Following on form our previous blog about lack of supply and high prices we have now had the Price Cap announcement from Ofgem and the government’s response to the expected much higher energy bills this autumn. After a £700 rise in the energy cap this Spring the cap is expected to rise to £2,800 in October. This is a further rise of £800.

The government is helping out the less well off with payments totalling £650 in July and in the Autumn. This money will be given to over 8 million low income families who are on Universal Credit. All households in October will be given a £400 discount on their energy bills

With many households already paying over £300 per month for gas and electricity we are seeing a huge rise in enquiries for Solar PV, storage batteries and Air Source Heat Pumps. With annual energy bills approaching £3,500 to £4,000 the economics of installing green energy in your home are becoming very favourable. It has been possible to install Solar PV and storage batteries for £5,000 in your average UK home. So with energy prices where they now are green energy domestic projects look to be giving a good return on investment.

However the industry is facing critical supply issues.

1. Shortages in Raw Commodities

Heightened demand for certain commodities has resulted in soaring raw material prices as supply shortages continue, a lingering effect of COVID-19. In particular, a shortage of polysilicon, a key component in the photovoltaic (PV) supply chain, has caused solar panel pricing to skyrocket due to exponential demand for solar cells. Other components of PV cells — including silver, copper, aluminum and glass — have also been subjected to inflationary prices as demand outpaces supply.

We have experienced delays in Tesla Powerwalls and Solar PV Inverters. These are two of the biggest parts that we are having supply issues with. Solar panels can be installed but cannot operate without an inverter. Inverters convert direct current (DC) electricity, which is what a solar panel generates, to alternating current (AC) electricity, which the electrical grid uses.

2. Supply Chain Constraints

Commodity shortages are only exacerbated by global supply chain bottlenecks caused by increased shipping costs, factory closures, trade actions and import tariffs. These supply chain constraints hit China particularly hard and have resulted in nearly crippling schedule impacts on the United States solar industry, which is heavily dependent on solar panels manufactured in China. This is having a knock on effect in Europe.

For a variety of reasons manufacturers of solar panels have had to shift production away from China, resulting in higher prices and longer shipping lead times for key project hardware. Shanghai was recently subject to further lockdowns due to Covid19.

Ocean freight rates surged again in April, worsening supply chain bottlenecks. Also issues with P&O ferries have not helped getting supply into UK.

It really is the perfect storm creating product shortages and spiralling prices. We really will try our best at Carter Electrical but patience will be needed from our customers when it comes to completing green energy projects.