What to do if photovoltaic energy storage components have increased in price?
Don’t rush to accept it or change suppliers.
A systematic approach using six steps is needed: “Verify authenticity → Negotiation leverage → Contract price adjustment clauses → Diversification → Inventory hedging → Shared responsibility throughout the entire lifecycle.”
First, clarify the “value” of the price increase: Verify authenticity
- Price increase notices are not always genuine: Require suppliers to provide a written breakdown of costs (raw materials/labor/energy/freight/factory), and provide the baseline from the previous period and the changes in the current period. Many price increases are just tests, and suppliers will back down when questioned (Source: Liquid Capital/Trade Entrust).
Cross-check with publicly available indices: For lithium carbonate, look at SMM/Guangzhou Futures Exchange LC2609; for metals, look at Shanghai copper/silver/tin; for components, look at IGBT/memory spot market prices. If the price increase significantly deviates from the index, there is room for price reduction.
Note structural price increases: Battery cells account for about 60% of system costs, and lithium carbonate accounts for about 40% of LFP batteries. For every 10,000 yuan/ton increase in lithium price, battery costs increase by 0.006-0.008 yuan/Wh. This can be used to calculate the reasonable upper limit of the price increase.
Distinguish the sources of price increases: Cost-push (metals/components), Policy-passed (2% consumption tax, reduced export tax rebates), and Price Repair (PCS profit supplementation). Different sources require different responses.
Clarify payment terms and prepayments: Upstream suppliers are generally tightening payment terms, increasing prepayment ratios, and even adding performance bonds. Payment terms themselves are also a bargaining chip.
II. Negotiation Combinations: Leveraging to Negotiate Price Increases
- Increase Deposit/Accelerate Payment: Raising the deposit from 30% to 50% can result in a 3-5% price reduction; cash/payment upon presentation of bill of lading in exchange for discounts is valuable for supplier cash flow (Source: Trade Entrust).
- Extend Commitment for Price Exchange: Signing framework agreements/annual long-term contracts and committing to longer procurement cycles gives suppliers room for volume-price linkage; locking in prices for 12 months can protect budgets.
- Standardization and Specification Reduction: Cutting unnecessary customized features/decorations and increasing volume with generic parts offsets part of the price increase.
- Compare Prices from 2-3 Suppliers: Negotiate with competitors offering the same specifications; with China’s PMI around 49 (contracting) and factories thirsting for production, the buyer’s leverage appears greater than the price increase letter suggests (Source: Trade Entrust).
- Negotiation Beyond Unit Price: Negotiate freight, rebates, payment terms, warranty, and delivery time together, exerting comprehensive pressure on cost ownership.
III. Contract and Pricing Mechanisms: Incorporating Price Fluctuations into Terms
- Indexed Price Adjustment Clauses: Prices are tied to publicly available indices (SMM for lithium carbonate, Shanghai copper, BLS PPI, etc.), with annual caps and floor levels, and two-way linkage—prices also decrease when the index falls, avoiding only one-way price increases (Source: QuickBooks).
- Lithium Price Linkage is Now Mainstream: Based on SMM battery-grade lithium carbonate, prices are adjusted only when fluctuations exceed ±5% or ±8%;
new long-term contracts are 70% linked to LC2609 futures and 30% linked to SMM, with floor/cap prices set. - Open Contracts and Price Adjustment: Drawing on the price adjustment mechanism for main building materials in EPC projects, prices are adjusted when exceeding thresholds;
central state-owned enterprises are piloting a “benchmark price + reasonable downward adjustment” in energy storage bidding, with separate bidding for large battery cells and simultaneous adjustments for lithium price fluctuations exceeding 15% (Source: People’s Daily).
Bill and Hold Price Lock-in: Purchase goods at today’s price, with the supplier handling the shipment in batches, locking in low COGS without warehousing pressure; agreeing on the attribution of damage risk and fixed delivery dates.
The contract should clearly state the validity period, price adjustment trigger, written notification period (at least 60-90 days), and approval process, eliminating verbal confirmations (Source: sed.energy).
IV. Diversification and Domestic Substitution
Dual-Source 70/30 Allocation: The primary supplier takes 70% to maintain the price tier, and the alternative takes 30% to maintain certification, preventing price increases at a single point and providing a real fallback option for “switching suppliers” (Source: Liquid Capital).
Alternative supplier qualification certification usually takes more than 90 days; don’t wait for the price increase letter to start, prepare a second supplier now.
Domestic substitution: IGBT self-packaged ratio reaches 64.3%, main control MCU domestic production rate reaches 78.5%, AFE domestic production rate reaches 52.1%, mature devices are prioritized for domestic production; high-end SiC chips retain imports through long-term contracts with locked-in prices.
Material substitution to reduce silver/copper: Silver-coated copper paste (containing 20%-30% silver) and high-copper paste can reduce silver consumption; aluminum-for-copper solder strips reduce costs by 30%, and silver-free technology reduces silver consumption by 50% (Source: Shanghai Securities News).
Use public channels to let suppliers know you are comparing prices; mentioning seeing competitors’ lower prices when renewing orders can help them curb price increases.
V. Inventory, Hedging, and Supply Chain Management
Price warning mechanism: A daily price increase >5% triggers restocking; a daily price decrease >5% reduces inventory; safety stock is increased from 7 days to 30 days to cope with fluctuations (Source: Sina Finance).
Futures Hedging: Leading companies hedge 30%-50% of their purchases using a combination of futures and options, with advance payments locking in supply for 3-6 months. Small and medium-sized enterprises can engage in industry-wide joint hedging, controlling the proportion at 20%-30% to prevent speculation.
Locking in Supply and Avoiding High Prices: Maintain inventory at around 20 days’ worth, never hoarding at inflated prices, using long-term contracts to guarantee a floor price, ensuring protection against price drops and preventing panic during price increases (Source: 36Kr).
Inventory Classification Management: Strategically stockpile key scarce materials (large-capacity cells, IGBT/SiC), while allowing suppliers to replenish general materials as needed via VMI.
Supply Chain Review: Prevent delayed delivery, reduced configurations, and failure to fulfill warranty obligations; pay attention to delivery risks under conditions of “orders booked until the end of 2026” and “chip shortages.”
VI. Customer Shared Costs and Full Lifecycle
- Price increases vary depending on the customer: small customers see a one-time price increase, strategic customers continue negotiations, and costs are likely to be shared by both parties;
signed orders generally do not require retroactive price adjustments. - Transparent communication with customers: Provide supplier price adjustment letters, index data, and cost breakdowns;
use written change orders to maintain audit trails;
avoid verbal price negotiations (Source: sed.energy). - Provide alternative options: Change brand, change capacity, phased delivery, postpone procurement, protecting both projects and profits.
- From static price comparison to LCOS and stress testing: Conduct multi-scenario stress tests on raw materials, taxes, electricity prices, utilization rates, capacity degradation, and financing costs; phased procurement + staged price locking (Source: People’s Daily).
- Price increases in 2026 are due to multiple long-term variables: lithium carbonate up by over 200%, non-ferrous metals by 30%-200%, components by 50%-800%, adjustments to consumption tax and export tax rebates, and AI crowding out wafer capacity; this is not a short-term disturbance (Source: Economic Observer/People’s Daily).
The industry enters a “price correction” phase: shifting from low-price competition of “losing money to gain market share” to competition based on quality, fulfillment, and full lifecycle value (Source: People’s Daily).
The pricing mechanism has been completely restructured: fixed-price contracts are no longer effective; price linkage, open contracts, indexed price adjustments, and risk-sharing have become industry standards.
Leading integrators lock in cost-effectiveness through long-term contracts and large-scale procurement, while small and medium-sized manufacturers face pressure in the competition for supplies due to the scarcity of certain chips, leading to a rapid increase in industry concentration. For buyers, rising component prices are not the problem; the problem is passively accepting them.
A combination of measures—verification, negotiation, contracts, diversification, hedging, and risk-sharing—can transform price increases from a cost shock into an opportunity for negotiation and supply chain upgrades.
Project evaluation should no longer be limited to initial prices: it should comprehensively consider quality, safety, lifecycle efficiency, capacity retention, operation and maintenance, and contractual responsibility. This is the “corrective” value brought about by this round of price increases.
VII. Procurement Recommendations
Price increase notice ≠ final transaction price: first, obtain written details, compare indices, and check if the contract contains price adjustment clauses before deciding whether to negotiate, negotiate, lock in, or switch.
Use a combination of leverage in negotiations instead of just pressuring the unit price: deposits, payment terms, quantity commitments, long-term framework agreements, standardization, and comparing prices from 2-3 suppliers together can often cut off a large portion of the price increase.
Write price fluctuations into the contract: indexed price adjustments + capped and guaranteed prices + two-way linkage + written notification period; all long-term procurements should include adjustment clauses.
Diversification and domestic substitution for desensitization: 70/30 dual-source for key materials, localization of mature components, and material substitution such as silver reduction/aluminum replacing copper, reducing reliance on a single supplier.
From unit price thinking to LCOS/full lifecycle thinking: Batch procurement, phased price locking, stress testing, using stable supply and quality fulfillment to gain long-term cost advantages.
