Silicon Shortage Short-Circuits Sunpower, (STP)

[santafe2]

- [Edit] Thread title should read "Silicon Shortage Short Circuits Suntech Power, (STP). Sunpower is SPWR.

For anyone interested in the current dynamics within the photovoltaics industry this article from Business Week is well written. While the focus is on STP, most solar panel manufacturers are facing the same challenges.

A major portion of the cost for mono or poly silicon solar panels is the purified silicon, and that silicon is in short supply. All manufacturers have long term contracts for their silicon supply from one of the major providers but contracts are often signed, (and partly paid for!), years before actual delivery so most manufacturers, don't have enough contracted supply and have to go into the spot market to allow them to meet their production requirements.

A bit of history: Ten years ago, silicon for the commercial solar industry was supplied by the chip industry. Semi-conductors require several orders of magnitude more purity than does silicon for our industry. So ingots which did not meet standards were moved into this secondary market. I wasn't involved in these sales but the price I most often hear quoted is $25 a kilo.

As the solar industry has grown, it first became a competitor of the semi-conductor industry and a couple of years ago, the preferred customer due to steady , predictable growth. This year more silicon will go into solar panels than into semi-conductors.

Contract prices have risen over the last ten years from ~$25 to $70-$100 a kilogram. Given demand, inflation and US$ relative value, this is a reasonable cost increase over that time. The problem is in the spot market. In 2005 when shortages first occurred there was a 50% premium in the contract to spot price, then a 100% premium, now a ~400% premium.

This need to buy a significant portion of supply in the spot market makes it difficult for companies to grow and to remain profitable. There is a lot more supply coming on line, but if the US elects a renewable energy friendly group of legislators and a solar friendly president, all bets for oversupply in 2009 and for the foreseeable future, are off.

http://www.businessweek.com/investor...bal%20business