Solar Prices Set to Rise in 2026: Understanding the Factors
As the deadline approaches for a significant price increase in solar panel costs, social media platforms like LinkedIn are inundated with urgent messages urging consumers to “buy solar now! Before the 9% price hike in April!” However, it’s essential not to be swayed by the hyped marketing tactics that prey on fears of missing out.
While it’s true that solar module prices in Australia are projected to rise—potentially surpassing the 9% figure—this shift is not predominantly due to the well-publicised tax rebate changes in China, despite what the algorithms suggest. These marketing posts have exploited the announcement that China’s VAT rebate on solar panels will cease from April, a move that was anticipated well in advance.
Impact of China’s VAT Rebate Decision
The 9% VAT change caught the solar sector off guard, but it is not expected to be the leading cause of cost increases for Australian solar panels in the upcoming year. Aiko’s country director, Thomas Bywater, highlighted that the forecasted rise will be within the range of 2 to 4 cents per watt during the second half of the year.
Factors such as soaring prices of silver, aluminium, and even glass, along with China’s recent control over polysilicon prices and currency fluctuations, are anticipated to play a more significant role in determining what Australians will have to pay for solar panels as the year progresses. Bywater stated, “The VAT announcement shocked everyone. It was initially thought to be a 3% adjustment, but it ended up being a 9% change.”
Government Strategies and Market Dynamics
In June of last year, there were discussions in China about completely removing the VAT rebate, with the intention later shifting to reducing it by 3%. However, as the government recognised that the industry might bear the extra costs against their intentions of not supporting unprofitable manufacturers, they reverted to the original VAT plan, resulting in higher prices for consumers.
Bywater expressed that the government’s current stance suggests a reluctance to support struggling solar companies anymore. Historically, there’s been an assumption that the government would provide backing, leading to a mentality of selling at any price, but that tide is turning.
Moreover, as highlighted by Huon Hoogesteger, managing director of Smart Commercial Solar, the VAT rebate removal specifically affects the photovoltaic portion of solar systems—accounting for roughly 20-25% of the overall cost. Thus, the actual price surge is limited to this 20%, making the real impact less than anticipated.
Understanding the Real Cost Increases
To illustrate, if Hoogesteger procures panels priced at 17 cents per watt, the 9% rise would only bump that to 18.5 cents per watt—representing a minimal increase of 1.5 cents on a system costing $1 per watt. Hoogesteger expressed scepticism about the exaggerated claims of impending doom for the industry, asserting that such alarmist rhetoric detracts from the message that solar remains the cheapest energy source available.
Conversely, the tangible increases in costs due to spikes in silver, polysilicon, and aluminium prices cannot be dismissed. The Chinese government has asserted control over the polysilicon sector, leading to increased scarcity of this vital material, causing prices to escalate. Bywater noted, “China has managed polysilicon pricing deliberately, resulting in market scarcity.”
Recent figures show polysilicon prices plummeted from RMB 37,000 per tonne to just over RMB 10,000, before rising sharply to RMB 60,000 earlier this year—an unsettling trend for the industry. Additionally, a surge in silver prices, which have risen over 200% in Australian dollars in recent months, is projected to raise costs further, potentially adding 2 cents per watt due to its significance in photovoltaic cells.
Overall Price Expectations and Market Conditions
Bywater anticipates an overall price hike of 10-15% for solar panels in late 2023, equating to an increase of 2-4 cents per watt. He recommends that those considering solar installations should proceed sooner rather than later.
Currently, solar installers in Australia have been operating at cost price for quite some time, as the sector transitions from PERC technology to TOPCon panels. This transition has led to an overabundance of both old and new-generation solar panels flooding the market.
The VAT removal by China aimed to curb this surplus. This overproduction is not solely due to competition within China but is also influenced by commitments made by Western nations during the COP 2023 to ramp up solar installations.
As Egan, co-founder of Solar Analytics, pointed out, “China has established the necessary supply chains to meet ambitious goals of tripling renewable installations by 2030. Yet, the market has not expanded correspondingly, with Australia stagnating at 4-5 gigawatts of solar capacity annually.”
While countries like India and Pakistan, which have newly emerged as substantial players in solar demand, are currently thriving in solar purchases, Egan argues that Western nations must offer more support to bolster the global solar market.
