Solar Investors, Understand Silicon Supply

 |  Includes: FSLR, LDK, SPWR, WEST
by: Nick Gogerty

The participants in the silicon market are a useful starting source of estimates about the market. As any good anthropologist knows, a source has its biases, but is nevertheless an interesting data point.

One interesting information source is from REC (Renewable Energy Corporation), a large Norwegian player in the Solar PV industry. They presented during the Piper Jaffrey conference on Feb 20, 2008 and had some interesting data point in their Power Point. Here is a link to the PDF.

In the presentation there is an indication of estimates for Metric Tonnes of Polysilicon Capacity out to 2012. It includes, various players and even lists some as “wild cards”.

From a downstream perspective the expectations of polysilicon are quite important as the expiring feed in tariffs from Spain caused a spike in demand during 2007. This demand spike caused a shortage in Polysilicon sending prices to $450/kg. These prices are believed to be declining rapidly as the market solves the price problem with supply.

In the power business silicon doesn’t count, gigawatts on the grid count. So let’s take some data points from REC and convert them to gigawatts. It is important to note these supply estimates don’t include amorphous silicon modules or thin film power coming online.

Various participants are slicing and utilizing ever thinner pieces of silicon to achieve ever greater wattage output per gram. A current crude estimate from some of the best indicates 6-10 grams of silicon per watt of nameplate power. Some are claiming use of only 2.5 grams/watt. All producers are working to minimize utilization.

Click to enlarge

REC estimates provide ranges and include the “wildcards” The estimates of gigawatts coming online is below. Remember the solar industry is pretty buzzed from an 07 year which saw estimated 3 gigawatts come online.

Next week I will write about the supply side of the equation, which has some very interesting properties in terms of subsidies and insolation globally which receives little coverage in the popular press. If you invest in solar, I would urge you to study a global insolation map as the business is global.

Hint: A supply glut could be a non-issue with a modest decline in module prices that would easily clear the marketplace. Thin film will ship a few gigawatts/yr itself in the next 1-3 years. The US grid has nameplate capacity of roughly 1 Terrawatt and the global energy nameplate capacity is estimated at 4.3 Terrawatts. Solar PV doesn’t even swing the needle at last year's .003 Terrawatts shipped. Last year's global PV production was equivelent to 4-6 normal coal plants.