Analysts at UBS securities are predicting a quadrupling of polysilicon supply in the next two years as more factories come onstream to supply the voracious market demand for polysilicon wafers.
The single biggest cost to solar cell makers – and the single biggest detriment to solar adoption today – is the high price of raw polysilicon. It is 70% of a solar cell maker’s cost structure. Even companies like Suntech (STP) – which have their entire 2007-08 inventory sold out – must go to the expensive spot market for 25-50% of their wafers. The cost of wafers is what has sunk the share prices of the smaller solar cell makers: China SunEnergy (CSUN), Canadian Solar (CSIQ), Solarfun (SOLF).
All that’s about to change. UBS estimates the cost of raw silicon for wafers is going to fall 66% over the next 3 years, from $300/kg to $100/kg. Solar has overtaken the market share for raw silicon once held by the semiconductor industry (for decades). This acceleration in polysilicon supply will reduce the materials cost for solar cell makers to 25% from today’s 70%. That cost savings ($) can go right to the bottom line: strengthening profit margins, reducing prices for consumers, and making solar adoption more widespread. Solar can be more affordable, more doable, and on a parity with oil in 5 years. Demand for this new energy today is unprecedented. Industry estimates are for 50% year over year growth; yet it is not even 1% of the world’s energy source.