Waiting it out

The annual PV demand for solar panels is set to grow from 36 GW in 2013 to 49 GW in 2014, according to a recent report by NPD Solarbuzz. The industry analyst firm expects that North America, China and Japan will be picking up the slack created by declining demand in Europe.
For the industry as a whole, this is a welcome development. However, for the uppermost portion of the PV manufacturing segment – the production of polysilicon, the raw material for making solar cells – continuing oversupply and low silicon prices are far from conducive for investments in new capacity and new production equipment. But as demand begins to catch up with supply, tier-1 polysilicon producers are reaching high utilization rates again and prices are expected to rise, as supply and demand balance out.

Upgrades vs. new capacity

Polysilicon equipment demand can be broken down into two categories, demand for upgrades and new capacity demand. China is the major source of demand for polysilicon equipment upgrades.
Though a large number of polysilicon plants in China were shut down over the past three years, there is still uncertainty over how much of this idle equipment will be recovered for use in upcoming plant expansions, according to Jan Maurits, President of Burbank, California-based Poly Plant Project (PPP). A lot of the equipment from the closed plants included small capacity chemical vapor deposition (CVD) reactors, so it is unlikely these will be reused in upgrades as polysilicon made from many small reactors is much more costly to produce than material made from fewer large reactors. Poly Plant Project (PPP) was set up in 2005 by a team of polysilicon industry experts and veterans, to work with manufacturers producing polysilicon for the solar industry. With its engineers having worked in tier-1 polysilicon plants the company is familiar with all aspects of polysilicon and related production including ingot and wafer preparation and has designed plants from 1,500 to 15,000 metric tons (mt) annually. PPP works with manufacturers to help them address the productivity as well as the safety of their plants.
While manufacturers in China have made big investments in polysilicon production over the years, they have largely failed to realize the expected return on investments, according to Maurits. Problems include high operating costs and poor productivity. “The question is howmuch of the installed capacity can be upgraded and who will provide the funding,” he states.
In terms of demand for new capacity, some of the tier-1 polysilicon plants have delayed expansions, but when the time comes for investment – when prices increase again – new equipment will be needed for these. “Some plants in China are considering expansions, but need funding. We expect the new emerging markets to generate the demand for new capacity,” says Maurits. He believes that there are still compelling technical and business reasons for vertical integration and installation of polysilicon-to-cell production facilities. “We see new clients in the Middle East and North Africa (MENA), South America; and new market regions are more interested in a complete facility rather than polysilicon only,” he says.
According to M+W Group, regions with high electricity costs do not make suitable locations for polysilicon and ingoting/wafering plants, which require energy-intensive processes. The Germany-based consulting and engineering services company that designs and constructs PV manufacturing plants worldwide explains that centralized polysilicon and ingot/wafer plants with capacities exceeding 1 GW a year will be situated in locations with competitively low energy costs, while it may be advantageous to locate future cell and module facilities near the end user market, benefiting local job markets and economies. Indeed, in November 2013 M+W Group received an order for a 70 MW PV production facility in Argentina, South America, with Schmid Group as general contractor. M+W Group is responsible for engineering and construction, installation and project management of the project. The plant, located in San Juan, will enable integrated production from monocrystalline silicon ingoting to PV cells and modules from mid-2015. The plan is also to expand to include polysilicon manufacturing at a later date.
The drivers for building integrated facilities can be several, including the ability to supply the global market against trade barriers. Another is the strategic decision to supply all material as part of a national PV program within a country to maximize job opportunities and conserve resources, as illustrated by the Argentina deal. M+W Group’s Technology Manager for photovoltaics Klaus Eberhardt, also cites demand from Russia/CIS as well as from MENA: “Governments are interested in establishing new industries which are technology-driven, though not as high-tech and established as the semiconductor industry. Solar is seen as an ideal candidate to meet these ambitions.”
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Though there are sites where favorable electric rates, water supply, materials supply, government support and infrastructure provide for low operating costs, if plants located at them do not have experienced managers, engineers and operators, good plant design, continuous improvement, good supplier/user partnerships, these advantages will not be realized in the market. “The tier-1 polysilicon suppliers have proven their ability to supply low cost, high purity products even with some site limitations,” observes Maurits.
According to German tier-1 polysilicon producer Wacker the ideal location for a polysilicon plant is not just where the cheapest electricity rates are available but where the optimum combination of cheap electricity, a highly qualified labor force, innovative process development conditions and protection of intellectual property are offered. For downstream activities the relocation of capacities will be determined by end market proximity and to a high degree by artificial trade hurdles.
According to GT Advanced Technologies (GTAT), a supplier of equipment for all stages of polysilicon production, regions that are responsible for investments in polysilicon production equipment include South Korea, China, especially in the northern and western regions, Malaysia, Germany – because of Wacker, the U.S., the Middle East and Taiwan. However, South Korea and Taiwan could lose some market share for new investment because of rising electricity prices. The U.S. is being affected by tariffs. “The market in the Middle East has been slow to develop, but we do expect further investment in this region,” states Chad Fero, Senior Director of Worldwide Service at GTAT.

Impact of low prices

The extent and rate of end market PV demand will affect polysilicon prices. If prices remain below $20/kg there will be very few new investments. “Prices will need to be $25/kg or more for sustained investment. Cash costs for producers may be around $15/kg, but depreciation adds another ~$7/kg. Add the fact that silicon costs require investment of around $1 billion for a competitively sized plant and it is clear prices need to rise for substantial new investments,” says Maurits of PPP. During the last two years, when polysilicon prices have been very cheap, no new projects have been started.
Some estimates assume that the current global capacity of polysilicon translates to about 35 GW of cell capacity, so as global PV demand exceeds 40 GW and 45 GW, this will mean polysilicon suppliers will have to implement delayed plans and increase capacities with planned expansions and upgrades. But according to Maurits, tier-1 suppliers will not do so unless the users will commit to buying the polysilicon and pay an acceptable price. “Contract polysilicon price should be about $35/kg to be an attractive investment for high purity polysilicon. In addition, it may take two years to finish the expansions,” he says.

Production and process trends

The industry continues to look at the viability of producing polysilicon via a fluid bed reactor (FBR). The advantage of the process is that it allows for competitive variable costs, but up until now the technology has had higher fixed (investment) costs. Over many years economies of scale have been achieved to allow for the lowest total costs associated with the trichlorosilane (TCS) Siemens method, which accounts for over 90% of polysilicon production. Despite the hype building over FBR, MEMC and REC are the only producers of FBR-based polysilicon and have not gained much market share. However, the market is closely watching Samsung’s and MEMC’s joint venture to see if the company is successful at driving down costs to equal or better the TCS Siemens process.
Maurits comments: “The ‘low-cost capacity’ has not been proven in production and it is not feasible that this capacity will be on-stream in 2014.” Wacker sees the Siemens approach as the leading technology for the production of high purity polysilicon. In some applications, FBR-based granular material has certain theoretical advantages which need to be evaluated and proven, according to the polysilicon producer, which runs a pilot-scale FBR plant based on trichlorosilane in order to further develop this technology.
“The trend to n-type cells for higher efficiencies will require higher purity polysilicon and single crystal ingot growth,” says Maurits. According to a source from Wacker, the demand for high-efficiency multi and mono solar wafers and cells, n-type PV technology or multiple pulling requires increasing amounts of high purity polysilicon. In addition, high quality polysilicon enables wafer and cell producers to optimize their processes very effectively, reducing overall production costs and simultaneously increasing product quality. As higher efficiency PV products can be sold at higher prices in the market, the demand for high quality polysilicon will steadily increase and meeting this growing demand for high purity polysilicon is the big challenge facing the industry.
GTAT is continuing to develop its HiCz furnace, ideal for n-type PV cells. It has achieved some important milestones in the development of this technology and is aligning the furnace’s launch with the emergence of the n-type PV cell market, which could see the next capital equipment cycle begin in 2015 or even as early as the second half of 2014.