Silicon shortage – temporary or permanent?
Silicon is a crucial material for the energy transition and in digital technology, for example in chip production. The price of solar-grade polycrystalline silicon (polysilicon) fell steadily over the last 10 years, eventually reaching less than $6 per kilogram in 2020. In the same year, however, the supply of polysilicon was tightened for various reasons and prices have been rising ever since.
As a result, we saw polysilicon prices rise to around $40 per kilogram last year, which impacted the entire value chain. Between March and the end of 2021, solar module and cell prices increased 13%, wafer prices increased 54%, and solar-grade polysilicon prices increased 177%. (Rethink Energy)
According to a report by Rethink Energy, the raw material shortage has been caused by several factors. China has put many companies out of business with cheap polysilicon; at the same time, the drop in prices has led to a halt in investment in new production capacity. In 2021, global polysilicon production capacity was only 621,000 tons, while actual supply was only 579,000 tons, limiting the solar industry's annual production volume to about 180 GW. The Corona pandemic and supply chain problems are other factors driving the current polysilicon shortage. At the same time, photovoltaic additions continue to increase every year and are forecast to exceed 220 GW by 2022. (pv-magazine)
However, the authors of the report expect this to end soon. At the beginning of 2022, many companies announced an expansion of solar silicon production capacity to a total of almost 4 million tons. Two-thirds of this capacity would be enough to produce photovoltaic systems with a capacity of 900 GW per year. "Production capacity will more than quadruple in this decade compared to 2020," said Andries Wantenaar, analyst at Rethink Energy and lead author of the report. (Rethink Energy)
However, it takes about 2 years to build a polysilicon plant, so it is reasonable to assume that there will remain some shortage of feedstock until mid-2023, which will limit the industry's expansion. "The polysilicon shortage will continue to limit worldwide solar installations until mid-2023 […]. The price of polysilicon will take at least 5 years to return to the record low of 2020, but will then decline even further," says Wantenaar.
The study predicts that the huge amount of new polysilicon production capacity that will eventually exceed demand growth will lead to a supply glut by 2025. For the solar industry, a price adjustment for polysilicon could mean a reduction in the Levelized cost of electricity of up to 12%.
Sources:
Rethink Energy, article by Harry Morgan (2/2/2022):
https://rethinkresearch.biz/articles/polysilicon-woes-will-end-within-18-months-says-rethink/, accessed: 2/11/2022 at 10:45 a.m.
pv-magazine, article by Sandra Enkhardt (2/1/2022):
https://www.pv-magazine.de/2022/02/01/bnef-erwartet-erstmals-mehr-als-200-gigawatt-weltweiten-photovoltaik-zubau-und-leicht-sinkende-modulpreise-2022/, accessed: 2/11/2022 at 11:45 a.m.