Polysilicon Solar Cheapest Over Next 2 Years, Say Analysts

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The global supply of polysilicon is hurtling towards 500,000 tons by 2014, almost doubling today’s supply within 2 years, from 266,000 tons this year, analysts at Macquarie Group Ltd have told Bloomberg News. The ricochet in solar prices as demand and supply have in turn pushed and pulled at the solar PV market have created a dizzying seesaw over the last few years. Currently polysilicon prices are in a sheer drop, and taking out solar companies, not just in the US – like Evergreen and Solyndra were – but around the world.

Even Chinese manufacturers are hurting. About 90 percent of China’s polysilicon plants may suspend production because of the price slump, Xie Chen, an analyst at the China Nonferrous Metals Industrial Association, which acts as a conduit between industry and government, told Bloomberg.

The price drop hits smaller producers hardest, but with the enticement of the potential profit margins over 40%, these dizzying lurches between supply and demand are not going to ease up soon either.

The initial squeeze and resulting lurch into glut began in 2004, when European nations such as Spain first began introducing subsidies for clean energy to meet the Kyoto Accord climate regulations about to go into effect in 2005, requiring clean energy from sources like solar and wind. Spain offered an initially overly generous Feed in Tariff, that fed the development of a record supply of solar power for the country, in the process catapulting the Spanish energy firms such as Abengoa to solar world leader status.

From $30 in 2003 before the renewable policies, prices soared to $475 in 2008, as demand far overshot supply. Then as pentup demand finally pushed new supplies on-stream, prices dropped again. By 2009, solar companies were looking at a glut again, and currently prices are back down below the $30 a kilogram mark that preceded the first run on polysilicon to supply the European solar sector awakened by the Kyoto Accord.

Before the serious introduction of solar power in 2004 in Europe, polysilicon was only used for computer chips, in much smaller amounts. Although the Carter administration developed the first solar in the US, it languished as soon as the next administration dumped the subsidies, bankrupting the world’s first utility-scale solar company in the 1980s. The demise of Luz reduced the incentive for any new private solar investment, although the solar farm it built was bought out and has been supplying the California grid for 30 years.

(Related: Luz Rises Again as BrightSource)

Then, due to the 2009 Recovery Act under the Obama administration, with its $30 billion in renewable incentives (such as the $1/2 billion government guarantee of some of the private loans that Solyndra got from silicon valley VCs) now it is US demand that has shot up to EU levels.  The resulting surge in US solar development squeezed supply pressures again, and now a second glut promises to keep polysilicon prices at this level at least until 2014.

With so much supply coming on-stream, polysilicon prices will fall back into the $25 range within three weeks and will likely remain near that level for at least two years, analysts at Ticonderoga told Bloomberg. That is back below where they were when only computer chips needed polysilicon, in 2003.


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