Solar Energy Expected to Drive Silver Demand.
According to Thomson Reuters’ GFMS silver industrial demand is expected to grow for the third year in a row in 2018 driven by the electronics and solar industries. The bulk of that demand growth is expected to come from solar. According to market observers, the amount of silver used in the construction of solar panels is projected to increase from about 5-6% of overall demand 55 million ounces in 2015, to well over 125 million ounces by 2022. According to the Silver Institute, silver demand for the fabrication of solar panels rose from 79.3 million ounces in 2016 to 94.1 million ounces in 2017, a 19 percent increase. This increase was achieved on a 24% increase in solar panel installations.
How much silver is used in solar panels?
Industry estimates ranges from about 2/3 of an ounce to 7/8 of an ounce of silver per solar panel. Amounts of silver used per electronic devices are much smaller than amounts used in solar panels ranging from a few hundred million miligrams of silver per cell phone, to approximately 750 milligrams to 1.25 grams of silver per laptop computer.
Despite the small amounts of silver used in each electronic units, amounts of silver used annually for electronics have been higher than amounts used for solar panels. The rate of growth for solar for silver, however, far exceeds the growth rate for electronics. For example, silver demand for electronics was 242.9 million ounces in 2017 up 3.8% from 233.9 million ounces in 2016, while silver demand for solar grew 19% year over year from 2016- 2017. Indeed the growth rate for solar since 2014 (51.8 million ounces) to 2017 94.1 million ounces was 81.7% while silver demand for electronics actually declined 8% from 2014 (263.9 million ounces) to 2017 (242.9 million ounces).
Silver is in high demand for solar panels because it is the most conductive of electricity and heat and is highly reflective. The solar market is expected to grow globally due international initiatives to reduce global carbon dioxide emissions and combat “climate change”/global warming”.
Thus, the solar energy market has been growing as an alternative to fossil fuels and is expected to continue to grow.. A large portion of that demand comes from China, Germany, India and the United States all of which offer government funding or subsidies for the creation of solar energy. The photovoltaic cells in solar panels use a silver based paste. According to the Silver Institute, the amount of silver required to satisfy solar panel manufacturers was about 7 million ounces in 2005 and is expected to top 125 million ounces in a few years.
As a result of the anticipated explosive demand for silver for solar panels, companies have made technological advances that allow lower amounts of silver to be used per solar panel, in a process called thrifting. These initiatives have not been a top priority however as the price of silver has declined in recent years. As annual silver production has not increased in two years, and industrial demand has been increasing, low silver prices are not forecast to be a permanent component of solar manufacturing costs.
Top Solar Countries
China has invested heavily in solar power as it searches for alternatives that can help reduce its air pollution while satisfying its growing energy demands. China consumes the most energy of any country in the world but is second to Germany in solar power generation. China is already the world largest solar panel exporter. According to Reuters GFMS data, 2005 China used less than a million silver ounces in its solar industry in 2005. That amount is expected to top 50 million ounces in 2020.
India has also initiated an ambitious solar energy program that is projected to also require 50 million ounces a year to meet its solar power demands. One large Indian solar panel plant completed in 2016 required twenty million ounces of silver a year during its construction phase.
In addition to silver to satisfy solar demand, India has been importing 200-330 million ounces of silver a year! More than half of annual silver demand in India is from silverware and silver jewelry. In 2018, India imported about 145 million ounces of silver through August.
Investment demand for silver ETFs, silver coins, rounds and bars is expected to compete with silver solar demand for the limited silver supplies in the coming years.
This article by BGASC is not, and should not be regarded as, investment or tax advice or as a recommendation regarding any particular course of action.