Silicon hike hits solar energy

The price of silicon has soared by 50 per cent over the past year, curbing the growth of the solar industry and driving up costs.

Silicon, made from sand, is a raw material used in semi-conductor devices such as computer chips and the cells that generate electricity in solar panels. Production of silicon has not kept pace with demand from the solar-energy industry, which has soared in the past four years because of the growth in the market for solar panels.

This now accounts for about half the global consumption of silicon, compared with one-fifth in 2000. The rest comes from the electronics industry. Between 30,000 and 33,000 tons of silicon were produced last year.

Jenny Chase, a senior analyst at the information provider New Energy Finance, said that long-term silicon contracts this year were likely to cost around €45,000 (£31,000) per ton, compared with €30,000 per ton last year. Spot prices are even higher, with some analysts putting them at €190,000 per ton.

Prices are estimated because there is not an open market in silicon; deals are struck in private between suppliers and customers.

"There's a huge supply bottleneck in the silicon market, largely caused by increased global production of solar cells," said Ms Chase.

A spokesman for Renewable Solar Corporation, the world's third-largest producer of solar cells, said that global production grew by more than 50 per cent last year. In contrast, production growth in the electronics industry was a more modest 8 per cent.

Travis Bradford, the president of the Prometheus Institute for Sustainable Development, said that the cost of silicon accounts for about a quarter of the cost of producing a solar cell.

"Chinese solar cell producers in particular are bidding up the cost of silicon, which is constraining production growth for solar cell manufacturers in Europe and the US," he said.

It takes several years to build new silicon manufacturing facilities. But by the end of the decade, annual production capacity is expected to more than double to just under 85,000 tons, which should drive down prices.