Photovoltaic may drive the explosive growth of silver demand in the future.

At present, two precious metal commodity futures are listed on the stock exchange: gold and silver. From the perspective of the overseas market, the lowest price of gold and silver appeared in the 1980s, when the value fell to 14. The main event was that the Hunt brothers forced their positions in silver; the highest value was 112 in 2020. The main reason is that the transportation of COVID-19 was blocked, which led to the forced position of gold. In general, the average price of gold and silver is 60 per cent. Which variety is more suitable for investment? From the analysis of the current fundamental situation, we are more optimistic about the investment value of silver.

In terms of supply, there is little difference between gold and silver, and the sharp decline in mine capital expenditure over the past decade has led to a relatively limited reserve of gold and silver available for mining, and both gold and silver have shown a certain downward trend in production, which is difficult to reverse in the short term. From the point of view of demand, the application of silver in photovoltaic silver paste is emerging as a new force, and will maintain a high growth rate in the future. According to 2019 data, the global demand for photovoltaic silver is about 3000 tons, accounting for about 20% of the overall silver industry demand.

As we know, the manufacture of photovoltaic equipment is mainly divided into five parts, namely silicon material, silicon wafer, photovoltaic cell, photovoltaic module and photovoltaic system. The photovoltaic cell and module can be divided into photovoltaic glass, EVA, silicon metal and silver paste circuit. Silver paste is a kind of viscous paste composed of high purity metallic silver particles, glass oxides, organic resins and organic solvents. Silver paste is needed because silver has much higher electrical conductivity than copper and lower value than gold. Generally, silver ingots are processed into silver powder, and various excipients such as resin, glass powder and polymer synthetic materials are added into silver paste, which is engraved on the silicon wafer to conduct electricity by screen printing technology. With the increase in the number of new photovoltaic installations, a large number of battery modules are bound to be used, which also drives the explosive growth of silver demand.

Development of energy industry and photovoltaic industry

From the perspective of the whole energy environment, with the continuous progress and development of human society, the overall demand for energy is increasing, unless there are major natural disasters or wars. According to the judgment of the China Electric Power Development report on the development trend of electric power during the 14th five-year Plan, the growth rate of electricity consumption of the whole society in 2020 is about 2.8%, and the electricity consumption of the whole society will return to medium-speed growth in the next three years. The report predicts that in 2025, when the 14th five-year Plan ends, the electricity consumption of the whole society will be 9.1-9.5 trillion kilowatt-hours. If, as expected by the market, under the target of 18% non-fossil energy, the total consumption of non-fossil energy will be 987.7 million tons of standard coal in 2025, equivalent to 3.1 trillion kilowatt-hours of electricity generation. Of course, this also includes nuclear energy, wind energy, solar energy, hydropower and biomass power generation. If other related energy sources are excluded, it can be estimated that the generation of photovoltaic and wind energy is about 1.1641 trillion kilowatt hours, an increase of 484.8 billion kilowatt hours compared with the forecast in 2020, corresponding to 372.9 GW, which is equivalent to the annual increase in 74.6GW by 2025.

Of course, it can't all be solar energy. According to the statistics of the National Energy Administration, photovoltaic accounts for 40% of new photovoltaic power generation and 80% of wind power generation in the past few years (80% in 2017, and distributed power stations broke out due to subsidies), so we calculated according to 50%, 55%, 60%, 65% and 70%. According to the conservative annual growth rate of 2.5% of primary energy, the proportion of non-fossil energy reached 18% during the 14th five-year Plan period, while the ratio of photovoltaic to wind energy is calculated at 60:40. If the volume ratio is taken into account, the actual photovoltaic installed capacity is about 58GW. If more optimistic, according to the average annual growth rate of primary energy consumption by 0.5%, under the same conditions, the average annual installed capacity of photovoltaic in the next five years will be about 67GW, while in the most optimistic case, the average annual installed capacity will reach 128GW.

Technological Progress and High Silver consumption

The main reason for the high-certainty growth of the photovoltaic industry is the rapid decline in the cost of photovoltaic power generation. According to a 2018 speech by Li Chuangjun, deputy director of the New Energy Department of the National Energy Administration, the cost of photovoltaic modules has fallen by 90% in the past decade. With the gradual development of photovoltaic technology and industry chain in China, the whole photovoltaic industry has undergone earth-shaking changes. At present, the cost of power generation in some areas is close to or even completely equal to the cost of thermal power generation, and in the foreseeable future, the cost will be further reduced, making photovoltaic power generation have more cost advantages and partially replace thermal power generation.

Of course, technological progress is the biggest push to reduce the cost of photovoltaic. At present, the photovoltaic cell market is mainly based on PERC cells, supplemented by BSF traditional cells. Before 2018, the market share of PERC batteries was only 30%, but due to the higher conversion efficiency of PERC, which is more beneficial to cost control, the market recognition of PERC batteries is more concentrated. In just a few years, the market share of PERC batteries has exceeded 65%, and may further increase in the future.

From the technical means commonly used in the market at present, PERC batteries are generally coated with silver paste on the front and back, generally, the amount of silver paste on the front is 100mg, the amount of silver paste on the back is 40mg, a total of one battery 140mg. At present, the area of the silicon wafer is generally 156 square centimeters, and the conversion efficiency is 23.5%, from which the single chip power is calculated to be about 5.77w. If all the new photovoltaic installations in 2020 use PERC cells, then the corresponding photovoltaic batteries will be about 21.6 billion, and the silver consumption will be about 3024 tons. Of course, the above calculation assumptions are too simple and do not take into account the changes in wafer size, package loss rate, changes in photovoltaic cell technology and the decline in silver consumption caused by technological progress. In addition, there is a more efficient HJT technology waiting to be used, in which the amount of silver paste used in a single battery is about 300mg, twice as much as PERC technology, resulting in a much higher cost per battery than PERC batteries. The larger the size, the silver consumption per wattage will be reduced to a certain extent. We make some reasonable assumptions about this. From the derived data, in a more optimistic situation, the demand for silver of photovoltaic has an annual increase of nearly or more than 1000 tons.

Long-term prospect

Although the recent release of the relevant consultation draft of the National Energy Administration on the photovoltaic industry has reduced market expectations for new installations in the photovoltaic industry, with the large-scale increase in capacity of battery manufacturers, the demand for photovoltaic silver has not been substantially affected. From the perspective of field research, with the massive purchase of silver paste by battery enterprises, as well as the continuous improvement of the localization rate of silver powder and silver paste industry, the proportion of industrial demand for silver is also increasing. Strong point-price buying provides a good support for silver in the case of significant changes in macro factors. Based on the price of gold and silver in the London market, the gold-silver ratio has fallen further to around 66. In the future, we are optimistic about the demand for silver.