Polysilicon Supply Will Approach Demand

The Prometheus Institute for Sustainable Development, of Cambridge, Massachusetts, released “Polysilicon: Supply, Demand & Implications for the PV Industry.” The authors of the October 2006 report, Hilary Flynn and Travis Bradford, open by saying, “Our goal is to accelerate the deployment of socially beneficial sustainable technologies, including those of energy, water, and food, by educating industry participants, advocates, and policymakers about their advantages. We achieve our mission by collecting and disseminating reliable data, quantitative analysis, and practical information about these industries.”

“Today, the Institute strives to be the world’s leading source,” the authors continue, “of publicly available primary data on the photovoltaic (PV) supply chain and endmarkets through a series of data collection and outreach projects and the publication of the industry’s oldest newsletter, PVNews. Currently, the Institute focuses solely on its initiatives in the solar energy industry.” To follow is the report’s Foreword: This polysilicon supply report is the first of a series of comprehensive reports from the Prometheus Institute that delves deeply into the various links in the photovoltaic (PV) supply chain. These reports meet our mandate to provide comprehensive industry information and analyses in order to accelerate the deployment of sustainable technologies such as solar electricity. We believe that delivering good data and information about the industry’s stages of production and its prospects for growth will help industry stakeholders, users, and policy makers make the best decisions about how and where to increase the use of PV. Given the amount of industry speculation this year about silicon supply, a comprehensive review of this vital feedstock is timely. With raw material prices rising and rumors of idle cell production capacity, silicon has become the bottleneck for the growth of the PV industry. In 2005, nearly 95% of the cells produced used silicon-based technologies, and long lead times to deploy new production plants mean bottlenecks will persist, slowing the industry’s growth rate, historically in excess of 30% per annum. Thin films, while promising, will not increase their market share fast enough to keep the PV industry from relying almost entirely on the polysilicon supply through 2010. Understanding the supply of silicon, therefore, is essential to understanding the prospects for the PV industry as a whole. In this report, we look at all of the factors that affect the availability of this feedstock for the PV industry. We survey seven major polysilicon producers and nearly 20 emerging producers (a third of them in China), and we project production capacity through 2010 under a variety of scenarios. In so doing, we determine that the current silicon supply shortage will begin to ease by 2008, and that there will be enough silicon to allow the PV industry to grow to eight gigawatt (GW) per year by 2010. We also look at various technological approaches to refining silicon, different methods of increasing efficiency of silicon use, and dynamics shaping the industry. What emerges is a view of a stable base of producers that is currently enjoying increased pricing power and profitability. Meanwhile, however, many new players have been attracted to silicon manufacturing. These newcomers threaten to erode the market share of established producers and perhaps even to flood the market by the end of this decade. While much new capacity is planned and outcomes are uncertain, what is certain is that polysilicon supply is in for a dynamic transformation in technology, industry structure, pricing, and margins over the next four years. I want to thank all the staff, advisors, and company representatives who helped put this report together. Much thought and work went into creating this report, and many people provided data, insight, and suggestions for improvement. However, this report, like all the research of our Institute, remains a work in process. It is vital to us and to the mission we serve that we continue to improve the information and analysis we provide to our readers. Please help us to make this report better by sending your comments, corrections, and suggestions. They are always welcome.

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