The renewable energy sector, which has weathered challenges such as inflation, rising financing costs, and project delays, is showing signs of a potential renaissance. Stocks have faced significant declines, particularly for wind specialists like Orsted and Siemens Energy, grappling with financial and managerial turbulence.
One positive development easing the sector’s woes is the cooling of component costs. Solar, in particular, is emerging as a more favorable option compared to wind due to increased flexibility in its supply chain.
Both wind and solar have encountered similar obstacles, including post-Covid disruptions in supply chains and surging steel prices. Polysilicon, a key component in solar panels, saw its cost soar to more than four times its 2020 levels at its peak in 2022, according to the International Energy Agency.
The levelized cost of electricity from new projects in 2022 rose nearly 20% compared to 2020 due to increased logistics and financing costs, posing challenges for developers and manufacturers. However, the tide is turning, and costs are expected to decrease, with solar generators experiencing a faster decline. PV module prices have already dropped more than 25% in the first eight months of the year, as reported by SolarPower Europe.
One contributing factor to the optimistic outlook for solar is its production ease compared to wind turbines. The abundance of manufacturers, coupled with the straightforward expansion of existing plants, has created an environment where around 1,100GW of new capacity is expected by the end of 2024, according to Bernstein. This surplus, while potentially challenging for manufacturers, offers a boon to developers like Iberdrola who can access more affordable components.
In contrast, major wind turbine manufacturers, including Vestas, Siemens Energy, and GE, face more complex challenges. Adding capacity is a formidable task, as equipment tends to be manufactured close to installation sites. Moreover, the trend toward larger turbines and more intricate offshore projects adds to the difficulties faced by the wind sector.
As the renewable energy landscape evolves, solar seems poised to bring a ray of sunshine to specialists in the field—provided the sun itself continues to shine frequently.