The cost of solar cells and microchips has nowhere to go but down because of a supply glut for the commodity they’re made from, a brittle charcoal-colored semiconductor baked in ovens at 600 degrees centigrade.
Polysilicon has plunged 93 percent to $33 a kilogram from $475 three years ago as the top five producers more than doubled output, data compiled by Bloomberg shows. The industry next year will produce 28 percent more of the raw material than will be consumed, up from 20 percent this year, said Robert Schramm- Fuchs and Shai Hill, analysts at Macquarie Group Ltd.
“Polysilicon is a grossly, grossly, grossly oversupplied commodity product,” said Paul Leming, director of research at Ticonderoga Securities in New York.
Perhaps the story can be read either way, but overall it doesn’t sound like good news for the future of the solar industry. It sounds like a glut induced by previously high expectations, which now have been corrected and converted into ruinous excess capacity: “The famine turned to a glut when demand growth for panels slowed as solar-energy subsidies were cut. With plants taking at least two years to build, new factories are set to keep opening.” And this:
Price declines for products at every step in the solar supply chain triggered a 60 percent drop in the Bloomberg Global Leaders Solar Index since February tracking 37 shares. It’s led to speculation that more poly producers and panel makers may either combine or go bust in the coming months. Q-Cells SE (QCE), once the world’s biggest cell maker, has said it’s open to takeovers.
Hat tip goes to on Dan Hill on Twitter. Here is my previous post on the topic. You can read this background as a case for subsidies, but it’s hard to read it as a case for optimism or the expectation of exponential progress.
Addendum: Robin Hanson offers related remarks.