FOCUS: Solar Energy Production To Grow, But Challenges Ahead

[Ardent Listener]

21 March 2012, 2:00 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/

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(Kitco News) - Solar energy production grew sharply in 2011, but the outlook for this industry is only partly sunny.

A reduction in government subsides, a sluggish global economy, a shaky manufacturing base, energy prices and high silver costs may curtail some of the development of this renewable energy source.

The global solar industry struggled for most of 2011. However, growth picked up substantially in the fourth quarter, allowing the industry to record a 50% increase in photovoltaic cell installations over 2010, to reach about 27 gigawatts, said Shayle Kann, managing director of GTM Research, a market analysis company. A gigawatt is 1,000 megawatts.

Photovoltaic cells are how sunlight is converted into electricity and silver is used in the bulk of the solar cell installations, accounting for 7% of silver’s industrial demand.

Much of that growth came from a flurry of activity in the U.S. The Solar Energy Industries Association, along with GTM Research, estimated in their fourth quarter “U.S. Solar Market Insight” report that photovoltaic cell installations grew to 1.855 gigawatts in 2011, a 109% rise over 2010. The report was released last week.

The outlook for growth in the U.S. and China for 2012 is bright; Kann said it’s expected the U.S. market could increase by 60% over last year’s levels and China could double its solar panel installations. Yet with clouds forming over Europe regarding renewable energy installations, it’s possible a shrinking European market will offset any growth in the U.S. and China. That could mean a flat rate growth for the solar industry in 2012, he said.

“The European debt situation is the biggest concern. The EU is the primary risk factor as their ability to finance has been hit,” Kann said.

The outlook for the solar market is vital for silver as this area was one of the fastest-growing areas of demand. Barclays Capital said over the past 10 years, sector consumption has risen to 1,820 metric tons last year from 50 tons in 2001.

Erica Rannestad, commodities analyst with CPM Group, said the consultancy estimated about 48 million ounces was used in solar in 2011.

EUROPE A LEADER IN SOLAR INSTALLATIONS

Germany and Italy are the top two countries globally for photovoltaic installations, driven by subsidies to encourage renewable energy, and Europe makes up about 68% of the world demand, according to NPD Solarbuzz, a market research firm.

GFMS, in a study done for the Silver Institute, said about 50 countries used “feed-in tariff” programs, which guarantee photovoltaic energy providers fixed, wholesale prices for a certain number of years. Utilities then need to buy this energy at higher prices than conventionally generated electricity.

Germany was a big proponent of this type of subsidy, but Kann said the country is in the process of renegotiating and restructuring these tariffs and that will likely impact the solar industry.

Germany, though, said it will continue to support the solar industry, with media reports earlier in March saying the DIHK national industry and trade chambers forecasts 8 gigawatts of installations this year, at a subsidy cost of 20 billion euros (USD26 billion).

A lot of the year-end increase in installations globally was an effort by installers to take advantage of expiring subsidies or subsidies likely to be reduced in many countries, including in Germany and the U.S. The U.S. also saw an increase in solar panels devoted to feeding the utility sector as part of renewable portfolio standards, installations that were delayed following the 2008 credit crisis.

LOOKING TO US, CHINA

Hopes are that the areas of significant growth in the solar industry will come from the U.S. and China. Solarbuzz noted that China and the U.S. are numbers three and four in the countries that use solar. However, Kann pointed out the growth in these two countries comes from a small base.

Solar energy only makes up a fraction of current U.S. energy supply. In 2009, the latest data available from the U.S. Energy Information Administration, the statistical arm of the U.S. Department of Energy, showed that renewable energy was 8% of the consumption in the nation’s energy supply. Of that total, solar only made up 1%.

When looking specifically at net electricity generation from all renewable energy, solar remains one of the smallest. In its 2009 Renewable Energy Annual, the DOE said total was 417.7 trillion kilowatt hours, with the bulk coming from conventional hydroelectric sources – 273.4 trillion kilowatt hours. Solar made up 891 million kilowatt hours.

SILVER STILL KEY TO SOLAR, BUT FOR HOW LONG?

Silver is a key component in thick-film solar panels, known as crystalline silicon panels, which represent about 90% of the industry, said Shyam Mehta, senior solar analyst, GTM Research. Because silver can conduct electricity superbly and doesn’t oxidize, it is the preferred conduit.

Barclays Capital said it forecasts silver usage in photovoltaic cells to grow by 4% year-over-year in 2012, from 1,800 tons in 2011, which is its baseline scenario. That baseline represents a significant slowdown for installations versus previous years because of the reduction of subsidies and a sluggish economy.

Mehta said the outlook for solar is “for moderate, but steady growth” with forecasts for global demand to reach 55 gigawatts by 2016 from the 27 gigawatts in 2011. “The last four years have been five-times growth and we’re expecting only two-times growth,” he said.

Silver is applied as a paste on cells, with most on the front, but sometimes on the back, too. How much depends on the manufacturer, Mehta said, but he uses a figure of 0.28 gram of silver content in a solar panel used on the front. Barclays uses a much smaller 0.105 gram per panel estimate. CPM Group’s Rannestad said another common measurement is that panels use about 2,000 ounces per megawatt.

Last year’s parabolic rise in silver prices to near $50 an ounce shocked the solar industry and compounded economic problems in an industry that was already being hurt by tepid demand and overproduction of cells, Mehta said. Excess supply caused panel prices to fall in almost half, which hit all manufacturers. Silver’s price hike was “the last thing manufacturers wanted,” he said.

The manufacturing industry is still suffering from last year’s problems. That’s led to some soul-searching in the industry about how to get around using so much silver. There’s a move to greater efficiency, he said. DuPont, a major manufacturer of silver paste for solar cells, said in September it reduced its need for the metal by 15%.

There is some research into using copper, Mehta said, but it’s subject to oxidation. Barclays said several companies are looking to try and work base metals like copper into solar cell designs. Silver has been holding above $30 an ounce, but copper and nickel prices per ounce are closer to 28 cents and 59 cents, respectively, Barclays said.

There is some talk about thin film panels becoming more predominant because they generally don’t use silver, and Rannestad said that could be a challenge for the silver industry.

Mehta, though, said thin-film panels are less efficient than the traditional thick-film and when taking that into consideration, the price difference between the two outweighs switching. “Any solution has to have a cost-benefit analysis done. You don’t know what the price of silver is going to be in three years, so you’re taking a chance on a new solution,” he said.

UNABLE TO NEGOTIATE

Unlike with other commodities, silver-paste manufacturers had little bargaining power when prices rose so they had to pass on the costs, he said.

Right now the most expensive input for solar is silicon. Silicon must be hyper pure for use in solar cells and the solar industry is the main user of what’s called poly silicon. When the solar industry had problems, average prices fell. In 2009 the average price was $140 a kilogram and fell to $50 a kilogram in 2011. Prices have kept falling and are now around $35, which equals about 36 cents a watt, he said. GTM’s Kann said that’s about 20% to 25% of a panel’s cost.

During 2011, all-in panel prices fell from about $1.85 a watt to about a $1 a watt, Kann said, adding that all-in panel and installation costs are still around $3 a watt.

Yet silver prices per watt rose 3-4 cents a watt to about 7 cents during this time, Mehta said. The worry is that by 2016, he projects poly silicon prices to be 8 cents a watt and silver prices will remain about 6-7 cents a watt.

Mehta is forecasting continuing rises in silver prices from the current $1,215 a kilogram to $1,815 a kilogram by 2016. One kilogram equals 32.15 troy ounces, so the current price in the solar industry would be nearly $38 an ounce and rising to more than $56 an ounce.

Barclays said even if prices fall back to their forecast of $21 an ounce by 2015, silver will still be about 12% of costs, using a weight of 0.11 gram per watt.

 “Ideally we don’t want to use any silver because precious metals are subject to violent fluctuations. You don’t want to deal with a product that has so much fluctuation when you’re trying to bring costs down,” Mehta said.

Solar is still dependant on subsidies to spur demand. Kann said the U.S. Department of Energy’s Sunshot program is an effort to make solar energy cost competitive with other forms of energy by the decade’s end. The goal, Kann said, is to get solar energy down to $1 per watt installed and to get there without incentives.

For that to happen, panel prices must come down more, technology must improve, balance of systems costs must fall and labor costs need to come down, he said.

By Debbie Carlson of Kitco

http://www.kitco.com/reports/KitcoNews2 ... solar.html

[everything]

More research money is being spent on mirrors, the U.S. has about 400 megawatts of that, vs. 2 gigawatts of solar. I think mirrors and salt will be the future for harnessing the sun. They are only pushing this commercially but some day I'm sure it could be put into a much smaller package, maybe 10-20 years from now, and when/if fossil energy keeps going up. Lately, the hybrid power plant is a popular push where you use sun during the day then natural gas at night to keep the turbines going.