Photo Voltaic

PV supply and cost limitations

To understand the supply limitations for PV, you need to know how we get from "sand" to solar cells. The process begins by refining quartzite, a type of sand, into 98.5% pure silicon called metallurgical-grade silicon. This requires a lot of energy and is produced in large quantities around the world, mainly for the steel-making industry. Known as mg silicon, it is the primary feedstock for making silicon wafers used in both the computer chip and solar wafer industries.

The next step in making photovoltaic cells is to further refine mg silicon into ultra-pure, nine nines silicon called polysilicon that is 99.9999999 percent pure and because most of the world's polysilicon has been used for the computer chip industry, it has to be extraordinarily pure, which makes it very expensive.

Historically, solar wafer manufacturers have relied on the cast-off waste of the silicon ingot industry to save costs, but with the growth of the photovoltaic solar industry -- now using as much polysilicon as the computer chip industry -- all of the waste silicon is now spoken for. This means the solar industry is paying as much for crystalline silicon as computer chip makers, which can generate significantly more profit from a single wafer than their PV counterparts. And because of the global demand for solar panels, driven largely by an aggressive renewable energy policy in Germany, there is now a severe shortage of polysilicon, which has stalled the steady decline in the price per watt cost of solar PV. In 2005, the industry consumed some 32,000 metric tons of polysilicon.

DoE studies in the late 70s and early 80s, however, indicated that the price needed to be around $10/kg to be competitive. The supply cost is mostly the cost of energy for refining, which means that there will be an increasingly costly “embodied energy” in the PV materials as oil prices continue to rise. At the moment polysilicon is going for upwards of $50-60/kg, if you can even get it. On the spot market, it's selling for upwards to $200/kg. Right now, the industry is happy to get whatever it can to make up the shortage. Some wafer production facilities in China, for example, are only running at half their capacity due to supply shortages.

While efforts are underway to build more polysilicon capacity to meet the current shortage, industry insiders are of the belief that supplies will continue to be constrained into the immediate future. One industry study that shows demand for PV cells in 2006 is 5 gigawatts. Yet the industry is only able to manufacture between 2.5-2.8 gigawatts this year. Although some believe new capacity coming on line in 2008-2010 will satisfy demand for polysilicon that is by no means a universal consensus within the industry.

Even by 2010, insiders have indicated that it will still be difficult for the industry to meet the demand for polysilicon, even with the ramp up of some producers level of output, such increasing supply is said to already be completely sold out well into the future.

What about other solar technologies like thin film and organic solar? They will continue to grow, absorbing more market share, but crystalline silicon (C-si) will continue to be the dominate player for decades to come. Projections see C-si still holding on to 80-85% of market share by 2020, down from its present 95% share.

adapted from information at EVworld

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