Solar panel prices dip due to oversupply

• Low prices on solar panels are set to continue.
• Subsidies on fossil fuels make renewables more expensive.
• Invest now before green taxes land in the EU and elsewehere.

Stockpiles of solar panels in the US and EU have grown sharply, with capacity held nearly twice that of expected demand for the panels, the International Energy Agency (IEA) has reported.

The oversupply has caused a price cut, reducing wholesale rates by nearly half. The IEA says that the mismatch between manufacturing and sales will continue until 2028. Rather than further price drops, the agency predicts that manufacturers will “focus on cost-cutting and innovation,” edging out smaller manufacturers that cannot compete due to their smaller economies of scale.

For businesses looking to decrease their carbon footprint, using solar energy sources can offer tax incentives, a more sustainable investment profile, and highly marketable CSR wins.

Solar panels to reduce fossil fuel reliance

As part of the European Green Deal, the EU is aiming for a 55% reduction in greenhouse gases across the continent by 55%, and to become entirely carbon-neutral by 2050. The Green Deal will likely be backed by so-called green taxation, penalizing high-emissions organizations. The EU also plans to use subsidies, what it describes as ‘pricing instruments,’ and public infrastructure investment to achieve its goals of a more sustainable Europe-wide economy.

Currently, many countries, including most member states, subsidize fossil fuel consumption, a legacy policy intended to promote production and economic growth. The Energy Taxation Directive, last updated in 2003, does not link CO2 emissions to tax rates applied to energy sources.

Furthermore, the ETD exempts aviation and maritime fuel from tax, a mandate clearly out of sync with the European Green Deal. Significant legislative and fiscal changes are clearly afoot.

Joe Biden’s agenda in 2021 proposed removing or reducing the tax breaks on domestic fossil fuels, which account for around $20bn per year of effective subsidy, most of which goes to oil and gas producers. Across the EU, 55 billion Euros annually were similarly granted as of 2019.

So the current oversupply of solar panels offers a prime opportunity for organizations to invest in green energy, with market prices due to stay low for the next four years – at least, according to the International Energy Agency. The higher cost at the point of consumption of renewable energy is due to electricity suppliers passing on the extra costs associated with its storage and distribution, according to The Economist. In a market for electricity, suppliers competing on price will favor the lower cost of fossil fuels.

Meanwhile, the capacity for solar power generation will remain underutilized, with the manufacturing pipeline set to produce panels capable of 1,300GW output by 2028, the IEA stated. That figure assumes no particular changes in technology to develop more efficient panels.

While the climate crisis remains a bogey-man many choose to ignore, the IPCC (Intergovernmental Panel on Climate Change) predicted in 2021 that the planet would warm by 1.5 degrees Centigrade by 2040. By 2100, according to research by University College, London, the economic cost of climate change will be between 37 and 51% of world GDP.

The choices made by individuals, governments, organizations and business have created a situation that will have massive impact on quality of life of the next generation. By the same means, individual decisions made this year can alter this outcome. Investing in solar energy now, when market conditions are attractive to even the most short-term thinking, is an unmissable opportunity.