Silver Supply Facing Pressure as Solar Energy Attracts Interest

What role does silver play in solar panels?

The solar energy industry has increasingly been gobbling up silver in recent years, and according to the 2022 edition of the Silver Institute's World Silver Survey, this interest is expected to continue moving forward.

As the association explains, the white metal plays an important role in photovoltaic (PV) technology.

“Silver powder is turned into a paste which is then loaded onto a silicon wafer,” the group states on its website, noting that PV is the top source of green electricity. “When light strikes the silicon, electrons are set free and the silver — the world’s best conductor — carries the electricity for immediate use or stores it in batteries for later consumption.”

A curiosity when it comes to silver demand for solar energy is that each solar cell only needs a few milligrams of silver. However, according to German company AE Solar TIER1, the sheer scale of PV installations makes up for that.

“I view the industrial side as the backbone of demand for silver, and of course we can go into where the growth has been — namely the energy transition side of things, where the world is moving towards alternative energy sources. Solar plays a huge part in silver for that, and that area has been growing,” Maria Smirnova of Sprott Asset Management told INN.

How much silver does the solar industry use today?

It’s clear that silver has a critical relationship with the solar power market, and that this use case needs to be considered in future demand projections. As it stands, AE Solar TIER1 states that solar energy reached 1 terawatt of cumulative PV installed capacity in 2022, contributing 4 percent of worldwide electricity demand.

How has this energy production affected silver demand numbers?

A 2020 report from the Silver Institute on silver's role in solar power shows that in 2019, 11 percent of total silver supply, or approximately 100 million ounces, went on to be used for solar energy demand. By 2020, PV ended up consuming 12.7 percent of the year's silver supply at 101 million ounces as both supply decreased and demand increased.

As the need for green energy intensifies, market participants have raised questions about how much silver demand from the solar market will rise, and whether increasing usage may affect other high-demand sectors, such as the automobile industry, jewelry fabrication and physical investment in the form of bars and coins.

Looking into the next decade, the Silver Institute expects consistent interest for the precious metal. Between 2024 and 2030, it projects that solar demand will vary between 70 million ounces to 80 million ounces.

“While this amount is a small decline from the 2019 peak, it would be higher than any consumption level prior to 2016, and demonstrates that the PV sector will remain an important and consistent source of industrial demand for silver,” its report states.

The study from the Silver Institute projects a decline between 2020 and 2023 as “PV capacity added per year dips, while attempts at silver thrifting in PV panels continues at a diminished rate.”

However, it expects silver demand from the solar market to go up in the long term. The institute references a World Bank projection as a basis for its own predictions — according to the World Bank, use of silver in the energy technology segment could reach about 50 percent of 2019's total silver demand by 2050, meaning consumption of 500 million ounces for solar alone.