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Polysilicon Price Plunge Provides a Ray of Hope for Solar Industry

By Dan Haugen

Apr 1, 2009
solar panel

The market for solar-grade silicon has seen a night-and-day change compared to a year ago.

Polysilicon, a key ingredient in most solar products, was in short supply and selling on the spot market last summer for almost $500 per kilogram.

Enter a global recession and credit crunch, and polysilicon prices plunged alongside those for many other raw materials.

Today, that same polysilicon goes for well below $200. A report issued last week by predicts polysilicon prices will continue falling as much as 43 percent next year.

The solar industry is seeing a badly needed "normalization" in the cost of raw materials, said Shyam Mehta, a solar analyst with Greentech Media. It's one bright spot for an industry that is dealing with two other major problems in this economy: deflation and slumping demand.

Polysilicon accounts for a significant portion of the cost of a finished solar module. The solar industry initially used leftovers from the semiconductor industry and later built its own production plants. Still, the supply has been tight most of the last half-decade.

Prices have receded recently because of new plants coming online, as well as slumping demand due to the economy.

Many consumers are nervously putting off big purchases until they feel the economy has improved, and that's having a big impact on the solar industry, said Ed Gunther, author of the blog, which tracks news about the photovoltaic industry. Meanwhile, solar developers are running into difficulty financing commercial and utility projects because of the credit market.

The price of solar photovoltaic modules started dropping sharply in the fourth quarter of 2008, Mehta said. That's good news for consumers and the climate, because it means solar electricity is getting closer to the point where it is competitive with grid electricity prices.

According to , a research and consulting company, the average U.S. retail price per watt for 125-watt and larger systems fell from $4.85 in December to $4.78 in March (note correction). That's the lowest point the index has reached since April 2006.

But the price solar manufacturers have been paying for raw materials hasn't kept pace with that decline, Mehta said, and that has squeezed profit margins at companies whose growth will help solve our climate challenge.

The decline in polysilicon prices should help manufacturers maintain "decent" profit margins, he said.

"The real question at the moment is: can poly prices fall faster than module prices," Mehta said.

When polysilicon price declines start to show up in the price of photovoltaic modules, that should help the industry by spurring demand.

Mehta expects the polysilicon market to stabilize over the next few years. For now, though, the lower prices are among a few positive signs among an otherwise gloomy outlook, courtesy of the economy.

It's a good thing, Mehta said, "but by no means is it a panacea for the solar industry."


See also:

Incentivizing the Green Build Up

The Ultimate Urban Solar Lab: New York City

In a League of Its Own: First Solar Breaks the $1-a-Watt Barrier

Plan to Turn Africa into the Saudi Arabia of Solar Gains Traction


Fairly safe, article

Fairly safe, article Dan!

Although with silicon prices falling by over $200/kg you'd think there would be a bigger retail price drop than this: "the average U.S. retail price per kilowatt for 125 megawatt and larger systems fell from $4.85 in December to $4.78 in March"

7c/watt? even if solar cells only take 5g/watt (most take between 7-10g/watt) this implies that the marginal cost of a watt of solar has fallen by $1. Who is getting the other 93c/watt?

I assume you mean retail price per WATT (not kilowatt) for 125 kilowatt (not megawatt)...

@David McClellan "Currently PV is so expensive and un-economically justified"

If you ignore the cost of CO2 pollution, (as the US currently does) along with all the other externalized costs of burning fossil fuels, then I see why you think this. But just remember that society does pay these costs even if we don't allocate the costs to the individual polluting.


Thanks for catching my mega/kilo watt mistake. Fixing...

Silicon Prices

Currently PV is so expensive and un-economically justified except for rare circumstances that the real control on demand ( and therefore price ) is government support. Where there are large tax breaks or feed-in tariffs, PV can make economic sense ( for the individual, but not society ). Over the last year, I think, government subsidies have fallen, especially in Europe, so naturally demand has dropped. At the same time, ( I think ) supply of the end product is up somewhat. Shrinking demand and increasing supply pretty much means the price will go down.

The answer is not more government support: the limited money available should be spent on the most cost effective choices, not the least. That way, we all get more (more energy and less CO2) for our money. Right now, energy efficiency and co-generation are MUCH better places to spend money than PV although they are not nearly as sexy.

Some government support may be appropriate for R&D, maybe to finance plants, maybe some end market subsidies to create at least some kind of a market until it actually makes sense economically.

Longer term, I expect the price of silicon to drop since a number of new plants and new technolgies are being built. This will allow PV manufacturers to drop their prices, which is a good thing. If prices drop to a level that makes economic sense, then PV will see more use.

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