Silver's Time In The Sun

(November 2021 - Heraeus Precious)

The solar photovoltaic (PV) industry accounts for 11% of total silver demand, consuming 101 million ounces (moz) last year, up from 98.7 moz in 2019 and almost double the level just five years earlier (54.1 moz in 2015) (source: The Silver Institute). Despite the pandemic, global PV installations reached 138 GW in 2020, a new annual record of 18% growth and causing a modest uptick in silver demand (+2% year-on-year) despite the ongoing thrifting of metal in solar cells. Even in countries badly affected by the pandemic, PV installations and associated silver demand have been resilient. Global PV deployment is expected to record another year of record growth in 2021, with estimates ranging from 163-183 GW (equivalent to ~120-130 moz of silver at current loadings). By 2022, PV installations are forecast to exceed 200 GW for the first time on record, with silver consumption moving closer to ~140 moz.

Silver will benefit from the global renewable energy drive in the wake of COP26. The 26th United Nations Climate Change Conference (COP26) started in Glasgow last week, bringing global leaders together to accelerate action towards the goals of the Paris Agreement. Highlighting the importance of solar energy in achieving these goals, leaders from India and the UK launched the ‘One Sun, One World, One Grid’ initiative to accelerate the growth of an interconnected global solar energy economy. Solar energy is already expected to lead the growth of renewable energy over the next decade, with PV installations increasing by an average of 13% a year to meet almost one-third of electricity demand growth out to 2030 (source: IEA).

Despite a high price regime, the outlook for silver demand is positive. For the PV market, the past 18 months have been characterized by the increasing cost of raw materials, particularly polysilicon and solar glass. Silver, the second most expensive component of a solar cell, now costs over one-and-a-half times its average cost over the last few years. While thrifting is expected to continue reducing the silver content of solar cells while prices are high, there is a limit to how much can be removed before efficiency losses outweigh cost benefits. With solar PV energy identified as a critical technology in meeting long-term goals to curb global warming, there is considerable upside for the silver market over the next decade