone projects to wait for prices to fall back.

US-based solar cell and module manufacturer First Solar expects freight costs to remain high into 2022, affecting its gross margin guidance. The company said that it has partially mitigated the impact through the use of its US distribution network and freight-sharing contractual arrangements with its customers to cover a portion of its expected 2022 deliveries. "Despite these mitigating factors, the challenging freight environment has adversely impacted our financial results," the company's chief executive Mark Widmer said on its quarterly earnings call. First Solar had around 820MW of shipped modules in transit at the end of the quarter, nearly double the amount of the preceding four quarters, which were not recognised as revenue.

"[With] the coming traditional peak season of shipping before Christmas, coupled with booking difficulties, serious port congestion, [and the] unstable shipping schedule, the global sea shipping situation is becoming more tense together with continuously increased shipping prices," solar module manufacturer Amerisolar said recently. Solar module buyers, investors and distributors have sought to sign contracts since August to lock in module prices and secure shipping slots, the company said, adding that it has "taken very aggressive measures to control the manufacturing cost" since August.

With China accounting for around 70pc of global solar module manufacturing capacity, the restrictions on energy consumption have further exacerbated the supply and demand imbalance on the market, particularly as the disruptions have also affected supply of silicon metal and polysilicon.

Many Chinese manufacturers have prioritised supplying modules to the local market where state-owned enterprises are the major investors in utility-scale solar projects, Widmar said.

High prices for polysilicon, which have been soaring since mid-2020 on tight supply, have resulted in module manufacturers delivering previously signed orders at a loss. Several module makers have begun to halt deliveries, and reduced utilisation rates to 50-70pc in October, according to Amerisolar.

Prices for solar glass and silicon gas are expected to continue rising along with polysilicon, prompting Chinese module producers to call for the government to encourage a slowdown in the pace of solar installations and global customers to consider postponing projects.

China added 25.56GW of new solar power capacity in the first nine months of 2021, a 36.68pc increase year on year, according to the National Energy Administration. But new additions peaked in July as the rise in model costs began to weigh on the number of new installations. China had expected to add around 60GW of new solar generation this year.

By Nicole Willing