Polysilicon prices expected to stabilise in the near term

Demand for silicon used to make solar cells is likely to rise from 41,000 tonnes in 2006 to 120,000 tonnes in 2010E. Although polysilicon prices have risen the world over, causing concerns on cell/ module makers’  profitability, we believe these prices are due for a correction by Q1/Q2CY09 as more capacities come on stream.

What drives cost reduction for solar energy?

While polysilicon prices are a key cost driver, cell efficiency as well as wafer thickness play important roles in driving costs down. Currently, wafer thickness ranges between 200 nm and 300 nm; it is expected to come down with a theoretical limit of 130 nm, after which wafer becomes transparent and difficult to handle.

A 70 micron decrease in thickness, leads to a 10-15% increase in wafer output or 10-15% cost reduction. A 1% increase in cell efficiency leads to a ~7% cost reduction at all levels in the value chain. Economies of scale also play an important role in cost reduction. Other levers for cost reduction include increase in throughput, reduced breakages, increased proportion of A cells, and increase in uptimes. With a robust 40% demand CAGR expected over CY06-10E, cell capacities are also growing at a rapid pace.