Renewables Growth Fuels Demand for Min-Metals
By Andrew K. Burger
10 Dec 2006 at 12:28 PM EST
resourceinvestor.com
DAMMAM (ResourceInvestor.com) -- The U.S. and global renewable industry has grown to a degree where its demands for mineral and metal, as well as financial and human, resources is altering supply/demand conditions in a range of key commodities markets, from corn and soybeans to copper and steel. Recent shortages of high-grade silicon have commanded the attention of industry analysts, as well as existing producers and new market entrants, many of whom are now rolling out plans to expand capacity.
To whit, some 450 leaders from across the U.S. renewable energy industry’s manufacturing, production, distribution, finance and policy sectors gathered in Washington D.C. November 29-30 and met with legislators and government agency officials for the American Council on Renewable Energy’s (ACORE) annual national conference.
Under this year’s banner theme, “Renewable Energy in America: Phase II Market Forecasts and Policy Requirements,” participants for the first time put together and announced a collective, industry-wide forecast. According to ACORE’s media release, the U.S. renewable energy will be able to bring on-line 550-700 gigawatts (GW) of electrical power by 2025, easily enough to reach its sought after “25 by 25” goal of being able to meet 25% of the nation’s electricity demand by 2025.
Growth Drivers
An increasingly wide range of organizations in the public and private sectors are driving demand for, investing in, and supporting renewable biofuels, geothermal, solar, water and wind power projects.
Total U.S. clean technology financings as of early November amounted to more than $4 billion, more than double that of the corresponding period last year, according to figures compiled by U.S.-based investment bank Jefferies & Co.’s Clean Tech group. This is bound to add to demand for a range of raw and processed agricultural, mineral and metal resources that feed into renewable energy production processes.
"We have today put real numbers on America's renewable energy future that we have for years felt in our gut," said ACORE president Michael Eckhart in a press statement opening the ACORE conference. "This is a huge tipping point that will guide the public policy support required for renewable energy to help lower CO2 emissions and reduce our nation's dependence on foreign fossil fuels.”
Asked what will be the key factors necessary to foster the growth of a significant and sustainable renewable energy industry and infrastructure in the U.S., Jefferies & Co. managing director of investment banking Jeff Lipton told Resource Investor, “I think the biggest single factor will be continued public and private support. Clearly incentives, rebates, RPS (Renewable Power Standards), tax credits, etc. are important and critical near term to this sector remaining strong.”
“Equally important, though not as prominent in media reports, is the fact that large multinationals are committing real dollars here,” Lipton added. “For some, it is about PR and actual dollars are modest, but many large global corporates are putting real dollars to play, altering the way they do business, etc., because there is a bottom line financial impact to their business and they see it and monitor it.”
Speaking about the solar power market, Edwin Koot, founder of Netherlands-based Solar Plaza BV said, “The main market driver the coming years will certainly be government policy and support. Without financial incentive schemes, the market demand will not grow substantially.”
“The solar energy market is not yet a sustainable market. On the other hand, with more and more countries offering these incentives, further global market growth seems likely to happen. The solar PV industry is growing enormously, mostly up-scaling production capacities. This will bring down cost and market prices.... Within 10 years, a sustainable market without financial government support could well be within reach, making it possible for solar energy to really take off as a major energy source.”
Scarcity Amidst Abundance
There’s been no shortage of shortages in key agricultural, metal and mineral resources in recent years. And this is certainly true of one non-traditional industrial mineral, one of the most abundant on the planet and one which has been the key element in the extraordinary growth and evolution of multi-billion dollar global markets in digital electronics that make use of silicon-based semiconductors.
Silicon is one the most abundant mineral elements on earth. Used to manufacture integrated circuits, it has been the mineral substrate for the huge leaps in performance and capabilities behind the digital revolution, and as such has played an essential role in the transformation of economies and societies around the world.
It is also the substrate used to manufacture solar photovoltaic cells (PV), and demand for silicon has grown to the point where it has caused significant, albeit temporary, shortages, cut into margins and constrained growth and production for semiconductor and solar PV manufacturers, and industry-wide supply chains that depend on them, from computers and consumer electronics to solar power systems providers.
It wasn’t very long ago that high-grade silicon producers could comfortably meet the needs of silicon manufacturers by selling them what was left over after meeting demand for even higher quality silicon from semiconductor and chip manufacturers.
That’s no longer the case, explained Travis Bradford, a former hedge fund executive who founded and is now director of the Prometheus Institute for Sustainable Development. Bradford told Resource Investor that Prometheus expects that demand for solar PV will exceed that from the electronics industry for the first time this year.
“Just a few years ago, polysilicon prices were in the $50/kg range, while PV companies were paying nearly $25/kg. In 2004 and 2005, contract prices began to rapidly increase as the demand growth became imminent and inventories were depleted. Now, long-term contract prices for PV companies mirror those semiconductor companies pay for feedstock. Today‘s contract prices are above $50/kg; spot market prices are $200-$300/kg,” according to Prometheus’s Polysilicon 2006 report.
Encouraging Outlook
There are seven major producers supplying the global polysilicon market for both solar PV and semiconductors, according to Bradford: Hemlock Semiconductor Corp. and MEMC (Monsanto Electronic Materials Company) [NYSE:WFR] in the U.S.; Wacker and REC (Renewable Energy Corp.) [Oslo:REC] in Europe; and Tokuyama, Mitsubishi Materials Corp. and Sumitomo Titanium Corp. in Japan.
Given future growth rate forecasts, producers are scrambling to add capacity, aspiring new market entrants are sourcing supply and members of both groups are pouring investment dollars into developing new, more efficient methods that make use of less silicon, or that make use of other materials, such as gallium-arsenide.
“Solar manufacturers are increasing efficiency in terms of cell processing and by making it thinner, but there are limits given the current type of technology being used. In order to meet 30-40% per annum forecasts, they’ll have to crank out a lot more silicon,” Bradford noted.
Spectrolab, Inc., a wholly-owned Boeing subsidiary, last week realized a PV milestone by producing a solar PV cell with 40.7% conversion efficiency. Partly funded by the U.S. Dept. of Energy, the breakthrough development could bring installed solar PV costs down to $3 per watt and produce electricity at a cost of $0.08 to $0.10 cents per kilowatt-hour, according to an ACORE news report.
“At less than $4 per watt installed, solar PV can meet a majority of the world’s electricity demand. Two years ago, we were at $6.50 per watt, but we’re now at about $8 per watt due to the silicon shortfall,” Bradford concluded. |
