Solar panel manufacturers struggle with high silicon prices

Flickr photo courtesy of kevinthoule.

Today’s Wall Street Journal reports about how solar panel manufacturers are dealing with record high prices for solar grade silicon.

It turns out that although silicon is the most abundant element on earth after oxygen, only about half a dozen companies exist that can purify the silicon into a grade that is suitable for solar panels. As demand has skyrocketed while capacity has remained the same, prices have gone up.

Most panel makers have signed costly long-term supply contracts for silicon with fixed prices and huge upfront payments, and pay even stiffer prices for silicon on the spot market if those contracted supplies fall short. At the same time, some have developed a slew of new strategies — from recycling castoff bits of silicon to re-engineering their production lines to make thinner, more efficient cells. Some are even building or buying their own factories to make the silicon wafers that are sandwiched inside solar panels or purify their own silicon.

Those companies that tackled the problem early have gained ground against more established rivals. “The biggest players were much slower to move,” said Michael Rogol, a solar-industry consultant for Photon Consulting in Aachen, Germany. “The biggest companies lost their steam” as a result. Sharp Corp., Mitsubishi Electric Corp., and BP PLC subsidiary BP Solar have all seen their growth slow after dominating the industry for years.

Sharp, the market leader by volume for the past seven years, has stumbled after several years of double-digit growth, in large part because it didn’t move to cope with the shortage quickly enough. Last year it produced panels that could generate 434 megawatts of electricity, or the equivalent of a single gas-fired power plant, about the same amount it made in 2005.

Ron Kenedi, vice president of Sharp Solar Energy Solutions Group, conceded that Sharp’s growth rate had slowed because of the silicon shortage, but that the firm was “working on all fronts” to be able to grow as fast as possible. “Everybody in the industry is constrained,” he said.

Makes you wonder why no one is building new silicon refineries to jump into that business!

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