Here Comes The Sun
You all recall Christy’s posting on Al Gore’s joining this energy venture, right?
Well, it turns out that he and the others involved have picked an excellent time for this — silicon, the basic material used in most solar cells, is about to go into big-time production with a corresponding price drop that in five years (less if oil keeps getting pricier) will make solar energy cheaper than oil, even with oil’s massive subsidies.
Analysts at UBS securities are predicting a quadrupling of polysilicon supply in the next two years as more factories come onstream to supply the voracious market demand for polysilicon wafers.
The single biggest cost to solar cell makers – and the single biggest detriment to solar adoption today – is the high price of raw polysilicon. It is 70% of a solar cell maker’s cost structure. Even companies like Suntech (STP) – which have their entire 2007-08 inventory sold out – must go to the expensive spot market for 25-50% of their wafers. The cost of wafers is what has sunk the share prices of the smaller solar cell makers: China SunEnergy (CSUN), Canadian Solar (CSIQ), Solarfun (SOLF).
All that’s about to change. UBS estimates the cost of raw silicon for wafers is going to fall 66% over the next 3 years, from $300/kg to $100/kg. Solar has overtaken the market share for raw silicon once held by the semiconductor industry (for decades). This acceleration in polysilicon supply will reduce the materials cost for solar cell makers to 25% from today’s 70%. That cost savings ($) can go right to the bottom line: strengthening profit margins, reducing prices for consumers, and making solar adoption more widespread. Solar can be more affordable, more doable, and on a parity with oil in 5 years. Demand for this new energy today is unprecedented. Industry estimates are for 50% year over year growth; yet it is not even 1% of the world’s energy source.
This is for real, folks.
This is what’s going to make it possible to get that solar array on your roof (or a set of condo-association-pleasing shingles) without you needing to forego sending your kids to college.
This is what will cause medium-sized businesses to decide to go solar.
It gets even better:
There are two more aspects to this picture: government subsidies and technological improvements. The explosive profits in the solar sector have thus far been coming from Germany, Portugal, and Spain. In two years a Democratically-controlled congress (by a wide margin) will be the majority ruler and it is very likely we will have a Democratic chief executive. The leaders in both houses of congress are from western states (CA, NV) which have already hosted large solar initiatives and projects, states with solar industries which stand to benefit from a favorable tariff pass-through rate if initiated by congress. They also set the committee agendas. I don’t see who would be able to stand against a national solar initiative or why.
Green is growing in popularity daily and $100/bbl oil encourages policy initiatives. California already pays a solar construction rebate of $2.25/watt for residences and businesses, and $3.25/watt for non-profits. If a Federally sponsored bill was added to that (and this seems likely), it would encourage homebuilders and corporations to go green.
The Democrats wouldn’t even need to throw solar and wind and biofuels that much of a bone — just stop the Bush and the GOP Congress’ practice of having been actively hostile to them. (Though it would be nice to see the subsidies currently flowing to Big Oil start flowing in other directions.)