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Heraeus Precious Appraisal

  • Edition 37 - 26. Oktober 2020

Will a solar-led renewable energy surge be the pandemic's silver lining?

Silver stands to benefit from the global renewable energy drive in the wake of Covid-19, owing to its use in solar photovoltaic (PV) cells.Solar energy is expected to lead the growth of renewable energy over the next decade, with PV installations increasing by an average of 13% a year and meeting almost one-third of electricity demand growth out to 2030 (source: IEA). Under the International Energy Agency’s Stated Policies Scenario, global solar PV deployment is forecast to return to pre-pandemic levels by 2021 and continue to grow each year after that, owing to widely available resources, declining costs and policy support.

Solar PV accounts for 10% of total silver demand, consuming 98.7 moz last year(source: The Silver Institute). However, consumption of silver in energy technologies, which includes solar PV, concentrated solar and nuclear, could grow by more than 50% of current demand by 2050, the largest proportion for any non-battery metal. More than 95% of this growth is due to a rapid expansion of solar PV (source: World Bank).

Thrifting could see silver demand rise slower than PV installation growth.Ongoing innovation is likely to continue reducing the silver content of solar cells, halving from 111 mg/cell in 2019 to around 50 mg/cell by 2030 (source: Fraunhofer Institute). However, silver is difficult to replace entirely and there is a limit to how much can be thrifted before efficiency losses outweigh cost benefits. A high silver price is a key driver of thrifting in solar cells; when the price doubled between 2009 and 2011, silver loadings almost halved. In 2020, the silver price has already rallied more than 50% year-to-date, including a 142% gain from the low in March to the high in August. This is likely to accelerate the rate at which thrifting will take place this year and moving into 2021.

The transition towards a ‘greener’ future brings considerable upside for the silver market over the longer term,and solar PV is expected to remain a critical source of the metal’s industrial demand. While thrifting remains an ever-present concern, silver’s unique electroconductive properties are not readily overcome, which mitigates some of the risk.

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