Solar bubble

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: Solar photovoltaic segment seems to be red hot. Several small and medium players are making a beeline to convert sunlight into electricity with the use of solar cells. As they start finalising their plans, however, most of these players are waking up to the market realities. One of the major constraints is the supply of essential raw materials, especially, polysilicon, a key component used to make solar panels.

Is there a threat on horizon for the much-hyped solar photovoltaic segment, where investments worth over $ 7 billion have already been pledged? Does it spell a threat to Indian companies trying to get a foothold in the global solar power market? As per market estimates, the photovoltaic industry is projected to touch $70 billion by 2012, up from $21 billion in 2007. However, the stockpiles of most of the polysilicon manufacturing companies have almost touched the bottom. Industry players are worried that this might affect the growth of the industry in the near future.

Mismatch is even more marked in India. This arises from the fact that there is no single manufacturer of silicon in India and there are very few players worldwide.

There are two ways to purchase silicon—long-term contract and on-spot supply. While a long-term contract costs about $230 a kg, it is $375 a kg for on-spot supply. The economics is as simple as the supply-demand ratio. Similar is the case of wafer, which is about $7 a kg in long-term and $12 in on-spot. As such, the demand has outgrown supply and there is a need for capacity building.

Says Amol Kotwal, deputy director (energy and power systems practice), Frost & Sullivan, South Asia and Middle East, “The rapid growth of the solar PV industry, estimated at 40-50% year-on-year, has put pressure on the raw material supply (polysilicon) globally. The situation has led to skyrocketing polysilicon prices. Long-term contract prices for polysilicon have escalated to almost three to four times the prices in 2004, whereas spot prices in a few cases have touched $380-400 a kg, which is nearly 10 times the $40-a kg spot prices in early 2004.”