Good news for the c-Si solar cell producers and module manufacturers is that overcapacity in polysilicon production should continue as major producers continue with capacity expansion plans and new entrants, especially in China, ramp initial plants. According to a new report from Bernreuter Research, entitled ‘The Who’s Who of Solar Silicon Production,’ despite strong solar module demand, pressure on the silicon prices rising will likely be limited this year.
Bernreuter Research estimates that global polysilicon production will reach 250,000MT in 2012, with approximately 80,000MT produced in China alone, making up about one-third of global production.
Johannes Bernreuter, founder of the research firm, told PV-Tech that polysilicon supply/demand dynamics this year would translate into spot pricing in the range of US$45 to US$50/kg.
“In 2011, I expect that a significant volume in China will probably be produced at manufacturing costs below US$35/kg, and that the spot price will fall to this level– whether by the end of the year or earlier,” commented Bernreuter.
However, this price decline will cause problems for many of the new and smaller polysilicon producers, according to the research firm.
“The Chinese polysilicon industry will undoubtedly become an important player in the global market,” noted Frank Haugwitz, photovoltaics consultant in Beijing and coauthor of the report. “However, about 20 smaller manufacturers, which had an annual production capacity of only 1,500 MT or even less at the end of 2009, are the first potential candidates for consolidation.”
Bernreuter clarified the issue of ‘consolidation,’ suggesting many would simply go out of business. This is due only in part to manufacturing cost disadvantages compared with significantly larger competitors, but can also be attributed to smaller producers’ financial strength and ability to survive a period of loss-making while prices fell below manufacturing costs.
“In this sense, Chinese manufacturers enjoy an advantage with all the money they have reaped from the government’s stimulus program. Nevertheless, a nominal production capacity of only 1500MT or even less at the end of 2009 is simply not an economical scale,” he noted.
Bernreuter explained that, as a rule of thumb, smaller start-ups would be able to achieve production costs of above US$40/kg in the first and second year of ramp up. All those who are still in this phase in 2011 will start to suffer financial problems.
What isn’t clear yet is whether the expected consolidation will have a meaningful impact on polysilicon overcapacity and potentially lead to a rise in prices. Solar energy demand dynamics is also a contributing factor, which because of its volatile position makes such a call even more difficult.
Perhaps more controversial is the report’s claim regarding different technologies fighting to compete with the traditional Siemens process for polysilicon production.
Bernreuter Research examined nine alternative production methods to the standard Siemens process, noting that “none of them will challenge the Siemens process in the short term. In particular, fluidized bed reactor technology has not delivered on its promise of lower manufacturing costs.”
Bernreuter believes that the high capital investment costs of developing and scaling FBR processes are at the root cause of the technology not meeting a 30% lower manufacturing cost compared with the Siemens process. The resulting high depreciation drives up total manufacturing costs, according to the analyst.
However, he recognised that both Wacker and REC have functional reactors now, so the technical challenges are behind them. It should be noted that MEMC has been using the FBR process successfully and was a pioneer in its use.
As far as upgraded metallurgical-grade (UMG) silicon, the research firm projects the technology will only play a marginal role with a market share of less than 1% through 2012.