The Sun Shines on Silver
Solar power appears to be coming back with a vengeance on the back of recent announcements by China and Japan. Both countries are pushing for new programs to significantly increase their solar power capacity in the years ahead.
Last week, China’s State Council backed targets to more than quadruple the country’s solar generating capacity to 35 gigawatts by 2015. This target had been previously stated by China’s State Grid, which manages the country’s electricity distribution, but now has the official backing of China’s cabinet and its top governing body. According to the statement from the State Council, China will add around 10 GW per year from 2013-2015. If com pleted, this effort will significantly increase China’s solar power generating capacity, which stood at eight GW at the end of 2012.1
Meanwhile, Japan is now expected to become the world’s largest solar energy market this year. According to a report by U.S. research firm IHS Inc., an estimated 5.3 gigawatts of generation capacity will be added this year, supplying the output roughly equivalent to five nuclear reactors. Japan’s domestic solar power market is forecast to reach $19.8 billion (¥1.91 trillion) in 2013, surpassing that of Germany, which was the biggest solar market from 2009 to 2012, according to IHS.2
With 5.3 gigawatts of new capacity in Japan in 2013 and up to 27 gigawatts added in China over the next three years, the solar industry could potentially have a big impact in the silver market. Silver is a key component in solar panels due to its unique electrical conductive properties, with approximately 80kg of silver required to generate 1MW of electricity. According to the Silver Institute, one megawatt of solar power requires as much as 2.8 million ounces of silver.3 China and Japan’s solar projects combined will add up to 32.3 megawatts over the next three years. This capacity will require approximately 91 million ounces of silver, which means that China and Japan’s new demand could consume up to 11% of global mine supply – and that’s if the world produces as much silver as it did in 2012.
Jessica Cross, CEO of VM Group suggests that silver also will benefit from limited recycling of the metal from solar panels compared to other uses such as photography. Further limiting the recycling of silver in panels is the fact that most solar panels have a warranty for 25 years, according to Rob Cockerill, North American PV segment manager with DuPont Microcircuit Materials a supplier for the solar industry, proposing that silver used in panels today won’t be recycled until the end of their useful life well out into the future.4
If China and Japan can follow-through with their respective solar programs, the silver market could benefit significantly. None of the 2013 silver price forecasts have incorporated these recent announcements, but the prospective numbers are big enough that they should.
Erratum: Thank you to our readers for pointing out several errors in the figures that we presented when this article was first published. Additionally, in the original version we had suggested that silver in solar panels cannot be recycled when in fact it can be recovered. However, this activity will not take place until the panel reaches the end of its useful life in approximately 25 years which will therefore have very little impact on the silver market in the short term. A corrected version now appears above.
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