We live in a time where visionaries have become very popular. Tesla's Elon Musk constantly makes bright predictions about our wondrous high-tech, clean energy future. Those who care about the world, while also desiring to keep our current living standards, find these predictions to be impossible to resist. We can have our cake and eat it too, according to a growing number of influential voices, so people can be forgiven for increasingly buying into the narrative.
It has been estimated that given current solar panel efficiency rates of about 20%, it would take us covering a landmass area the size of Spain with solar panels in order to power the world, in 2030. I find it odd that people are concerned with how much land mass it would take, but not with how much silver it would take to build those panels. While enough land may indeed be available to build solar power facilities, it only takes some basic arithmetic to figure out that there is nowhere near enough silver to accommodate a mainly solar-powered world.
It is estimated that it currently takes about 20 grams of silver to build an average solar panel. The average size of a solar panel is about 1.8 square meters. Given that there are 1,000,000 square meters in a square kilometer, it would take about 11.1 million grams, or 11.1 tons of silver to cover a square kilometer with solar panels. Given estimates that it would take covering a landmass the size of Spain with solar panels in order to meet all our energy needs, we should multiply that 11.1 ton figure by 506,000 square kilometers, which is the size of Spain.
When doing that, we get a figure of 5.62 million tons of silver, given current solar panel efficiency. Assuming that we could quadruple that efficiency rate, in terms of how much silver per unit of energy produced from solar panels, we will get a figure of 1.4 million tons. One thing I should point out before I get criticized for being too pessimistic in regards to my assumption in regards to future advances in solar panel efficiency is that while it is true that there has been progress in the past, there is no guarantee of it continuing in the future.
The world's current known official silver reserves that can be assumed to be recoverable from mines is estimated to be less than 600,000 tons.
It is probable that there is more silver out there which is yet to be discovered, or which can be upgraded to reserve status if the price is right. At the same time, we have to remember that we currently live on a planet, which we are increasingly familiar with geologically speaking, so chances of big surprises are diminishing with every year that passes. We should also keep in mind that not all the silver that we can get our hands on can be automatically allocated to solar panel production. Silver does have many other practical uses, not to mention cultural uses, which I don't think we will ever be able to deny people around the world from indulging in.
It is also possible to divert some of the already existing silver above ground into solar panels. It is estimated that to date, about 45-50 billion ounces, or about 1.5 million tons of silver were produced throughout history. I should note however that most of it will never be made available for conversion, unless world-wide extreme measures were to be taken to take away the silver held by private individuals, businesses, governments or other institutions.
We should also keep in mind that some of the silver mined to date has been used for industrial purposes already and is therefore no longer available for re-use. I also doubt very much that any silver objects that qualify as antiques or historical artifacts will ever be used for such a purpose. Any collection of silver already in use will have to be voluntary, based on market forces convincing people to part with their belongings.
The hypothetical world of complete post-solar conversion (needs yet more silver).
While converting the entire world's economy to solar is not feasible by any stretch of the imagination, because, among other things, the world does not contain enough silver to make it happen, I want to point out the fact that the story does not end with managing conversion. Assuming that by 2030, the entire world was to be converted to solar energy, with a minimum of 1.4 million tons of silver invested into making it happen, we would quickly realize that we will need yet more silver, in fact a lot more silver, just to keep the world running on solar.
Solar panels do have a loss of efficiency rate ranging from .2-1% per year, depending on a number of factors, including climate conditions. Assuming an average loss of .5% per year, we would need an additional 7,000 tons of silver per year in order to install more panels. I am not including panel replacement in this assumption. Panels will be replaced most likely after a while, either due to damage or due to a drop of efficiency below a desirable level.
In addition to having to replace lost capacity each year, keeping the world running on solar will mean meeting growing energy demand. Assuming a very conservative average rate of energy demand growth of just 1% per year, the solar economy will need an additional 14,000 tons of silver per year in order to add enough panels to keep up with energy demand growth. Adding the 7,000 tons per year needed to replace lost capacity, we would need an additional 21,000 tons of silver per year immediately after the great solar conversion is completed, in order to keep the world running exclusively on solar.
For reference, current global silver mined production amounts to about 28,000 tons per year. It is hard to see where such a large amount of silver would come from in the aftermath of having mined twice the amount of the current silver reserves, in order to achieve complete solar conversion by 2030 in our hypothetical world.
Back to the real world, with still some optimistic assumptions.
Assuming that we will see a quadrupling of solar panel efficiency in terms of how much energy we can get per unit of silver, and assuming that current mined silver production will remain flat until 2030, and that we can allocate one third of it to producing solar panels, the world will still only achieve about 10% conversion to solar by that time. At that point, about 700 tons of silver per year will be needed just to replace lost panel efficiency every year.
It is the absolute maximum that we will be able to achieve, yet it is very far from where today's visionaries claim that they see us reaching. Elon Musk for instance, claimed that solar will become the number one source of energy in the world by about that time. Given that currently oil and coal are both at around 30% of the global energy share each, solar would have to reach about 30% as well in order to claim that number one spot. In order to achieve this, 100% of all the silver mined between now and 2030 would have to be allocated to making solar panels, which is simply not possible.
We should remember that all these calculations are made based on my original assumption of all the solar panels installed from this moment on being four times more efficient than the current ones. Needless to say that if in reality, we will only achieve a doubling in average efficiency for all solar panels installed between now and 2030, we would have to allocate double the entire silver production currently mined each year in order to achieve Elon Musk's vision.
The visionaries and their adherents would of course argue that there is no such thing as a limitation due to silver availability, because we can just innovate and replace silver with something more plentiful. I do not deny the possibility of this being the case in the future, but the reality of today is that the solar industry remains dependent on silver, even if they are able to continue to cut back on its use per unit of energy capacity produced.
That is why I made a very optimistic assumption for this exercise in regards to the quadrupling of average solar panel efficiency. If a real viable breakthrough, which will eliminate the need for silver will indeed occur one day, it might make the vision of a solar-powered world more viable, assuming that we could overcome some other issues, such as the volatile nature of solar power production, which depends a great deal on weather patterns. But as of today, that breakthrough has not occurred, therefore, we cannot assume that it will. It might or it might not, which is all we can say at this point with some certainty.
People can be forgiven for believing that a breakthrough in regards to replacing silver with other, more plentiful materials is just around the corner. Natcore, for instance, has been announcing such a breakthrough on a regular basis. It is claiming that it was able to replace silver with aluminum, which is much cheaper and significantly more plentiful, while still achieving similar efficiency rates to panels made with silver.
After reading the claims, the first thing I did was to take a look at how the company's stock has been performing since it made this claim. Not surprisingly, it did not make a huge impact, which suggests that something is off in terms of the claim, because the stock is certainly not behaving in a manner, which one might expect it to in the aftermath of a major technological breakthrough.
Other claims in regards to being able to viably replace silver with copper for instance, have been around for years, and yet it is just not happening, because while it is easily done at a prototype scale, when it comes to doing it in a price-competitive manner, at industrial scale these solutions tend to prove themselves to be unviable. Until we see a viable breakthrough, which will provide us with an alternative to silver use, the solar-powered economy will have to wait, because it is simply not possible at this point in time.
In terms of what this all means in regards to the future of energy and commodity-related investments, it is obvious that silver has a great future as an industrial metal. Aside from solar panels, silver is to be found in a large number of electronic products. It also has growing potential in water purification technologies, in welding applications, medical technology and so on.
But I do believe that as the world embraces the concept of limiting greenhouse gas emissions, silver is likely to benefit from increased demand for solar energy more than it will from any other industry, even if continued efficiency gains will cut the amount of silver needed per unit of energy produced.
On a few rare occasions when I mentioned to a friend or acquaintance the fact that I own oil stocks, my comment was often greeted with some astonishment lately. It seems that many people already believe that we are on our way to a fossil fuel-free economy. It therefore puzzles those people who do believe this to be true that anyone would still want to own oil stocks. I do want to hold on to my oil stocks for the reasons that I pointed out in this article.
The solar-powered economy is nowhere near being within reach at this moment. Solar may be more relevant to coal & natural gas use, than oil, so it would not realistically speaking affect oil all that much anyways, but there are other technologies which could, such as electric cars. In regards to electric cars, as I pointed out in previous articles, given the fact that we are set to double the number of cars on the global roads in the next two decades or so, we better make sure that a few hundred million of those cars will be EVs, because if not, we will have a serious liquid fuel availability crisis on our hand in coming years and decades.
We are still very far from living in the world where wind & solar power will meet our electricity needs, and EVs will plug in to those sources in order to meet all our transportation needs. In this article, I explored the problem of silver availability in achieving a solar power-dominated world, given technological possibilities we know to be available today.
There are however many other issues related to energy strategies built around such sources of energy, including reliability given over-dependence on weather, or even the availability of appropriate weather patterns that can make such technologies viable in certain regions. For these reasons, we should be careful in distinguishing between facts from wishful dreams of visionaries, especially when considering making investment decisions.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.