Polysilicon

Published: May 24 2009 19:16

Silicon had its day in the sun but is now turning into just another commodity, roiling the solar power industry. Being the second most abundant element in the earth’s crust would have left it this way from the outset were it not for the shortage of plants to turn it into polysilicon of 99.999999999 per cent purity for semiconductors. Before solar power saw a renaissance a few years ago, it could live on that industry’s castoffs (a mere six decimal places pure), but a building boom in new plants to build wafers specifically for solar panels has sent spot prices tumbling. Polysilicon was below $10 a kilo about the time of the technology bust early this decade. It surged to about $400-$450 on the spot market last year and recently descended to $110. Analysts at iSuppli think it is headed to $40 by 2010 – about the cash cost of production.
Price fluctuations harm the competitive position of solar panel makers such as Energy Conversion Devices and First Solar, which were booming thanks to technologies using non-silicon alternatives as others struggled with shortages. Big makers of traditional panels such as Q-Cells and Sunpower, which previously had trouble securing raw materials, now have an abundance of supply.

It is a shame about demand though. After growing by a compound 45 per cent rate since 2000, Navigant Consulting reckons world solar panel demand will fall by a fifth in 2009. The culprit is a lack of project finance and retrenchment in Spanish and German subsidies that outweighs extension of US tax credits. Cheap polysilicon helps but margins are still narrowing as customers exploit weak demand. Even so, the glut of raw material is a watershed for the industry, giving it secure, standardised supply and allowing it to focus on the government subsidies that make solar viable. That seems quite enough to worry about.