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Is renewable energy set for a renaissance? The sector has been hit by inflation, rising financing costs and project delays. Stocks have plummeted. Wind specialists have performed worst, with financial and managerial turmoil at the likes of Orsted and Siemens Energy.
Component costs are now cooling, which will help relieve some of the pressure. With more slack in its supply chain, solar now looks a better bet than wind.
Wind and solar have suffered from similar difficulties. Post-Covid dislocation snarled up supply chains. The cost of steel has soared. At its peak in 2022, polysilicon, used to make solar panels, was more than four times more expensive than at the start of 2020, reckons the International Energy Agency.
With logistics and financing costs also increasing, the levelised cost of electricity from new projects in 2022 was nearly 20 per cent higher than in 2020. That has been a problem for developers and manufacturers because auction prices have not kept up.
Costs should now drop — and the decline will be faster for solar generators. Indeed, PV module prices have fallen by more than 25 per cent in the first eight months of the year, trade group SolarPower Europe has warned.
One reason is that it is easier to make panels than turbines. There are lots of manufacturers too. Extending capacity at existing plants is child’s play. Some 1,100GW of new capacity is expected by the end of 2024, says Bernstein, outstripping demand growth.
The coming glut is bad news for manufacturers. The stock of Switzerland’s Meyer Burger has more than halved since the start of August. Developers such as Iberdrola will access cheaper components, meanwhile.
Contrast the outlook for big makers of wind turbines, including Vestas, Siemens Energy and GE. Adding capacity is no easy feat. Equipment tends to be manufactured close to where it is installed. And the trend is for turbines to become bigger and offshore projects to get more complicated.
This leaves solar to spread a little sunshine in the lives of renewables specialists — so long as the sun itself shines often.
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