Renewable Energy Solar Energy Wind Energy Geothermal Energy Bioenergy Hydropower

How did the silicon shortage situation catch so many by surprise?

By Scott Sklar
February 9, 2006 | 13 Comments

Do you like this opinion & commentary?

Bookmark

Feed

Dear Scott Sklar, I am having a hard time understanding how this so called "shortage" of raw materials used in the production of photovoltaic cells, manifested itself in the PV industry so quickly and with very little warning. It would almost seem suspicious of a marketing ploy to increase investor returns. For years, all I read was how PV module prices were getting better (which the prices stayed relatively the same, it was the technologies in production that produced better quality PV modules and longer warranties that got better) now in the course of one year, 2005, there is a "shortage" of raw materials and PV module prices are going through the roof. Can you shed some light on this for me? Sincerely, Thomas S, Castalia, NC Thomas,

I appreciate the dismay that constrictions in the silicon market has driven up prices of photovoltaics and delayed supplies, but it was no surprise to anyone tied to the photovoltaics industry. The issue was raised and addressed by US manufacturers when I was still running the Solar Energy industries Association in 2000, and in 2001, the National Institute of Science and Technology (NIST) announced an award to a Dow Corning team: Develop industrial refining processes to produce low-cost, high-purity silicon feedstock in virtually unlimited commercial quantities for the solar cell industry. NIST stated in 2001, "The solar cell industry depends on purified silicon, and continued growth depends on having an unlimited source of pure silicon feedstock at costs at least five times lower than currently available. Currently, solar cell makers rely on the silicon "waste" of the microelectronics industry, whose quality is far superior to what the solar cell industry needs. However, the demand for this waste soon will outstrip the supply. Without new sources, photovoltaics prices will rise substantially." Several companies have grown to increase photovoltaics manufacturing using different non-silicon technologies including UniSolar (MI) using triple junction thin films, First Solar (AZ) using CdTe, and Konarka Technologies (MA) using light sensitive dyes via nanotechnology. But the industry was not prepared for the triple whammy - Germany and Japan markets growing so quickly with California and a host of other US states (NY, NJ, PA, MA, CT, etc.) coming fast behind - a rapid increase of petroleum and natural gas prices coupled with natural disasters including the Pacific tsunami, Hurricane Rita, and Kasmir earthquake - which drove 25 percent growth rates even higher. Recent announcements by REC (Europe) SGS (USA), and others to expand solar silicon production is good news for the global PV industry, so many of us believe the silicon shortage will begin to abate in 2007. Other tactics such as greater use of hybrids with photovoltaics such as small wind, has begun to alleviate PV supply shortages in certain niche markets. But the bottom line is that the free market does address these issues, not always smoothly, and the world will see solar grade silicon in full supply for the global PV industry's next growth spurt. And non-silicon PV along with solar thermal electric will increase even more substantially as well. So don't get unnerved with these market perturbations which impact all emerging high growth industries. - Scott

Sklar Q&A note: see RenewablEnergyAccess articles on this same topic.

Solar Energy

The information and views expressed in this article are those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on its Web site and other publications.

13 Reader Comments

Comment
1 of 13

dgw3049

February 10, 2006

So it's a catch 22, if you want to take avantage of the current tax incentives or try to minimize the financial burden of escalating energy prices, you'll have to pay a higher price for your materials. Just figures something really stinks of greed or sabotege or something but thanks for your rose coloured oppinion,Scott

Comment
2 of 13

jim-duncan-26685

February 10, 2006

I tend to believe that, while there may not have been an orchestrated ploy to cause a shortage lurking in the shadows, there could well have been key players who, by NOT responding to a looming shortage, were able to drive up the cost of silicon by not addressing the crisis pro-actively.
Jim Duncan
North Texas Renewable Energy Inc.

Comment
3 of 13

joel-gordes-3637

February 10, 2006

Hi Scott and Thomas,

As usual Scott is right on the mark and this shortage was pending as early as 1999 when Chris Robertson and John Schumacher alerted a number of people to its approach. They approached a number of entities to build a facility to produce a dedicated supply of silicon but could not get the backing. A real life episode of "no one belives a prophet in their own land" sort of thing. Equally amazing is the November 1979 issue of Solar ASge magazine (p. 20) which also headliedn "Shortage may Cramp Photovoltaics" from and earlier ramp of activity that stressed silicon supplies. Will we ever learn.

Best,
Joel N. Gordes

Comment
4 of 13

michael-welch-3030

February 10, 2006

Hi Scott & Thomas. Great question, great answer. The following BusinessWeekOnline article just crossed my desk, and seemed interesting and apropos:

Aargh, frustrating. RE Access is not allowing me enough room to paste it, but see if you can Google the 1/31/2006 article:

What's Raining On Solar's Parade

Comment
5 of 13

david-king-45455

February 11, 2006

Thanks for a sound response. Hopefully the PV adequate silicon will be available by mass production in time. More users are appreciating the absolute necessity of using the sun's energy directly to minimise climate change effects for countries with enough nouse to realise the urgency and exploit the brief window of opportunity while oil is still at an acceptable cost.

Comment
6 of 13

assu-kapapa-46646

February 11, 2006

Hi Scott,
As a new PV learner I would to congatulate for your good answers,
please continue
assu kapapa

Comment
7 of 13

corby-ferguson-35932

February 11, 2006

Good! I am glad they have other solar materials and not just silicon to make electricity. So long as I can have it, and use it wisely. Green Tree Solar? CF

Comment
8 of 13

rich-barbarics-33637

February 12, 2006

You stated that the taxpayer funded Agency NIST awarded Dow Corning a contract to develop a silicon industrial refining process back in 2001. What are the results so far and will this benefit us taxpayers or will this become a patented process of Dow? 4 years seems like a long time to develop a new process.

Comment
9 of 13

Reynier

February 12, 2006

Indeed this should not have been a surprise. When I started to look in RE mid 2004 one could read & hear the complaint from silicon suppliers everywhere, that PV manufacturers did not want to commit to long term orders, a pre-requisite for Silicon plant investments of 100 Million$ plus and 2 year lead time. So the problem has been for a large part PV industry caused, which hoped to keep ridinmg the glut in the IT industry (surprise hich disapperaed). Now things have changed but a remeianing risk is that in the mean time (till 2008!) a lot of consumers will get turned away because PV module prices went up with 20% or more from 2004 till now, but at same time feed-in tariffs in countries like Germany are decreasing. This could cause a schock to demand and risk that investments halt again. Too bad, the only hope is that the PV industry seems to have gotten it now and since 2005 has become more willing to sign long term contracts ith silicaon suppliers.

Comment
10 of 13

sam-salamay-7842

February 13, 2006

I am so turned-off by this calculated shortage. All of us in the PV trenches, convincing companies to go solar and then having to explain we cannot perform our tasks. Thanks to the greed of manufacturers turning to Europe and their Euro prices, the U.S. market is now under control of the PV ogopoly. Many of my associates are going to move away from PV as an on-site generation source into other forms of renewables, if we can get it. Scott, you know about me moving the PV cause over the past 9 years; you should be as concerned about this plague of greed as I am. So many of us pushed PV for years and now we have to move-on. What a shame!!!

Comment
11 of 13

stuart-bloom-38969

February 14, 2006

Amazing. Conspiracy theories here too.

Now what are the conspiracy types going to say about the fact that Russia and South Africa have a lock on most of the catalyst materials for H2 fuel cell membranes. You gonna blame that one on the evil oil companies and GB too? All the technologies need to be developed in parallel. Let the markets shake things out. Lots we can do individually while keeping the government out of my house.

Stu

Comment
12 of 13

brian-hall-45210

April 26, 2006

I don't know how much money people think that PV module manufacturers are making, but Si is not the only factor in increased costs for modules, Aluminum and other raw materials have gone up tremendously in recent years as well, no to mention the energy costs have increased. Most PV module manufacturers are not driven by greed, but by financial survival and to do the right thing and provide sustainable renewable energy. (Ask any one of their CEO's) Think of all of the US manufacturing companies that have gone under or changed hands purchased by other companies...They went away because they WEREN'T making money!!!
We are now in a global economy, and people in the US must realize that we will eventually be paying the same $6/gal. Gas paid in Europe and Asia, and RE technologies will follow that same path. We have been sheltered by our government from the global inflation at the cost of multi trillion dollar debts. I am not claiming right or wrong, only truth.

Comment
13 of 13

brian-hall-45210

April 26, 2006

Actually...there were those in the industry (unpublished) who predicted the problem in the 90's...believe it or not. However, it was based on predictions of growth and existing raw material stock, and would require extremely large sums of money to construct new Facilities. Scott is absolutely correct regarding Germany, Japan and California simultaneous surge. During the 90s, Solar Salesmen were working very hard to sell their products all over the world. In 2001, if you recall there was a General Economic issue due to 9/11, and investor purses puckered up tighter than a...(insert your own metaphor here) This, is the approximate time when investments should have been made to alleviate the silicon shortage. Additionally, Si producers had been burned in the 90's by the dot com boom. With PV now coming to them for raw materials, they refused to get burned again and required significant investments (as Scott stated) and very few Manufacturers had the finances to do so.

Add Your Comment

Registered users, please make sure to Sign-In. We and others want to know your ideas and opinions. If you are not yet Registered -- it's quick and easy. Just click below.
Thanks!

NEW Smart Phone App

Scott Sklar

About: Scott, founder and president of The Stella Group, Ltd., in Washington, DC, is the Chair of the Steering Committee of the Sustainable Energy Coalition and serves... more »