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Are solar manufacturers profiting from the Russian war? | Arthur Speiser Media

Are solar manufacturers profiting from the Russian war? In this video I will explore whether solar energy is profiting from the Russia war on Ukraine. In response to the global energy crisis triggered by Russia’s war in Ukraine, the International Energy Agency (IEA) published a 10 Point Plan that proposes action to reduce Russian natural gas imports by accelerating the deployment of new wind and solar projects. Austria’s Ministry of Climate Protection and Environment approved a 300 million euros as an investment subsidy budget for green energy in 2022. 80% of this investment will go for the installation of new solar photovoltaic plants. So, there is no doubt demand for solar energy is on the rise! Chinese solar giant Jinko Solar predicts global solar capacity installations will rise to 250 gigawatts this year, compared to the 184 installed in 2021. To back this prediction, the company saw a 92% revenue jump on module demand in the first quarter of 2022. As a whole, China exported US$ 25.9 billion worth of Photovoltaic products in the first half of 2022, recording a 113% increase while module exports jumped 74%. Like I said before, demand for solar is on the rise, no questions asked! But the question here is; is this increase converted to actual business profit? The IEA has recognized China as the most cost-competitive location to manufacture all components of the solar photovoltaic supply chain. China is 10% lower than India, 20% lower than the US and 35% lower than in Europe . So, China’s investment in technology innovation has enabled to curb their costs and become the world leader. How are there profits looking? Global giant LONGi reported US$2.7 billion of revenue in the first quarter of 2022, that was 17.29% more compared to the same period in 2021. But their quarterly profits have fallen by 8.96%. Similarly, US giant First Solar saw a 138% decline in their profitability. Revenue is increasing but profits are falling! Basic accounting tells us to look at our costs. It is the cost of the revenue that is threatening these company’s bottom line. Cost of revenue saw a 20.22% increase for LONGi in quarter 1 of 2022, compared to First Solar’s 28.85% increase. So… what explains this cost increase? Polysilicon! The cost of the key material in photovoltaic supply chain has seen a rapid price increase for six straight weeks! The average cost of the most expensive grade polysilicon rose by 1.9% to $43.5 per kilogram , prices are at the highest level since 2011! So what gives? It’s the shortage of material! Once again, supply simply CANNOT keep up with demand, that would eventually put upward pressures on renewable prices. It is the cost competitiveness and the improving economics of renewables that in-part justifies governments enthusiasm towards green energy. According to S&P global, cost of solar generation fell to $45 per megawatt in 2021 from $381 in 2010 . With today’s limitations of materials and other supply chain disruptions, we can expect these costs to increase. Sooner than later, the Chinese manufacturers will increase their prices to ensure their profit margins make them happy! So, it’s not exactly a case of solar manufacturers profiting from the ongoing war, but a story of simple economics reshuffling global markets. Do you agree? Share your thoughts in the comments. Thanks for watching…