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Solar Costs Can Only Go Down

solar cell costs going down

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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Written By

Zach is tryin' to help society help itself one word at a time. He spends most of his time here on CleanTechnica as its director, chief editor, and CEO. Zach is recognized globally as an electric vehicle, solar energy, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, Canada, and Curaçao. Zach has long-term investments in Tesla [TSLA], NIO [NIO], Xpeng [XPEV], Ford [F], ChargePoint [CHPT], Amazon [AMZN], Piedmont Lithium [PLL], Lithium Americas [LAC], Albemarle Corporation [ALB], Nouveau Monde Graphite [NMGRF], Talon Metals [TLOFF], Arclight Clean Transition Corp [ACTC], and Starbucks [SBUX]. But he does not offer (explicitly or implicitly) investment advice of any sort.

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