Silicon Rally

For 40 years or so, the price of solar panels fell steadily, as volumes grew and technology improved. But in 2004 Germany enormously increased subsidies for solar power, prompting a surge in demand. The supply of pure silicon, the main component of most solar cells, did not keep pace. Its price rose from $25 a kilogram in 2003 to as much as $250 this year, abruptly halting the downward march in the price of panels. If making energy from sunlight is ever to become as cheap as burning fossil fuels, the price of silicon will have to fall.

Happily, it seems likely to do so soon. New Energy Finance, a research firm, expects the output of silicon for the solar industry almost to double next year. It has asked big buyers and sellers what prices they have agreed on this year for silicon to be delivered in the future. The responses suggest that participants in the industry expect prices to fall by more than 40% next year, and over 70% by 2015 (see chart).

Yet even if the silicon price falls, other bottlenecks may well appear. The first step in making solar cells is to shape silicon into ingots and then slice it into wafers. Ingot- and wafer-makers hope a surge in the silicon supply will expose a lack of capacity in their fields. Others wonder whether there will be enough of the specialist chemicals that coat cells. HSBC predicts that the solar industry will grow by 45% a year until 2012. Such searing expansion is bound to cause more growing pains.

via The Economist