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The conflict between Russia and Ukraine may lead to a rise in photovoltaic raw materials, sea freight, etc. (high); the global clean energy transition is accelerating

At 10:00 Beijing time, Russian President Vladimir Putin said that he had decided to conduct a special military operation in the Donbas region of eastern Ukraine. Immediately afterwards, explosions were heard in the Boryspil Airport area in Kiev, the capital of Ukraine, in Kyiv, Odessa, Kharkov, Kramatorsk and Berdyansk, marking the Russian and European countries in the European region. The conflict between the two countries has escalated in an all-round way. The whole of Ukraine is in a state of war.

As of press time, the European natural gas benchmark price TTF has soared to 114 euros per MWh. What kind of profound changes will the emergence of the Russia-Ukraine incident bring to the clean energy business at home and abroad, and how will it affect the pace of replacing traditional energy in the photovoltaic and wind power industries? At present, it is expected that the raw material prices of some photovoltaic products will rise, and the demand for wind and solar in Europe and other places will further accelerate.

Specialty gas prices may rise, shipping capacity is tight and prices remain high

In fact, Ukraine is the source of special gases for global semiconductor manufacturing, so behind this conflict will affect the shortage of some electronic special gases used in semiconductors. Semiconductor products are also important raw materials for photovoltaic manufacturing products such as inverters. Will there be a series of reactions in the future?

Ukraine has a high proportion of the neon, xenon, and krypton gas markets, and the conflict will make some special gas production facilities inoperable or damaged.

Several semiconductor manufacturers said that because specialty gases are generally obtained from many countries, including Ukraine, there is no shortage of products in the short term. Micron CEO Melotta said in an exclusive interview with Bloomberg News that part of the noble gas comes from Ukraine, but a large inventory has been prepared, and more importantly, the company has multiple sources of supply, including the United States, the European Union and Asia. He believes that the company is continuing to carefully monitor the situation and hope it will ease. SK Hynix also revealed that it has secured a large inventory of inert gases, so there is no need to worry too much. But while demand can roughly match supply, it is unavoidable that some noble gases will see price increases. The price of neon, a product, soared after the conflict between Russia and Ukraine in 2014, when the price was $3,500 per cubic meter, more than 10 times higher than before.

With the escalation of the conflict between the two countries, the price of gold has risen significantly. The main raw material of the more common silver paste products used in solar energy is silver powder, which is linked to the London silver price. There is no news of a broad-based rise in silver prices yet. Therefore, in the short term, there is no sign of silver paste prices rising.

What effect will the Russia-Ukraine incident have on container transportation, especially for new energy products?

According to Fang observers, sea freight prices will remain high. In the past two years, the price has risen by 4, 5 times or even more. The recent surge in oil prices may affect the increase in the price of diesel, the raw material for container transportation, but even if the shipowner increases the price on this, it will not affect the existing high shipping price. The boost won’t be by much scale. However, the price index of container shipping will not drop in the short term, the overall shipping capacity will continue to be strengthened, and the container shipping supply chain will be in a tight situation. On the one hand, due to the mutant strain of Omicron, the epidemic in many European countries continued to spread, and the accumulation of newly diagnosed cases kept the export situation at a high level, and the market for shipping was very good. In response to the risk of local wars, Europe may increase the stockpiling of materials, thereby driving the overall demand for ton-nautical miles to increase. On the whole, container capacity will be more in short supply, and the possibility of seaborne prices diving is not high, and it is more likely to maintain the status quo or even increase slightly.

Photovoltaic wind power, etc., the global renewable energy transformation is accelerating

The start of this round of local war between Russia and Ukraine will have a positive impact on the acceleration of new energy to replace traditional energy. All day today, new energy stocks showed a surge. Zhongli Group, Sungrow, Trina Solar, Risen Energy, Foster, JinkoSolar, JA Technology, LONGi, GoodWe, Chint Electric, Zhonghuan, and Jolywood all rose at the close. The PV 50ETF gained 1.53%.
Natural gas prices have skyrocketed recently. This is not good news for the European region, where natural gas prices have risen nearly fourfold in the past year. At present, one-third of the natural gas in Europe comes from natural gas, and geopolitics has magnified the supply problem again. As of 4 p.m. today, the Dutch TTF benchmark natural gas futures prices rose for the fourth consecutive session, rising as much as 41% in one day. U.S. President Joe Biden also said he would take further punitive measures against Russia. Any sanctions restricting Russia’s access to foreign exchange would upend oil, gas and commodities markets such as metals and crops.

The local natural gas dependence in Europe is very high, reaching 90%. Therefore, at this moment when the price of natural gas is soaring, more industrial, power and heating users who are accustomed to using natural gas will seek safer ways to solve their needs. The replacement of new energy sources such as solar energy will be accelerated.

Wood Mackenzie has pointed out that with the surge in variable power output, Europe has four options for balancing grid operations: pumped hydro, natural gas peaking power plants. Rory McCarthy, the agency’s principal analyst, said, “For modern power systems, natural gas plants can achieve full power output in two minutes, and can operate at part load with increased efficiency and can supply power for unlimited continuous generation time. The premise is an uninterrupted supply of natural gas.”

But by 2030, battery energy storage will overtake natural gas peakers as the cheapest option to balance Europe’s grid. Energy storage capacity across all sectors in Europe is expected to grow from the current 3GW (excluding pumped hydro) to 26GW by 2030 and 89GW by 2040. McCarthy noted that by 2040, Europe could have 320GWh of energy storage capacity available to balance the power system. Most of them will come from user-side battery energy storage systems. “Oil and coal-fired power generation costs will also rise, and net-zero emissions policies will ultimately target the decarbonisation of all electricity market services,” McCarthy said.

Analyst firm Bloomberg New Energy Finance once issued a survey report, which pointed out: In the United States, as solar power generation facilities continue to spread and eat up the operation time of natural gas power plants, natural gas power plants are required to restart and shut down more frequently. This increases their operating costs due to fuel requirements and wear and tear.

At present, when the price of natural gas is too high, investors will be more prudent in deciding whether to replace the new power generation method to avoid the problem of this high-priced raw material.

Of course, exporters of natural gas are reluctant to see this situation continue. They will also find ways to make gas prices more than ridiculously high, otherwise exporting natural gas will become a problem once the situation of industrial and power abandonment is formed.

Compared with the first stage of the Russia-Ukraine conflict in 2014 (January 19, 2014 to March 20, 2014), in the performance of major asset classes, commodity prices have risen sharply, as high as 7.6%. The price of crude oil rose by 4.2%, and the price of gold rose by 6.1% (from Haitong Securities.) The continued high price of crude oil will also make the use of electric vehicles, clean cars, etc. more important.

In terms of the future development of new energy, especially the photovoltaic industry, this year will continue to improve. On February 23, relevant parties predicted that the newly installed photovoltaic capacity in 2022 may increase to more than 75GW, which is about 75-90GW. This value is compared with the data of the National Energy Administration – the newly installed photovoltaic capacity of the country in 2021 will be about 55GW, a year-on-year increase of 36%-64%. At the same time, it is estimated that from 2022 to 2025, my country’s annual new photovoltaic installed capacity will reach 83-99GW. According to data from the Ministry of Industry and Information Technology, in 2021, my country’s photovoltaic production of polysilicon, silicon wafers, cells, and modules will reach 505,000 tons, 227GW, 198GW, and 182GW, respectively, up 27.5%, 40.6%, 46.9%, and 46.1% year-on-year. The annual export of photovoltaic products exceeded 28.4 billion US dollars.

According to the latest research report of CITIC Construction Investment, the domestic photovoltaic installed capacity in January 2022 exceeded expectations, and the new photovoltaic installed capacity in the country exceeded 7GW, a year-on-year increase of 200%. Among them, the newly installed capacity of distributed photovoltaics was 4.5GW, a year-on-year increase of 250%; the newly installed capacity of centralized photovoltaics was 2.5GW, a year-on-year increase of 150%. Upstream silicon materials, silicon wafers, downstream batteries, modules, as well as inverters and auxiliary materials, all links in the industrial chain are generally full of orders, and the operating rate does not drop but rises. This year’s traditional off-season may be “not weak”.

Writing this, we hope that the people of Ukraine can protect themselves and their families, spend this special moment safely, and return or find a peaceful home as soon as possible.


Post time: Mar-12-2022