Most of us think of silver as jewelry or an investment. Indeed, it is a precious metal, so it fits these roles perfectly. But there's also another side to silver that gets overlooked: its widespread use in various industrial applications. Believe it or not, more than half (56%) of the annual silver supply goes toward uses in industry.
Due to developments in renewable energy technology, the industrial demand for silver may be poised to rise dramatically over the next several years.
The main shift to keep an eye on is the use of silver in photovoltaic cells, better known as solar cells. One solar cell combines with others into a module, or solar panel. The panels are then individual components of a larger photovoltaic system that uses an array of solar panels to capture the sun's energy in a direct current (DC) that is converted into an alternating current (AC).
Silver in Solar Energy
The introduction of photovoltaic (PV) technology has made harnessing the abundant power of the sun a reality. Even as the adoption and application of PV is still in its infancy, it has grown in a few short years from nothing to an increasingly cost-effective option for meeting all of the electricity needs for certain locales. In parts of Europe, solar power is already cost-competitive with other forms used to generate electricity.
Even before the emergence of solar power technologies, silver was already used in photography, batteries, sterilization in medical situations, and elsewhere in electronics manufacture and industry in general.
Where does silver fit into solar energy? Newer solar cell use a back metal panel that can be made of aluminum, silver, or gold. (The International Space Station uses the latter because of gold's supremacy as a conductor.) Between these choices, silver is the "Goldilocks"—it's not as cheap as aluminum, but it's more effective at the job; and it's less effective than gold, but far less expensive.
Even so, 90% of the standard silicon-based PV cells in use require a special conductive silver paste in their construction. According to The Silver Institute, "close to 70 million ounces of silver are projected for use by solar energy by 2016." Other sources have projected closer to 100 million oz.
For these purposes, each solar cell requires two-thirds of an ounce of silver. Due to the drop in the price of silver, there is little incentive for producers to explore the viability of alternative metals as substitutes. In other words, the use of silver in solar applications is here to stay. This adds up: the solar industry now uses over 6% of the annual silver supply, and this number keeps growing.
How Solar Is Growing
The emphasis on clean energy is driving greater and greater investment in solar technologies, especially in pollution-riddled China. As the technology has improved, the cost of construction for solar projects has greatly declined over the past several years. In Europe, a PV system now pays for itself in savings in an average of just 2 years. Germany produces the most solar energy in the region, covering 7% of the country's overall energy use.
The global energy-producing capacity for solar power is nearing 200 gigawatts, representing a 4,000% increase in the last decade. China alone is expected to grow its solar capacity fivefold by 2020, and global capacity is projected to more than double to 430 GW by 2018.
The main impacts for silver from these developments are that 1) greater demand for the metal will begin to drain larger portions of the silver supply; and 2) the increased industrial demand and shrinking supply will support higher silver prices as the use of solar energy grows.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.