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Industry sources say there is demand for three times as many solar panels as are currently being made. Consequently panels are over-priced and make solar electricity way too expensive. Our main hope is a sudden increase in Chinese production or imports. The US government has strategic stockpiles of silicon, but global warming is apparently not yet severe enough to justify releasing it.
The standard retail prices of panels are still up at about $400 for a typical brand name 50W panel in the US, and about $500 for the same panel in Europe. A 100W would cost about $750 in the US and about $900 in Europe. Even these prices will rise next year, because manufacturers have all sold down their inventory.
The problem is the rising demand for both computer chips and solar panels at a time when not enough silicon is being produced. The shortage of solar-grade silicon will ease in 2008, according to a report by the Prometheus Institute for Sustainable Development, but that is not soon enough.
The worldwide shipment of polycrystalline silicon in 2005 was pegged at 31,000 tonnes. Of the figure, 20,000 tonnes were used in the production of semiconductors and 9000 tonnes in solar cells. So the battle is on to wrench some silicon away form the computer industry and hand it to the solar energy industry. It s an important battle at a time when everyone is going crazy wondering about global warming.
Manufacturers like Nanosolar are hoping to deal with the temporary shortage by cutting silicon wafers more thinly and developing new technologies that require less silicon. Shell Solar has a different solution. It is banking on a variant based on copper indium di-selinide (CIS), which German firm Wuerth Solar says it will be producing 200,000 modules of by the end of the year, with prices falling to 60 cents per watt by 2015.
Red Herring (http://www.redherring.com/Article.aspx?a=19410&hed=Silicon+Shortage%3a+End+In+Sight%3f§or=Industries&subsector=Energy) quotes research firm Piper Jaffray’s estimate the total polysilicon available for the solar industry alone will grow from 13,523 metric tons this year to 30,510 metric tons in 2008 and 49,308 metric tons in 2010.
That means there will be enough silicon to allow the solar-electric industry to grow to 8 gigawatts of annual peak capacity by 2010. Larger-than-expected expansion plans by major silicon manufacturers such as REC, Wacker Chemie, and Tokuyama, are pushing the positive prognosis .
The institute also expects that thinner wafers, silicon recycling, a growing market share for thin-film technologies that use little or no silicon, and technology advances that enable modules to convert more sunlight into electricity using less silicon will help ease the shortage.
How bad is the shortage at present? Michael Rogol, managing director of Photon Consulting, told Red Herring expects a total of 2.4 gigawatts of solar equipment to be produced this year, but says the industry could sell 5-gigawatts worth if more equipment was available.
Even Sharp, the world’s No. 1 solar manufacturer, could double its sales if it had the silicon, says Ron Kenedi, head of solar operations in North and South America.
And with no significant new capacity this year, solar’s growth will stay limited through 2007, according to the Prometheus report. It is likely than 2006 and 2007 will be difficult for the PV industry, the report states.
The silicon shortage became apparent in 2005. According to Mr. Rogol, prices which had fallen as low as $9 per kilogram after the dot-com crash averaged $32 per kilogram by the end of 2004, regardless of whether the silicon was bought directly from silicon manufacturers or second-hand.
Those averages jumped to $45 per kilogram for direct purchases, and $100 per kilogram for purchases on the aftermarket, in 2005. This year, aftermarket prices are more than $150 per kilogram, compared with about $60 per kilogram for direct purchases.
And next year, Mr. Rogol expects the prices to rise to $70 and more than $200, respectively. The most profitable way to use silicon in the electronics sector is not to make a chip, but instead to resell it to solar, he says.
Projections about when the shortage will end vary widely. Mr. Rogol says even the higher-then-expected growth in silicon production isn’t enough to match the growth in demand. Supply this year, at an extreme, is up maybe 50 percent, but demand is definitely growing faster than supply, he says. Could that reverse eventually? Sure, it could happen, but not as long as grid prices keep rising and the government keeps putting strong incentives in place.
Of course, not everyone wants the shortage to end soon. Some thin-film manufacturers have benefited from increased attention and funding, for example, and would welcome a continued shortage.
B.J. Stanbery, CEO of thin-film startup HelioVolt, says he doesn’t expect the shortage to abate until 2009, and says it won’t disappear altogether until 2010 or 2012, if at all.
So opinions vary widely. With all the new silicon, many solar companies including MMA Renewable Ventures, Trina Solar, Yingli Solar, and Conergy say they expect the shortage to end in 1-3 years.
At Solar 2006, the annual meeting of the American Solar Energy Society there was much talk of the shortage . According to Flynn and Bradford, the silicon wafer industry is highly consolidated, with the following major players: Hemlock, Wacker, REC Silicon, Tokuyama, MEMC Semiconductor, Mitsubishi, and Sumitomo having about 99% of the market in 2005. Demand currently far exceeds supply, with more polysilicon being used in 2005 than was produced, with the excess being a drawdown of inventories, recycling, or an artefact of inaccuracies in the sampling method, or a combination of those factors.
PV manufacturers are scrambling to tie up contracts for their projected production, and some are failing to do so, with MEMC even reneging on an agreement with Evergreen Solar to supply them. However, the silicon processing is extremely capital intensive, with long lead times, and all the major manufacturers are announcing large planned expansions to investment, and several new players are also entering the industry. There is a long lead time between when a plant is announced, and when it come on line, so the silicon market is likely to remain out of balance, with extremely high prices and profits for silicon processers through both 2006 and 2007, assuming 30% growth in PV production.
It seems unlikely that PV manufacturers will be able to continue to make up the polysilicon shortfall in 2006 and 2007 from inventory (although no one seems to know what inventories are, except that they’re small, hence supply of PV growth will be constrained below 30%.
We expect all polysilicon manufacturers to be very profitable through 2007, with prices beginning to subside (and perhaps crash) in 2008-9. A crash of polysilicon prices would be facilitated by overbuilding of producers, combined with less than anticipated demand from PV manufacturers. This might be aggravated if one of the other PV technologies (CIGS, CdTe, or Amorphous silicon) were to grab market share from crystaline silicon due to price breaktroughs and constraint in the supply for polysilicon. Both CIGS and CdTe have the potential to be cost competitive with crystalline silicon say Booz Allen Hamilton, but will probably be constrained by the limited supply of Indium (CIGS) and Tellurium (CdTe) both of which are very rare. As an aside, this might produce a large opportunity for investment in mining companies with large proven reserves of Tellurium or Indium if one of these technolgies make much more rapid strides than crystalline PV.
There are two technologies in use by polysilicon manufacturers. The most common is the Siemens process on which the majority of production facilities are based. This process is extremely energy intensive, about 10x more so than the other technology, fluidized bed, which is currently used by MEMC and REC Silicon plans to use in it’s new capacity. Most other manufacturers seem to be sticking with the Siemens process, most likely due to patent issues. For this reason, my favorite silicon manufacturer is MEMC, since their less expensive process is likely to make them better able to weather a crash in the price of processed silicon in 2008 or 2009. In the next year or two, I think most players in the industry will probably continue to benefit in terms of profits, although much of this may already be reflected in their stock prices.
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