Biden’s solar ambition to increase metal prices... if it gets realized: 2022 preview

In early September, President Joe Biden’s administration announced that the United States planned to produce 45% of its electricity using solar energy by the year 2050

solar panels

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Considering that solar power makes up only 4% of the US’s current energy mix, the plan represents quite an ambitious 1,025% expansion over the next 29 years.

Until 2011, small-scale solar production, especially in commercial and residential sectors, accounted for 68% of the total solar energy generation in the US. Mass-generation systems have been picking up over the past decade thanks to the availability of a 10% Investment Tax Credit for utility-scale solar energy generation from 2023 and due to the fall in the average cost of solar power plant construction.

“There are some uptakes, but solar energy has not revolutionized the world,” according to Fastmarkets analyst Andy Farida, “Not just yet, that is.”

The US Energy Information Administration expects solar energy generation to make up 14% of the total power generated by the country by 2035 before moving up to 20% by 2050 - if everything else remains constant.

While metal market participants and analysts agree that, if realized, the ambitious US plan will benefit the metals industry, the general mood is that we “have to see it to believe it.”

One factor that is raising doubts is the long timescale to 2050 and the possibility that things may take unexpected turns.

“We still have 30 years to go,” one seasoned US-based metals trader said. “By that time, we will all be retired!,” he added.

“Not that silicon”

The special type of polysilicon used in solar panels is a higher-purity metal than the 98.5% standard silicon used in making alloys and steel, and has a purity level from 99.9999% to 99.999999%.

The world’s second-largest polysilicon producer is Germany’s Wacker Chemie, which operates one plant in the US – at Charleston, Tennessee – and four in China. Another producer with a US footprint is Hemlock Semiconductor in the US state of Michigan, which is the world’s ninth-largest polysilicon producer.

Three grams of solar-grade silicon is needed to produce 1 watt of energy. Electricity consumption in the US in 2020 was 3,802 terawatt hours – or 3,802,000,000,000,000 watt hours.

“So, do the math,” a US-based silicon industry source said, “and you get a sense of the potential size of the US market for solar-grade silicon.

“But the next question is ‘where will that material come from?’ Because there is not enough capacity to make [enough] solar-grade silicon in the states,” he added.

He said that he did not think the rise in demand for polysilicon would affect the price of the 98.5% metallurgical-grade material because to convert the lower-purity metal into solar-grade silicon would require additional expensive refining.

Major role for minors

The minor metals indium, selenium, tellurium, and germanium play major roles in the production of solar panels and all – except selenium – are on the 2021 list of critical minerals in the US. The rare metal is also in the European Commission’s list of critical materials.

For instance, the price of germanium, which is a semiconductor used at the bottom of solar cells, has soared as a result of its use in solar equipment.

The monthly average of Fastmarkets’ price assessment for germanium 99.99% Ge, in-whs Rotterdam has increased every month since March, with the largest increase seen in August, when it grew by 6.67% month on month. On March 3, it was $1,075-1,200 per kg, but by December 22, it had risen to $1,400-1,480 per kg.

Due to its high price, germanium is used mostly in orbiting solar panels because of its lightweight and higher efficiency. It has a practical conversion efficiency of 28-32%, which can rise to 42.8% with a higher concentration of light.

Silicon alternatives

Copper indium gallium selenide (CIGS), which also converts sunlight to electrical power, is being promoted as a more efficient replacement for silicon.

The indium used in CIGS is another critical mineral and, according to the US Geological Survey (USGS), estimated world primary refined indium production was 600-800 tonnes per year over the past decade, with 300 tpy produced in China.

The monthly average of Fastmarkets’ price assessment for indium 99.99%, in-whs Rotterdam increased from January to March 2021 as well as from August to November. The largest jump was in September, when the price increased by 19.81% over the previous month.

CIGS photovoltaic panels, which have higher efficiency than the traditional silicon-based solar panels, also use selenium.

The monthly average of Fastmarkets’ price assessment for selenium 99.5% Se min, in-whs Rotterdam increased in 10 out of the first 11 months of 2021. The largest percentage increases were in February and June.

Tellurium is mainly used as cadmium telluride as a key material for new thin-film solar cells. Cadmium telluride solar cells are the second most common photovoltaic technology in the world marketplace after crystalline silicon.

The record efficiency for a laboratory cadmium telluride solar cell is 22.1% by First Solar, with efficiency being measured by the percentage of sunlight converted into solar energy. First Solar also reported its average commercial module efficiency to be approximately 18% at the end of 2020.

The cadmium telluride consumption in photovoltaic cells is over 500 tpy and demand for tellurium is expected to grow steadily as the need for alternative energy and new green technology expands.

“On the fundamentals, tellurium [prices] should go up,” one European trader said. “But with all the mess with Covid-19, it is difficult to say.”

Wiring the grid

Solar panels rely on copper for cabling, wiring, and heat exchange thanks to the red metals’ efficiency in conducting heat and electricity. Approximately 4-5 tonnes of copper is used for each megawatt of energy produced by photovoltaic panels.

“There is no doubt that demand for copper, aluminum and zinc (coated steel), among other minor metals and rare earths, will improve with solar panels,” a multi-metals producer source said. The source estimates that the demand increase for these metals might be 2-3 times the current consumption for solar panels.

Copper will also be used in the replacement and improvement of existing electrical grids and the ramp-up of electric vehicle usage will require more copper wiring in not only the grid but also their charging stations.

It will not be only solar power but all renewable energy that requires copper, which will keep up and even increase the demand for copper, an industry veteran said.

“There will be need for more copper wire and cable to carry the energy produced and this will have an affect [on the prices] in the medium term,” the source explained.

“We will have more sale of the material, more wire made for power, more tools, more ancillary products.,” he added.

But an immediate effect on copper prices is not expected.

“If you were to tell me that the world will end tomorrow, that there is an alien attack and we need all the copper we can get to counterattack the aliens, then I can see it having an immediate impact on copper prices,” Farida said.

“But because [the demand increase stemming from solar energy] is not so urgent, it will not change the copper demand drastically.”

Efforts to decarbonize energy production is already baked into the current copper price, according to a copper producer source.

“It will have some upside impact to the consumption of copper, but the price of copper has really divested itself from fundamentals,” he said.

“I expect continued volatile swings in the price of copper,” he added.

A consumer source said: “Supply can’t ramp up in concert with demand, so it will affect prices.”

“But it will affect [the price] in the bigger, global, spectrum of all metals, not just one metal. It will also affect how [the metals] will get utilized,” the source added.

Policy changes

Market participants are also wary of changes to policies with changing administrations until 2050.

“The office of the presidency will change hands multiple times before that, so depending on who is in office, [they] will try to push their agenda,” the second copper producer source said.

Farida agreed, saying that we will not know whether the next president after Biden will change the plan.

A US-based trader does not think the policy will be substantially impacted by a change in power.

“Regardless of who has been in office, when you look back at the past 20 years, renewables have been becoming stronger,” the trader noted.

Orla O’Sullivan in New York contributed to this report.

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