Silver Surge Makes Headwind for Solar Industry

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"Soaring silver prices are hampering the solar industry's ability to compete with fossil fuels."

Bloomberg, Ehren Goossens

Soaring silver prices are hampering the solar industry's ability to compete with fossil fuels.

Panel makers consume about 11% of the world's supply of silver, the material in solar cells that conducts electricity. The metal has appreciated 74% to $35.30 a troy ounce on average so far this year from $20.24 last year.

Prices for solar cells have dropped about 27% this year and would be even lower if each panel didn't require about 20 grams of silver, according to Bloomberg New Energy Finance. That's pushing back the date when companies such as Solarworld AG and LDK Solar Co. can deliver solar power at prices that are competitive with traditional energy.

Prices for photovoltaic solar panels were $1.49 a watt in June, compared with about $1.80 in January, New Energy Finance estimates, as manufacturers especially in China raised production and incentives were trimmed in Europe.

"Some companies are implementing measures to reduce silver consumption, but we believe rising silver prices could still act as a headwind," Barclays Capital wrote in a note to clients.

The price of the silver paste that Canadian Solar uses to print circuits on the front of its solar cells more than tripled in the past year, Qu said. That adds about $0.03 to $0.04 a watt, or 2%, to the cost of the panels.

A typical solar cell uses 0.10 grams of silver for each watt of generating capacity. That amounts to about 20 grams in a 200-watt panel, adding $23.52 to the cost of each panel, according to New Energy Finance. The cost for metal in each panel totals about $0.11 a watt, up from $0.05 a year ago, the London-based industry researcher estimates.

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