(Kitco News) - The sun is adding some shine to the silver market.

One of the growing industrial uses for silver is photovoltaic cells in solar panels as the world seeks alternative forms of energy, metal consultancies said. There has been a jump in such demand in recent years, and analysts said millions more ounces of silver may be consumed for this over the next decade.

“Solar panels will probably be one of the leading industrial uses,” said Jessica Cross, CEO of VM Group.

Use of the long-established photovoltaic technology, referred to as PV, “really took” off in the last half decade, helped by government subsidies, said Philip Newman, research director for GFMS.

“The growth in demand did not primarily come about because of technological developments,” he said. “It came about because of changing attitudes of governments and government policy.”

Ultimately, the amount of silver used will hinge on growth that emerges in the PV solar market. This will depend on both future government support, as well as technology innovations that bring down the cost of solar power, said Erica Rannestad, commodities analyst with CPM Group. As it is, the cost for a typical PV module fell by around 40% in 2009 from mid-2008, she said, citing data from the trade group Solar Energy Industries Association.

One of the most popular government programs is a “feed-in tariff” mechanism in which electrical-grid operators pay producers of renewable energy long-term fixed prices for energy they feed into the grid. This originated in Germany and is especially popular in Europe, Rannestad said.

Any government policies calling for more renewable energy are likely to boost demand for solar cells. Europe is pushing for renewable energy to amount to 20% of total energy consumption by 2020, compared to around 10% in 2008, Rannestad said. “I expect new installations of solar panels to continue to rise on an annual basis,” she said.

Globally, solar-panel installations during 2009 meant 7.2 gigawatts of new electrical capacity, Rannestad said. (A gigawatt equals 1 billion watts.) Industry estimates suggest newly installed capacity will more than double to 16.5 gigawatts in 2010, Rannestad said. This may rise to 23.3 gigawatts by 2013 and 40.9 gigawatts by 2019.

German, Spain and Japan are the leaders in existing PV solar power generation, said Monique Hanis, spokeswoman for SEIA. The U.S. is No. 4. “But everybody is really eyeing the U.S. market because it perhaps has the greatest potential in terms of solar resources and demand,” she said.

India plans to up solar output to 20 gigawatts by 2020 from virtually zero now, while China aims to raise capacity from 5.5 to 30 gigawatts by then, said VM Group.

“We definitely see the solar market growing quite substantially,” said Rob Cockerill, North American PV segment manager with DuPont Microcircuit Materials. DuPont is a material supplier for the solar industry.

Silver Consumption To Rise As Solar-Energy Market Grows

Solar power is generated in PV technology when a silicon wafer converts incoming photons of light into electrical current, Cockerill said. Silver helps collect electrons for the current and transports them out of the module for use as power. A typical solar panel has about 20 grams of silver, he said. This is around two-thirds of a troy ounce.

“Silver fabrication will grow as the (solar-energy) market grows,” Rannestad said.

CPM Group estimates that 2010 use of silver in solar cells will be 64 million ounces, up from 20.9 million in 2009. Rannestad looks for 15% compounded annual growth from 2009 to 2019, with the amount of silver used for solar cells forecast to rise to 84.5 million ounces over the next 10 years.

VM Group’s Silver Survey, published earlier this year, called for compounded annual growth of 17.5% for silver use in solar panels over the next decade. VM Group estimated 18 million ounces of silver were used in 2009. This is likely to rise to as much as 70 million by 2020, even when factoring in some impact from a rising market share for “thin-film” technology that requires little silver. Furthermore, VM said, still more silver also will be used for reflective mirrors in solar-power-concentrator power plants, perhaps rising to 60 million ounces per year over the next decade.

In its Silver Survey earlier this year, GFMS estimated that PV-cell production rose 30% last year to 28 million ounces of silver. The growth doubled from 2008, and GFMS also looks for “fairly aggressive growth rates this year,” Newman said.

While more growth can be expected, the rate may moderate, he said. Percentage gains may slow simply as the industry becomes more mature, especially if government subsidies are scaled back, Newman said. Yet, demand could be encouraged if manufacturing costs fall, other energy prices surge again or another country institutes a new subsidy.

Cross said silver also will benefit from limited recycling of the metal from solar panels compared to other uses such as photography. Plus, any such recycling may not occur for a while. Most solar panels have a warranty for 25 years, Cockerill said.

Still, not all are convinced of the future silver demand for solar panels. “I don’t see it becoming a major market for silver,” said Jeffrey R. Ellis, senior technology consultant to the Silver Institute and adjunct professor of environmental science and chemistry at Florida International University.

Silver traditionally is used in the infancy of many new electronic products to gain efficiency. But once the rest of the products become more efficient, there can be a tendency to shift toward cheaper metals such as copper or a silver alloy, meaning less use of pure silver, Ellis said. Furthermore, he questioned how popular solar panels will become. “It seems like it’s the technology of the future and always will be,” he said.

“Thick-Film” Technology Using Silver Remains Dominant

There are two kinds of solar panels. The traditional “thick-film” technology has crystalline silicon cells that use silver to help convert light energy into electricity. However, newer, less-expensive “thin-film” technology uses other materials, such as cadmium telluride. Solar panels for both also use silver outside of the cells for reflectivity and other functions, Rannestad explained.

Still, the thick-film technology is considered more efficient in capturing energy. Analysts say it has a roughly 80% to 90% market share, although thin-film may gain in market share. “We are going to see growth in both segments,” Haas said.

Nevertheless, with the gains by thin film, if the overall solar industry doubles, silver consumption will maybe increase by 1 ½ times, Cockerill said.

 “The future for crystalline silicon (thick film) is market growth (that will be) definitely higher than any market-share erosion silicon will see in the next five years,” he said. “Beyond that, it’s hard to say what kind of disruptive technologies might emerge.”


By Allen Sykora of Kitco News; asykora@kitco.com

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