Silicon Shortage Threatens Solar Cells

MUNICH (Reuters) - Top solar power executives voiced fears on Wednesday that their industry's stellar growth over the past few years might stall due to a global shortage of polysilicon, the main component of solar cells.

Takashi Tomita of Japan's Sharp, the world's biggest solar-cell maker, warned of what he called a "vicious spiral" in which the market could grind to a halt as rocketing silicon prices meant suppliers could not afford to meet demand.

"I am very worried about it, because a shortage of polysilicon materials would lead to an increase in prices of polysilicon and could ultimately lead to a stagnation of the solar-cell market, said Tomita, chief of solar systems at Sharp.

The solar market currently supplies a fraction of 1 percent of the world's energy needs and is worth an estimated $7 billion annually. The industry may increase that proportion to 8 percent by 2030, according to the European Renewable Energy Council.

Given generous subsidies from some governments -- notably Japan and Germany, the world's two biggest producers of solar power -- demand has soared for the panels that harness energy from the sun to provide electricity without emitting carbon.

But prices for solar-grade silicon, which have leapt from around $9 per kilo in 2000 to $25 last year and $60 this month, are threatening to put the brakes on the annual growth rates of 30 to 40 percent the industry has seen since 1997.

Silicon makes up most of the earth's crust, but it is very expensive to purify into forms such as polysilicon that are used in the high-tech industry.

Unlike in 2000 when solar-cell firms could snap up cheap surplus polysilicon no longer required by semiconductor makers after the high-tech bubble burst, the solar industry now has to compete with a healthy electronics sector.

And chipmakers can more easily afford higher prices, because silicon is a far smaller component of chips than of solar cells.

Polysilicon producers, meanwhile, are developing means of making cheaper, solar-grade silicon especially for solar cells, which need not be as pure as that used for semiconductors, but volume production is some years off.

HITTING THE BUFFERS

In the face of the looming crisis, managers of companies including Shell Solar and Norway's REC lined up at a conference at the Semicon trade fair in the German city of Munich to suggest a variety of cost-cutting strategies.

Proposals ranged from making the silicon wafers that solar cells are built on bigger, or thinner, to moving to a different production method altogether, so-called thin-film, in which entire panels are made in one go rather than being assembled.

But in the short term, none of these will make a serious dent in costs, because materials -- largely polysilicon -- account for 80 percent of the production costs of solar cells.

At the same time, subsidies are being slowly reduced in Germany and will be stopped in Japan this year. Tomita declined to give a forecast for the Japanese solar market this year, beyond saying he expected "moderate growth."

"We've hit the buffers at the moment," Tim Bruton of Britain's New and Renewable Energy Center told Reuters. "There's not enough silicon to keep fueling this rate of growth."

Bruton, a former head of research and development at BP Solar, said he expected growth to slow to around 10 percent this year and next, before a likely acceleration in 2007.

"I would say the industry has been quite lazy," he added. "When it was able to buy cheap, scrap silicon, there was no real incentive to be more efficient. It has to do so now."

Copyright © 2005 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in ExtremeTech.