When does solar panel demand blow out the silver price ?

There are numerous projects in the pipeline in Australia for many Giga Watts of solar panels and therefore have exposure to dramatic cost blow out if there is a significant rise in the price of silver.

FFI are looking at 16GW of solar a year by 2029, Kepco & Western Green Energy Hub are looking at 50GW of solar and wind in WA as part of the ultra scale green hydrogen plan and WA has secured 3 Billion in federal funds to build out transmission projects to support stunning renewable energy plans. Sun Cable project is looking at 20GW solar and 40GW battery storage in a $40 Billion project and on Friday Singapore Energy Market Authority named 5 consortia to deliver a total of 11GW of solar PV and 21 gigawatt hours of battery storage to be built by 2027.

You are probably aware that in 1980 silver hit a high of US$50 and Gold at that time reached US$875. Today Gold is valued approximately US$1000 Dollars higher and yet Silver is only valued at US$23 and is probably the most undervalued asset on the planet.

In 2022 according to the Silver Institute report there was a silver shortage of 237.7 Million ounces and total demand for silver in 2022 was 1.242 Billion ounces of silver.

An average of more than 1GW a day of new solar is being installed around the world in 2023, according to forecasts from Bloomberg New Energy Finance, with China contributing at least half of that amount.

The BNEF numbers, sharedon LinkedIn by Europe-based energy analyst Gerard Reid, forecast that China will install a whopping 208GW of solar this year, which Reid points out is more than the US has installed over the last 20 years.

The 200GW from China combines with 33GW forecast from the US, 16GWand 15GW by Brazil and India respectively, and 11GW by Germany and then single-digit GW figures from another 14 countries, ranging from around 8GW to around 2GW, to deliver an average of more than 1GW a day.

Australia sits somewhere in the middle, and is expected to install a total of nearly 5.5GW in 2023, according to BNEF, which would be a 16% jump on the amount installed in 2022.

“Total demand for solar panels could be 400GWwhich would be 50% higher than in 2022!”

Trendforce published 2023 forecast of 350GW.

PV Info Link published 2023 forecast of 416GW.

World production has been projected up to 380GW in 2023 by Rethink Energy.

In contrast to the predictions by Wood Mackenzie, Rethink Energy asserts that the solar industry isn’t likely to have “one year of rapid growth followed by being stuck at below 400 GW through to 2030. It is growing consistently to1,000 GW per annum by 2030 (which equates to approximately 600 Million ounces of silver) , with tens of billions of dollars invested so far this year in manufacturing capacity.”

https://cleantechnica.com/2023/08/11/solar-is-king-2023-50-global-growth-predicted/

Now ANZ Bank’s commodities team of Daniel Hynes and Soni Kumari has turned its spotlight on to the metal with a paper out in July called “Solar’s Silver Lining”.

By 2025, ANZ expects industrial demand for silver in solar panelling to make up 53% of the metal’s demand . (Which equates to approximately 658 Million ounces)

The problem is, of course, that growth in mine production is largely beholden to mining of other metals with silver as a by-product.

With base metal prices weakening at present, this could have a knock-on effect in regard to the volumes of silver coming as a by-product.

The Silver Institute’s figures show that mine output in 2022 fell by 0.6%.

The reason? Lower by-product output from lead-zinc mines, especially in China and Peru.

In fact, Peru’s output last year was down by 263 tonnes due to a suspension at one mine and falling grades at several others.

ANZ also notes that scrap makes up 20% of supply, and that source is also now lagging.

The bank report points out that above-ground silver inventories remain plentiful but have dropped sharply over the past couple of years.

“We estimate the silver market is entering a period of tightness unseen for decades.”

“This may not be alleviated by higher silver prices,” adds ANZ.

The precious metals house, Incrementum of Liechtenstein, devoted two chapters of its recently released annual “In Gold We Trust” to silver, and agrees with ANZ’s analysis, saying that “steadfast commitments to the green energy transition serve as a key battleground for silver industry demand”.

But, along with this phenomenon, there is also the silver supply dynamic.

“We expect the prolonged absence of capital expenditure to be reflected in a future for the shiny metal that is characterised by unprecedented scarcity,” says Incrementum.

The future solar panel demand is projected to grow substantially and by 2030 is expected to be at 1000GW per year (there are approximately 600000 ozs of silver used in a GW of solar panels) and I haven’t even mentioned demand for silver from Electric Cars and the question is where is all that physical silver going to come from?

What happens when industrial users are unable to easily source physical silver for their production needs and are scrambling to get hold of silver?

Silver paste is the 2^nd biggest cost component for PV manufacturers 9% for PERC cells, up to 12% of TOPcon and up to 16% for HJT with future solar panels demand trending towards TOPcon and HJT currently as technology improves.

It will take quite a substantial rise in the silver price before it starts to impact on demand for silver from the manufacturers of solar panels.

The question is how can these companies that are building large solar panel projects hedge against the potential for a dramatic rise in the silver price ?

imo the simplest way would be for them to buy shares in companies that have silver projects that have a realistic chance of going into production this decade. An entity purchasing up to 19.9% would certainly gain some potential to preferential offtake and if silver prices explode higher all the silver stocks would stand to benefit but the potential producers like Boab Metals, Silver Mines and Investigator Resources probably benefit the most and a company holding a significant stake in a silver stock with realistic production prospects could gain substantially on the increased share value a silver price explosion would cause for the silver stocks which would more than offset any increase in the cost of solar panels.