Solar energy is poised to play a significant role in global efforts to roll out clean-energy infrastructure to replace dirty fuels such as coal and oil. Experts predict that solar energy will experience explosive growth over the next couple of decades as countries invest more in renewable energy, including solar and wind.
However, the accelerating demand for solar energy is placing significant stress on the supply of silver, a metal that is critical in building new-gen solar panels. The precious metal is used in paste form to provide a conductive layer on the back and front ends of silicon solar cells.
Even though solar currently accounts for a minute percentage of America’s energy mix, it is expected to play an increasingly larger role in powering up homes in America and around the world. And with green-energy firms adopting more efficient silicon solar cells that require a more silver paste, the consumption of silver in the solar-energy segment has increased from 5% in 2014 to 14% in 2023.
As more funds are invested into developing solar infrastructure, suppliers will most likely struggle to keep up with the rising demand for silver. BloombergNEF predicts that tunnel oxide passivated contact and heterojunction structure cells (TOPCon), which use around 22 milligrams of silver per watt, will eventually become more common than the currently used passivated emitter and rear contact cells (PERC), which need around 10 milligrams of silver.
Data shows that increasing demand is already squeezing the silver market, with the Silver Institute reporting that supply remained flat in 2022 even though demand rose by close to 20%. Recent reports note that silver production is expected to increase by 2% while industrial consumption is predicted to rise by 4%, indicating a potential supply crunch for the year.
While miners stand to rake in major profits if they can increase their supply to meet market demand, ramping up silver production will be far from easy. Since it is incredibly difficult and expensive to find primary silver mines, close to 80% of the silver supply is a byproduct of gold, lead, copper and zinc mining.
Furthermore, investors have been reluctant to invest in mining projects for the past couple of years, and it will probably be difficult for miners to attract new investment and secure the capital they will need to ramp up production. Even if there is funding for new mining projects, it can take more than a decade for new mines to begin producing market-ready silver ores.
The University of South Wales estimates that the global solar industry could use up to 85% to 98% of silver reserves worldwide by 2050. This is likely to create massive market opportunities for leading silver producers such as Hecla Mining Company (NYSE: HL).
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