Growth in the solar energy industry, powering ahead at about 30 percent a year, is threatened by the soaring price of polysilicon, the primary material used in photovoltaic cells.
A surge in demand spurred by government incentives and high prices for fossil fuels has caused the price to spike, putting photovoltaic producers in a bind as they try to reduce their costs to make their form of energy more competitive.
The increasing cost of silicon tracks higher prices for oil, steel, copper and other commodities that have affected the world economy.
"Solar is a victim of its own promotion," said Herb Hayden, solar program coordinator for Arizona Public Service Co., who hosted an international conference on solar energy last week in Scottsdale. "It’s like the price of homes. You want growth, but you don’t want to overheat it."
Prices for solar-grade silicon have increased from about $9 per kilo in 2000 to $25, and are reaching $60 for small-quantity shipments, industry sources say.
The supply-demand imbalance may continue for several years because of the long lead time needed to increase silicon-production capacity, said Tom Surek, manager of photovoltaic programs at the National Renewable Energy Lab in Golden, Colo., who participated in the Scottsdale conference.
"The result is the industry can’t grow as fast," he said. "But the feedstock producers will respond. They see photovoltaics as a major market for their product."
Although silicon is the second most common element in the Earth’s crust, it must be processed into forms that can be used in the solar and integrated circuits industries. Solar cells, which produce electric current when exposed to sunlight, do not need as pure a grade of silicon as the microchips that go into computers and other electronic devices. Thus the photovoltaic industry has not had to pay as high a price for their materials as have microchip producers.
But that gap is closing as the demand for solar-grade silicon increases while prices for semiconductor-grade silicon have remained relatively steady because supply and demand are in balance.
Also, the cost of silicon constitutes a relatively small percentage of the final price of microchips, but it is onethird to one-half of the cost of electricity produced by photovoltaic means, making the solar industry much more sensitive to price increases, Hayden said.
He thinks the price situation could spur the development of alternative solar technologies that use less silicon. For example, he said lenses and mirrors can be used to focus sunlight more intensely on solar cells, increasing the amount of electricity produced from the same surface area.
Concentrated photovoltaics accounts for less than 1 percent of the total solar industry, but it has good prospects in areas like Arizona that have lots of sunshine, Surek said.
For the silicon supply to increase, a few major chemical companies in Japan, Germany and the U.S. that dominate the world market would have to increase their capacity, he said.
But they also need longterm purchase commitments from solar-cell producers to make the needed investments, Surek said.
"About 15 years ago the IC (integrated circuits) industry was projecting a great need for more silicon, and they (the silicon producers) made huge investments to increase capacity. Then the IC industry tanked, and they were sitting with idle capacity," he said. "They don’t want to be burned again with excess capacity."
A German company called SolarWorld AG has made a 10-year commitment to purchase polysilicon, more fully known as polycrystalline silicon, from a German producer, which could be a step toward easing the supply shortage, Surek said.
The situation in Germany, where solar energy is heavily subsidized, has been a major factor in the supply imbalance worldwide, said Lane Garrett, president of ETA Engineering, a Tempe-based supplier of renewable energy components.
"Germany is buying everything they can get. They are paying 55 to 65 cents per kilowatt hour for what is generated. We pay 9 or 10 cents here," he said. "That is such a strong pull on the market that we have had trouble getting photovoltaics."
Still, even with the recent price increase, solar PV modules cost less today than they did in 2002, Garrett said.
He thinks the long-term trend of price reductions of about 6 percent annually will return in a few years.