Solar power has been the next big thing in energy for as long as most
people have been alive. But it was always too expensive to be anything more
than a niche technology, attractive more for its coolness than its
efficiency. That has changed, in a big way.
According to a report by Deutsch
Bank, generating electricity from sunlight is now as cheap as getting it
from coal in most US states when current subsidies are included. Extrapolate
the inexorably-falling cost of solar just a few more years, and the subsidies
won't be necessary.
At that point the floodgates will open, with every homeowner in the US
sunbelt and pretty much every other warm part of the world slapping solar
panels on their rooftops and happily watching their meters run backwards.
According to a new report by the International
Energy Administration, between now and 2050 solar's share of global
electricity production will rise from the current 1% to 27%, making it
humanity's single largest power source.
That's great news for climate change, air quality and West Virginia (where
they won't have to blow the tops off of so many mountains to get coal). But
the point for silver? Well, every traditional silicon solar panel uses a bit
of silver paste to conduct electricity out of its constituent solar cells.
And among the other cost cutting measures solar panel makers have been
pursuing lately is a reduction in the amount of silver they use. Some
alternatives have been found, but none are worth the trouble at current low
silver prices. And presumably further research has become less urgent
relative to immediate challenges like raising efficiency and lowering
installation costs.
So silver is unlikely to be supplanted in this generation of solar panels,
which means demand from the solar industry is going to soar along with panel
installations. Here's how a recent Forbes Magazine article does the math:
Approximately 20 grams of silver are used in each crystalline silicon
solar panel, which accounts for around 85% of the total market. Roughly 80
metric tons of silver or approximately 2.8 million ounces of silver are
needed to generate approximately 1 Gigawatt of solar power.
Growth in Installed Solar PV Capacity
Globally, installed solar capacity stood at 139 GW at the end of 2013.
Installed solar capacity has risen exponentially from a paltry 1.3 GW in
2000. Most of this growth in installed capacity in the past has come from
Europe, particularly Germany, with favorable government policies facilitating
the incorporation of a greater share of renewable energy into the country's
energy mix. Europe accounted for around 75% of global installed solar PV
capacity in 2010. However, the pace of new installed capacity in Europe is
expected slow down due to a reduction in incentives for PV installations in
some major markets, such as Germany.
The growth in installed solar PV capacity will be driven by China in the
years to come. China is making a concerted effort to reduce its dependence on
coal as a source of energy. The country is targeting 70 GW in installed solar
capacity by 2017, as compared to 18.6 GW in 2013. Thus, China's thrust on
solar energy will provide the impetus for growth in solar PV capacity
additions.
As per European Photovoltaic Industry Association estimates, by 2018,
cumulative installed PV capacity will grow to 430 GW in an optimistic
scenario and 321 GW in a pessimistic scenario. The incremental PV capacity
addition in 2018 is expected to be 69 GW in the optimistic scenario and 39 GW
in the pessimistic scenario. If we consider an intermediate scenario where
installed capacity grows to about 375 GW by 2018, it represents a compounded
annual growth rate of about 22% from the 139 GW in installed solar capacity
in 2013. This will correspond to roughly 54 GW in incremental solar PV
capacity addition in 2018.
Silver Demand from PV industry
If we assume that over the next five years, crystalline solar silicon
panels will continue to account for roughly 85% of the market, then these
will account for approximately 38 GW in installed capacity in 2014 and around
46 GW in installed capacity in 2018.
Taking into account that roughly 2.8 million ounces of silver are required
to generate 1 GW of solar power, the demand for silver translates into
roughly 106 million ounces and 151 million ounces in 2014 and 2018
respectively. To put this into perspective, global silver mine production is
expected to be roughly 800 million ounces and 750 million ounces in 2014 and
2018 respectively. Mine production accounted for roughly 75% of silver supply
in 2012. If we assume that this ratio holds till 2018, overall silver supply
will stand at roughly 1.07 billion ounces and 1 billion ounces in 2014 and
2018 respectively. Assuming a balanced market in which supply matches demand,
the demand for silver from the solar PV industry will rise from 10% of the
total demand for silver in 2014 to around 15% in 2018.
And even this might understate the case. The above formula assumes
declining mine supply, but -- another effect of the recent silver price smash
to below current mining costs -- the falloff might actually be far steeper.
From mining analyst Andy Hoffman:
And now, for the main event - and perhaps, the denouement
of the most vicious paper precious metals raids since 2008. Gold and silver
prices are now so far below their actual costs of production, both cash and
sustaining, that my recent estimate of a 25%+ drop in global PM production is
likely far more imminent than inevitable.
Combine soaring solar demand with falling mine output and it's possible
that solar panels will consume 20% of available silver in 2018 (again, up
from virtually zero a decade ago) and that this trend won't begin to flatten
until a much higher silver price boosts production and scales back solar
demand.
