Solar Costs Can Only Go Down

November 11th, 2011 by Zachary Shahan

Solar costs have fallen rapidly in recent years, as I’ve mentioned more times than I can count. And it seems they can only continue going down. Why? Because there’s a tremendous supply glut of polysilicon, a key ingredient for most solar panels (accounting for about 25% of their final cost). The price of polysilicon has dropped 93% in the past 3 years (from $475/kilogram to $33/kilogram).

The supply glut is the result of the top 5 polysilicon producers nearly doubling their output. And, the trend is continuing. In 2011, they produced 20% more polysilicon than was demanded. In 2012, they are expected to produce 28% more than demand.

“Polysilicon is a grossly, grossly, grossly oversupplied commodity product,” said Paul Leming, director of research at Ticonderoga Securities in New York. “We’re staring at years of stability where polysilicon pricing sits at something approaching cost of production and doesn’t move.”

The solar photovoltaic industry accounts for about 90% of polysilicon demand, while most computer chips also require it.

For the solar industry, this means that prices all through the supply chain have dropped and several solar companies are going bust or on the verge of going bust. (For computer chips, it doesn’t have as much impact, as it only account for about 5% of their cost.)

“Two-thirds of the existing 66 polysilicon producers could fall victim to the shakeout that has just started,” analysts at Macquarie Group Ltd. wrote this week. “The total number of Chinese polysilicon producers could fall to as little as four over the next three years, down from 35 known to us today.”

The projection by some analysts is that the price will drop a bit further (to $20 or $25 per kilogram) and then will stabilize there after a “shake-out” in the supply industry. They will then hold stable for a couple years.

The main cause of the glut: a fast increase in demand for solar panels due to helpful governmental policies, followed by a relatively quick drop in demand as those policies were cut and other countries didn’t follow suit. With factories already being built or expanded to supply a lot more polysilicon, the supply continues to rise while demand isn’t keeping up.

Source: Bloomberg
Photo: PNNL – Pacific Northwest National Laboratory

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Tags: polysilicon, polysilicon costs, polysilicon glut, solar cell costs, Solar Costs, solar energy industry, solar industry, solar photovoltaics

About the Author

Zachary Shahan spends most of his time here on CleanTechnica as the director/chief editor. Otherwise, he's probably enthusiastically fulfilling his duties as the director/editor of Solar Love, EV Obsession, Planetsave, or Bikocity. Zach is recognized globally as a solar energy, electric car, and wind energy expert. If you would like him to speak at a related conference or event, connect with him via social media. You can connect with Zach on any popular social networking site you like. Links to all of his main social media profiles are on ZacharyShahan.com.

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Anonymous

Polysilicon is going to be taking a further trip into bargain-land with a new technology breakthrough.

“A game-changing Optical Cavity Furnace developed by the U.S. Department of Energy’s National Renewable Energy Laboratory uses optics to heat and purify solar cells at unmatched precision while sharply boosting the cells’ efficiency.

The Optical Cavity Furnace (OCF) combines the assets that photonics can bring to the process with tightly controlled engineering to maximize efficiency while minimizing heating and cooling costs.”

“At about a quarter to half the cost of a standard thermal furnace, the OCF is poised to boost the solar cell manufacturing industry in the United States by helping produce solar cells with higher quality and efficiency at a fraction of the cost.

The furnace’s process times also are significantly shorter than conventional furnaces. The Optical Cavity Furnace takes only a few minutes to process a solar wafer.”

Quicker through-feed spreads factory/equipment/labor costs over more panels. Faster processing means a lot less energy used to process the silicon.

It is expected that the OCF will boost PV efficiency from 16% to 20% while at the same time significantly cutting processing cost. That will result in a 25% cut in panel glass/aluminum, rack, labor and real estate cost.

http://www.nrel.gov/news/features/feature_detail.cfm/feature_id=1629

If the NREL has this right, it’s a major breakthrough. This alone will take solar down to the price of coal, and possibly below.
- mds
  
  Thanks Bob and regards. Had not seen anything on the NREL’s OCF. Guess I should prowl NREL releases. Record low cost for purified silicon AND record low cost for wafer processing if OCF delivers on promise. Truly remarkable.
  - Anonymous
    
    I realized after I wrote my comment that the OCF isn’t going to be producing cheaper processed silicon, but turning that silicon into more efficient wafers and at considerable cost savings.
    
    The end result is the same. The decline in panel price will be accelerated.
    It feels like we may see PV break the $0.10/kWh soon.