The Importance of Silver for the Solar Industry

kinvestor on November 18, 2022

Silver’s Use in Solar Photovoltaics

Silver is at the forefront of our transition to cleaner energy because of its use in solar cells. The silicon wafers of the solar cells are coated with a silver paste on their front and back. These coatings are called fingers, and they collect and carry electricity for use and storage.

In 2019, the photovoltaic sector was responsible for 10% (or 98.7 Moz) of total silver demand, reports S&P Global. Within the energy industry, researchers expect solar PV to be responsible for 96.3% of the demand by 2050.

Factors Affecting the Demand for Silver in Photovoltaics

When it comes to the use of silver in the solar energy industry, there are four important factors that affect demand: the pace of transition toward cleaner energy technologies, the quantity of silver needed per panel, the availability of silver, and geopolitics.

1. The Pace of Transition Toward Cleaner Technologies

The urgency with which the world is moving toward cleaner solutions is an important factor in silver demand. In 2020, there was a 130 gigawatt (GW) addition in solar capacity and a 13% increase in silver’s use in photovoltaics, according to The Silver Institute (SI).

The total global solar capacity has doubled in three years from 2018 and currently stands at one terawatt (TW) as of April 2022, according to SolarPower Europe’s latest market outlook. Researchers expect global capacity to increase by 200 GW in 2022, and they predict the capacity will reach 2.3 TW in 2025.

A motivator for the energy transition is meeting international energy and climate goals. However, this will require significant capacity building. For example, to meet the goals of the International Energy Agency’s (IEA) Roadmap to Net Zero Emissions, we need to more than quadruple the solar PV capacity to 630 GW by 2050, according to the IEA.

2. The Quantity of Silver Needed Per Solar Panel

Another important variable in silver demand is the quantity of the precious metal needed in each solar cell. This quantity has decreased over the years and is expected to decrease further as advances in technology, like screen printing processes, mean that manufacturers are able to apply less silver in solar cell coatings.

According to a 2020 article from S&P Global, consulting firm CRU Group found that each solar cell used 111 milligrams (mg) of silver on average in 2019 compared to 521 mg in 2009. Florian Clement of the Fraunhofer Institute for Solar Energy Systems ISE expects this quantity may reduce to 15 mg within the next decade, adds the S&P article.

Another option is to replace silver with another metal, such as gold or copper. Copper seems like a suitable choice because of its availability in nature and its lower price point. However, it’s less costly to process silver for photovoltaics; therefore, silver is still the metal of choice among manufacturers. According to the Silver Institute’s 2022 World Silver Survey, there will continue to be a good demand for silver because of capacity additions countering the expected reduction in the size of the silver fingers.

3. Availability of Silver

Reducing the quantity of silver in solar cells may also be a necessity because of the metal’s availability constraining the development of solar photovoltaics in the future. Most silver is mined as a by-product in lead/zinc, gold, and copper mines instead of primary silver mines. This makes silver susceptible to supply shortages.

According to the Silver Institute’s 2022 World Silver Survey, the global total demand for silver increased by 19% in 2021 to 1,049 Moz, creating a shortage as global supply was just 997.2 Moz. The main drivers of demand were coins and industrial fabrication; however, photovoltaics and consumer electronics also supported the rise in silver demand.

The demand of silver in photovoltaics is forecasted to increase by 12% in 2022, reaching 127 Moz from 113.7 in 2021. Total silver demand is expected to increase by 5% in 2022, reaching 1,101.8 Moz, while supply is expected to increase by only 3%, reaching 1,030.3 Moz.

A research study on the subject by Samuele Lo Piano et.al shows that the reduction in silver in solar cells needs to proceed at a meaningful pace to match the rate at which we are deploying solar technology. The researchers also identified that the amount of silver available for extraction will be a major limiting factor for solar PV development.

4. Geopolitics

Geopolitics can have both a positive and negative impact on the demand for silver. For example, the E.U. has announced a plan to move away from Russian fossil fuels by 2027, hoping to increase the deployment of renewable energy across Europe.

In other geopolitical news, U.S. blocked over 1,000 solar energy shipments starting in June 2022 under a law banning imports from China’s Xinjiang province amidst concerns surrounding slave labour in the region. The seizures have created a bottleneck in solar development in the United States, with solar installations decreasing by 23% in Q3, according to the American Clean Power Association. The federal government continues to roll out its plan to decarbonize the country’s economy under the Inflation Reduction Act (IRA), a new law representing the single largest investment in climate and energy in American history.

Investing in Silver Stocks

Here are four options for investors looking to add silver to their portfolio:

1. Pan American Silver Corp. (TSX: PAAS, NASDAQ: PAAS)

Pan American is a Canadian mineral mining and processing company focusing on silver and gold, among other segments. The company owns and operates silver mines in Argentina, Bolivia, Peru, and Mexico. Pan American has a market cap of $4.09 billion as of November 2022, and the company produced 19.17 Moz of silver in 2021.

2. First Majestic Silver Corp. (TSX: FR, NYSE: AG)

First Majestic is a Canadian silver mining company that owns and operates four mines in Mexico. The company produced 12.8 Moz of silver in 2021 and has announced its 2022 guidance of between 32.2 to 35.8 Moz. First Majestic has a as of November 11, 2022 market cap of $3.36 billion as of November 2022.

3. Summa Silver (TSX-V: SSVR, OTC: SSVRF)

Summa Silver is a Canadian high-grade gold and silver developer with projects in Nevada and New Mexico. Summa has recently identified high-grade silver-gold veins at their Mogollon property. Summa Silver has a market cap of US$40.75 million as of November 2022.

Join Summa Silver and other companies in the battery metals and mining sectors at the Kinvestor Battery Metals and Mining Virtual Conference on November 22, 2022. Click here for more information or to register.

4. Glencore PLC (OTC: GLNCY)

Glencore is a Switzerland-based diversified natural resources company. The metals and minerals segment of the company produces several minerals including silver, gold, copper, cobalt, zinc, nickel, and more. In 2021, the company produced 31,519 Koz of silver from its own sources. Glencore has a market cap of US$75.43 billion as of November 2022.

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