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Upheavals in the Chinese Polysilicon Market May Lead to Further Solar PV Cost Reductions

New standards for polysilicon manufacturers may cause shakeup in the market but ultimately drive down costs, analysts say.

In late January, the Chinese government released its “Polysilicon Industry Access Standards” specifying rules and restrictions for polysilicon manufacturers relating to site selection, energy consumption, environment protection, project capacity and more.

Specifically the standard states that any new solar polysilicon manufacturing facility must adhere to the following:

  • Facilities need to have an annual production capacity of at least 3,000 tons;
  • Facilities may not be situated within 1,000 kilometers (620 miles) of any nature reserve, headwater areas or major residential areas;
  • The electricity consumption of the solar-grade polysilicon reduction must be less than 80kWh/kg and further reduced to lower than 60kwh/kg by the end of 2011
  • The recycle rate of silicon tetrachloride, hydrogen chloride, and hydrogen in the reduction tail gas shall be not less than 98.5 percent, 99 percent and 99 percent, respectively.

Finally, solar polysilicon production lines whose integrated electricity consumption is higher than 200kWh/kg must be eliminated by the end of 2011.

Chinese solar industry experts expect serious fall-out to occur. According to Meng Xiangan, deputy director of China Renewable Energy Society, although the standard is necessary for the long-term and stable development of the industry, a majority of companies may not meet requirements due to technology and capital difficulties. Small and medium-sized firms not meeting the requirements will be forced out.

Dou Zeyun, an analyst at Ping An Securities said that even though the standard may slow down China’s ability to grow its supply chain for the solar industry, ultimately it will increase the quality of the country’s polysilicon and significantly reduce production costs, driving long-term and healthy development of the country’s PV industry.

Several players within the sector concurred, adding that the standard will change China's production pattern of polysilicon and bring about a reshuffle and consolidation of the industry. The weak will be forced out, while the strong will remain with their position further strengthened.

For 2011, industrial analysts said cutbacks in PV subsidies in some countries in Europe (most notably Germany, Italy, the Czech Republic and France), may have an adverse effect on polysilicon sales. However, this will be offset by rapidly declining costs for polysilicon-related raw materials. 


Image: courtesy via Flickr.

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