The rising costs of raw materials weigh on the RES sector

Ten post dostępny jest także w języku: polski

The high prices of building materials and raw materials caused by the pandemic have an impact on the financial condition of companies involved in the construction of wind and solar farms. From early 2020 to mid-2021, copper prices went up by 50% and steel rebar prices doubled. The prices of fuels, cement and salaries for professionals have also increased.

The increase in prices visible in the entire construction sector is also visible in the wind farm sector, according to Bartosz Sobolewski, head of CJR Renewables for Central and Eastern Europe. He also adds that the chances of a drop in prices in the upcoming quarters are slim. Nevertheless, investors still express their willingness to start and continue projects.

It is not only the increase in raw material costs that is a problem for the sector. Due to the increased demand on a global scale, the prices of transport, especially sea transport, are also rising. The pandemic disrupted the supply chain, especially from modules from Asia, which meant that some of them had to be shifted from sea to rail.

Increased demand is also a problem in Poland – thanks to the rapid acceleration of the energy transformation, the demand for design services, construction works and supplies is increasing, which is accompanied by further difficulties.

Unpredictable conditions

At the same time, the continued increase in the prices of raw materials such as steel, copper and aluminum may adversely affect the financial condition of the contractor, and thus – the success of the entire project. These changes are difficult to predict, so it is important to discuss the valuation of contacts with the client beforehand.

Contracts in the RES sector are implemented mainly for private investors who expect a flat-rate contract price throughout its duration, and often approach auctions with an investment budget. The case is different, however, in the case of public tenders announced since 2021, when this public procurement law entered into force. It provides for obligatory indexation for orders longer than 12 months.

For projects from RES auctions, the deadline was extended by 12 months, taking into account the effects of the pandemic. This market attracts more and more attention, which in effect, will bring more and more general contractors.