Will the silicon shortage stunt the solar industry‚Äôs growth? By Alan Joch
High oil prices, growing interest in alternative energy, and decades of R&D all mean boom times for the solar industry, right? Not quite. Just when solar-panel sales should be skyrocketing, the industry finds itself grappling with a nagging shortage of polysilicon, the key ingredient in photovoltaic solar cells. Tight supplies are frustrating panel makers and causing investors to balk at backing public companies.
Ironically, polysilicon is made from one of the most common materials on earth: sand. So the problem isn’t so much a lack of raw material as a lack of production capacity for refining sand into polysilicon, the material that enables panels to capture solar photons and turn them into electricity. Burned by past downturns, polysilicon producers have been reluctant to invest in infrastructure that would increase capacity. Last year, though, convinced that long-term polysilicon orders were for real, companies like U.S.-based Hemlock Semiconductor, Norway’s Renewable Energy Corporation, and Germany’s Wacker-Chemie each committed hundreds of millions of dollars for new capacity. But with a lag time of about three to five years between commitment and production, the new polysilicon plants won’t impact the solar industry until 2008 and beyond.
So for now, shortages are still putting the breaks on solar-industry growth and pitting the solar sector in a fight against the massive semiconductor industry, which now uses more than half of the 30,000 metric tons of polysilicon produced each year to make everything from PCs to cell phones to gaming systems. Nevertheless, the solar industry is poised to hit a significant milestone soon: sometime in the next two years, more raw silicon will be going to solar panels than to electronics chips.
Even when new production capacity comes on line in 2008, analysts say polysilicon will remain very much in demand because much of the additional output is already spoken for. Solar cell maker Evergreen Solar (ticker: ESLR) recently signed a supply contract with Renewable Energy Corp. (ticker: REC) through 2014 for polysilicon from its yet-to-be-completed new facility. Other solar companies are expected to forge similar arrangements, according to analysts.
Hence, traditional solar-panel makers, such as Sharp Corporation and BP Solar, are hard at work designing thinner products that use proportionately less polysilicon; a number of smaller companies are also exploring ways to reduce—or even eliminate—the need for polysilicon. “There is a core group of firms making cells that use a fraction of the silicon needed for conventional solar cells,” says Jesse Pichel, senior technology analyst for investment-banking firm Piper Jaffray. Evergreen Solar, for example, relies on “string ribbon” technology, a manufacturing technique that creates long, 3.2-inch-wide ribbons of silicon that can be cut to shorter lengths for individual applications.
TrackBack URL for this entry: