Falling silicon prices shakes up solar manufacturing industry

Since 2008, there has been a drastic drop in prices of silicon-based solar modules and the material needed to produce it. This has now come to a point where there is a major shake-up in the solar manufacturing industry, and end-users are benefiting by way of cheaper solar electricity.

PV modules create power directly from sunlight, using the photovoltaic effect through tapping the energy of photons hitting semi-conducting material, creating an electron flow. These modules come in two broad types—Crystalline PV, which uses silicon in crystalline form as the main material, and thin-film, which uses different semi-conducting materials in non-crystal form, usually coated on a glass panel.

Over the past decade, spot prices of solar-grade silicon rose sharply from US $30 a kg in 2001 to a peak of $450 a kg in early 2008 because of higher demand potential and a production base that could not match up. In late 2008, the prices of crystalline modules started falling rapidly, owing partly to better manufacturing technology, economy of scale and the entry of fully integrated Chinese manufacturers into the market (see 'Falling PV prices' and 'Poly-silicon prices').

Even more so, the drop in price is because the economic crisis suddenly created a heavy over-supply as European and US growth of PV demand slackened. This over-supply has been squeezing the profit-margins of Crystalline PV manufacturers as they compete for a smaller market pie.

This fall in Crystalline PV prices has, in turn, forced producers of thin-film PV to follow suit and lower prices even further as their technology is not as efficient at converting sunlight's energy to electricity (see 'Compare price and efficiency of solar PV panel'). Thin-film is however less affected than crystalline in warmer climates, as high temperatures lower a solar module's efficiency.

Compare price and efficiency of solar PV module types

Chetan Singh, professor at IIT-Bombay's National Centre for Photovoltaic Research and Education states that there is no easy way of determining what technology will be most productive in the end as environmental conditions have a large impact on end results. Other factors impacting price could be that thin-films need more land and the quality of panels degrade over time.

Project developers could possibly go for low quality Chinese thin-film in Batch II to be able to present the largest discount in the reverse bidding process and still be able to get financial backing.

The discussion on which technology will prevail is expected to go on as prices change and innovation continues at a rapid pace in the solar sector.