A target of 1.7°C is far more achievable, given the effects of rising input costs and covid-19 on an industry that would need to sustain 10% growth in annual capacity.
Global solar manufacturing capacity may need to triple by 2035 to meet the 1.5°C Paris Agreement scenario by 2050, according to research from Rystad Energy.
It will be a major challenge, the researcher says, as manufacturers face rising costs and deal with restrictive measures imposed by governments in response to covid-19. To meet the 2050 target, they will need to increase capacity from 330GW today to 1,200-1,400GW by 2035 to handle the peak installations needed.
The cost of solar projects has declined considerably in recent years, but the reductions have started to taper off to reflect rising prices for polysilicon, silver, copper, aluminium and steel.
These input factors have seen a rise in prices in 2020 and 2021, Rystad says. Mono-polysilicon, the key ingredient in photovoltaic panels, rose from $7.6/kg in 2019 to $9/kg in 2020, and is likely to average $18/kg in 2021.
The price of silver, important for the connections from the silicon cell to copper wires, has climbed from $550/kg in 2019 to $850/kg (on average) in 2021.
The combined effect has seen global solar panel prices increase by 16% in one year. The weighted price inflation for solar projects, including labour, means that total costs are up 12%, potentially limiting demand growth for the next few years.
“The entire industry is experiencing shortages in the supply of raw and auxiliary materials, especially polysilicon and silver,” says Rystad Energy head of energy service research Audun Martinsen.
“Covid-19-related restrictions have not only created supply shortages of essential raw materials, but have also led to higher prices, resulting in fewer shipments and impacting revenues for industry participants.”
A reduction in the mineral and metal intensities could be key to increasing the production capacity and addressing the supply chain challenge, he says.
Maybe 1.7°C is more achievable
In the longer term, the solar industry must increase capacity and continue to fight cost escalation to meet climate change goals. Rystad Energy estimates that to maintain the global temperature increase below 1.5°C, solar panel manufactures should ideally grow 10% annually to meet the needed module production capacity of 1,200-1,400GW by 2035.
Module capacity has grown at a similar rate in the past but with the current supply shortages in essential raw materials (such as polysilicon, silver and glass), and the price hike in auxiliary raw materials, 10% growth would be a very ambitious target for solar companies.
In fact, by 2035, the solar PV industry would have to source seven times more silver than what it does today, when it already consumes 10% of global silver production.
Limiting global warming to 1.7°C instead is a more achievable scenario under the current supply constraints.
As there is enough capacity for another eight years, this should give solar companies more time to expand production capacity.
To accomplish the 1.7°C scenario, companies should be able to expand production capacity to 1,000-1,200GW by 2045, while still consuming a large part of silver and polycrystalline, in a time frame that allows supply to adapt.