The price of purified silicon (referred to as polysilicon or solar-grade silicon) is estimated to account for approximately 40% of the price of a crystalline PV module. With such a high dependence on one input, the supply/demand balance for polysilicon looms over the PV industry—with shortage-driven price increases, manufacturing constraints, volatile silicon markets, and plenty of grist for the PV rumor mill. PV competes with the computer chip industry for available polysilicon, and polysilicon prices skyrocketed from 2004 through 2008—from less than $50 per kilogram to more than $400 per kilogram—as producers struggled to keep up with demand from the exploding PV industry.
As prices increased, solar-grade silicon manufacturers worked furiously to add capacity. Today, polysilicon market prices are dropping as a result of supply increases and market turmoil. Production for 2009 may reach 80,000 metric tons, up from 36,000 metric tons in 2005. Reports indicate that close to 60 new companies plan to enter the supply stream in 2009, whereas in 2008 more than 90% of polysilicon was supplied by just seven companies. As the global economy unwinds, many are wondering if the roller-coaster ride will lurch from overdemand to oversupply. But as polysilicon prices decrease, we can expect module prices to decline as well, which sounds like good news to us!