Polysilicon Prices To Drop in 2012, Bringing Solar PV Prices to 70 Cents a Watt

With a glut of silicon now on the market, buyers are starting to renegotiate contracts downward. This could help drop the average price for crystalline silicon solar modules to as low as $0.70 a watt. Brett Prior, a senior analyst with GTM Research explains how a ramp-up in silicon production activity in 2011 will impact the market over the coming year:

In 2011, in the polysilicon industry — and the solar supply chain in general — manufacturing outpaced end-use. After a half-decade of silicon demand outstripping supply, the aggressive expansion plans finally overshot. This supply/demand imbalance will push producers to lower contract prices closer to the level of manufacturing costs at $20 per kilogram, and will force higher-cost manufacturers to exit the industry. While the solar market will continue to grow at a 10 percent to 20 percent pace in the coming years, reductions in the amount of silicon used in each module means that end demand for polysilicon will grow at a slower pace. The end result is that the current roster of over 170 polysilicon manufacturers and startups will likely be winnowed down to a dozen survivors by the end of decade.