Silver’s cleantech appeal burnished by solar power boom
If you think about silver these days, you have to build into that thinking the metal’s growing role as a cleantech metal – and that’s mainly due to the solar industry, which stands out in a slackening global economy as one of the more exciting metal growth stories.
A few months ago the gold:silver price ratio was at 1:85, historically on the high side (it was once 1:16). Now it is 1:76. So gold is 76 times more valuable per ounce than silver yet there are only nine ounces of silver mined for every one ounce of gold pulled out of the ground. And with silver’s growing industrial uses, that production equation must at some stage begin to affect the price ratio – although few would go so far as to predict $140/oz by 2019 (compared to $16 as I write this), as one Canadian mining CEO did last week.
Keith Neumeyer of First Majestic Silver Corp, in making that prediction, did present an interesting argument: the planet is being electrified (electric cars, solar panels) and silver is the most electrically conductive material on the planet other than gold – and gold is too expensive to use in circuit boards and car batteries.
But is it solar panels that have got some investors excited about silver. Silver is a precious metal, and an industrial metal, a technology metal – and, now, a cleantech metal.
As the Washington-based Silver Institute explains, “silver is a primary ingredient in the photovoltaic cells that catch the sun’s rays and transform them into energy. Ninety per cent of crystalline silicon photovoltaic cells (the most common cell) use silver paste and close to 70 million ounces of silver are projected for use by solar energy by 2016”.
In fact, demand for silver in the solar industry reached 78 million ounces in 2015, up an astounding 23% over 2014. The solar sector off-take now represents 17% of the silver used in industrial applications, up from 2% two years ago. China installed an additional 7.1 gigawatts in solar capacity in the first quarter of 2016.
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Simona Gambarini of London-based Capital Economist reckons that the strong growth in the number of solar installations in China and the U.S. should see silver demand from the sector up another 20% in 2016. This will more than compensate for the overall fall of silver use in other industrial applications that has occurred over the past three years.
The International Energy Agency estimates that global solar capacity increased by about 40 gigawatts in 2014. Over the past 10 years, global PV capacity has increased at an average annual growth rate of 51%, rising from 4.2GW in 2005 to 226GW in 2015.
China’s National Energy Administration has said that country plans to add up to 20GW of capacity a year, for five years. As Gambarini notes, the U.S. solar industry will continue to benefit from the Investment Tax Credit, a 30% tax credit for solar systems on residential and commercial installations, which has been extended to 2022. There is also the potential implementation of the Clean Power Plan.
She also makes the point that thrifting is not a concern: as silver paste accounts for only about 5% of total cost of PV panels, there is no great urge to reduce the proportion of silver.
And there is potential for growth that could affect the silver demand/supply situation. First Majestic’s Neumeyer said last week his company had just been approached by a Japanese electronics maker that wanted to lock in future silver supply, which he sees as a sign of supply concerns.
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