Norwegian Renewable Energy Corp. said this week that the expected cost of its polysilicon plant in Moses Lake, Wash., has shot up nearly 20 percent from the $660 million previously expected.
The "mechanical completion" of the plant also will be delayed by approximately two months, with commercial production scheduled to begin at the end of this year, according to REC Silicon – a branch of REC -- and its contractor for the project, Fluor Corp. REC blamed the setbacks on tight market conditions that "have pushed the world's equipment vendor and fabrication show capacity to the limit" and delayed equipment deliveries.
"Such delays impact both detailed engineering and construction and thus the entire project schedule and the project cost," REC said ina press release. "Furthermore, additional costs have been included to mitigate the potential effects of further delays in completion."
REC began working on the Washington polysilicon project in 2005, and decided in 2006 to invest in a plant with the capacity to produce up to 6,500 metric tons of granular polysilicon and 9,000 tons of silane gas. Both REC and Fluor have strengthened their project management and say the project will now cost "close to $800 million."
Delays and cost overruns have been rampant as the solar industry scrambles to increase its production of solar-grade silicon during a worldwide shortage. Some analysts have projected that the shortage could flip into an oversupply as early as this year (see Perspectives: Too Much PV in 2008?).
In the meantime, supplies of materials to build these plants have been scarce and delays have become the norm (see Silicon Setback and AE Polysilicon to Start Construction). Skyrocketing labor and steel costs in particular have affected construction of all kinds for the past few years. Yet many companies don't seem to be scheduling extra time in their expectations for late deliveries.
Take LDK Solar, for example, which announced it was building its first polysilicon plant in November and expects the plant to be up and running this year (see LDK Shores Itself with New Silicon Supply).
Investors said last month that they believe the plant is on track (see LDK Investors Say They're Satisfied). And Fluor said the plant is two weeks ahead of schedule and uses a "cut and dry" approach, while the REC plant will include proprietary technology.
At the Clean-Tech Investor Summit in Palm Springs, Calif., on Thursday, Ron Pernick, a principal at research firm Clean Edge, said REC's delay is not surprising.
"I don't see the two-month delay as a very big thing," he said. "These plants take a long time to bring up and running. In terms of pricing, every industry right now is facing rising costs for fuel, for concrete, for steel and [for] any of the basic infrastructure that would go into a facility."
Earlier at the event, according to Pernick, Jeff Sterba, CEO of energy holding company PNM Resources (NYSE: PNM), said that prices for basic utility commodities have gone up anywhere from 30 to 300 percent in the last few years.
"All industries are facing that," Pernick said, "and that will impact pricing from the original projection to what the end cost might be."
-- Rachel Barron contributed to this story.