The “thorny” issue of costs in conditions where the risk of a radical reversal of the business plans prepared by investors for new RES projects is now underlined by the International Energy Agency (IEA) in its latest report on the development of Renewable Energy Sources for the month May.
Prices for many raw materials as well as transportation costs have been on the rise since the beginning of 2021. Since March 2022, the price for a polysilicon photovoltaic has more than quadrupled, steel by 50%, copper by 70 %, aluminum doubled and transportation costs almost fivefold. The reversal of the long-term cost-cutting trend is reflected in the higher prices of wind turbines and solar panels as manufacturers pass on increased product costs to the product price.
Compared to 2020, the International Energy Agency estimates that the total investment cost for a new large-scale photovoltaic park and a terrestrial wind farm is from 15% to 25% higher in 2022. Increased fare costs are the biggest contributor to overall increases of prices for land wind. For photovoltaics, the “source” of the additional charge is uniformly related to the increased prices in transport, polysilicon and metals.
High prices for oil, gas and coal increase the production costs for materials used in renewable technologies as fossil fuels are used in both industrial processing and production of these products.
Although significant in absolute numbers, however, as the IEA points out, the increase in RES costs has not affected RES competitiveness because fossil fuel and electricity prices have risen sharply since the last quarter of 2021.
Historically, prices in photovoltaic and wind tenders (long-term contracts) have been higher than wholesale electricity prices in many major European Union markets.
But even the highest contract land price in the wind farm category closed in the last five years is 50% lower than the average wholesale price today in the European Union. In fact, a similar picture is presented in the contracts for new projects that despite the increase in costs as recorded above, prices continue to be lower than wholesale prices during the last six months.
For example, the price for a large-scale photovoltaic and a terrestrial wind farm increased by about 15-25% in the recent Spanish tender held in December 2021, to $ 37 / MWh and $ 35 / MWh, respectively. Again, these prices are 1/10 of Spain’s average wholesale price over the last 14 months.
