Polysilicon - The raw material for around 90 % of all solar systems

Author: Dr. Mathias Bremer, Wacker Chemie AG (as of June 2017)

Cost degression of photovoltaics and further market growth

The boom of the solar industry emerged since the beginning of the new millennium and has reached a sometimes dizzying speed since about 2005. Significant double-digit annual growth rates, initially still driven by (sometimes also too high) financial support, later globally driven by the achieved favorable prime costs of solar power characterize the market. The possibility of setting up solar power plants of any size and, if required, completely independent of a grid connection, opens up enormous potential. The growth boom, accompanied by initially very good returns for producers, has led to high investments in the expansion of global capacities at all stages of the value chain. At the same time, however, this newly created competition has also led to a drastic reduction in the manufacturing costs of solar modules. Based on the costs already achieved today, PV system costs of 0.50 Eur/Watt can be expected in the next 2 years or so. Translating the cost of solar systems - the cost of solar modules plus the necessary components for installation and conversion of direct current to alternating current - into the cost per kilowatt hour of electricity generated over a system lifetime of 20 years, generation costs of a good 6 cents/kWh are already a reality in Germany today - with a continuously falling trend.

This cost development stems primarily from fundamental learning curve effects. The solar industry is still in its adolescence in terms of the lifecycle curve, and countless research institutes and all manufacturers in the value chain are optimizing existing processes or developing new, improved ones with higher efficiency or lower costs.  WACKER POLYSILICON, too, is constantly optimizing its process steps, e.g. by increasing labor productivity, reducing specific energy consumption or developing new reactors. These continuous innovations have enabled us to occupy a leading position worldwide for decades now, both in terms of manufacturing costs and, in particular, product quality. The ongoing dynamic  cost reduction in solar systems has enabled some 78 GW of new capacity to be installed worldwide in 2016. For 2017, we again expect new installations of between 75 and 80 GW.

Challenges

1. Level Playing Field in the Energy Sector is Wishful Thinking

Photovoltaics has developed into a cost-effective variant of power generation. Thus it can take over a supporting role of the supply with renewable energy in Germany in the future. In many cases, there is talk of a level playing field in which all players and technologies in the electricity market have the same opportunities. This neutral level playing field does not exist as a result of many distortions in the energy sector. For example, no nuclear power plant would operate economically today if there were an insurance obligation for nuclear power plants, and no lignite-fired power plant would be in operation if the CO2 costs were fully reflected in the generation price. The investment decision made in the UK to expand the Hinkley Point C nuclear power plant shows the actual full cost of nuclear power (> 12 €-cent/kWh). This much honesty is part of a factual discussion. In addition, old depreciated (fossil) power plants compete with new plants, as well as technologies that are very advanced in their learning curve with those that still have their learning curve to a large extent ahead of them. The financial start-up support for photovoltaics is consistently allocated to electricity prices via the EEG in a way that is comprehensible to everyone and at 100%. It does not burden the state budget like the many hidden supports of other forms of generation

2. Trade conflict of the EU against China for the import of Chinese solar products - relevance for the expansion targets of photovoltaics in Europe

The boom of the solar market has led to high investments in new production capacities for solar cells and modules. And these investments have overwhelmingly taken place in Asia - with China leading the way. Production costs in these countries are substantially lower than in Europe. In 2013, at the urging of some European solar manufacturers, Brussels imposed punitive tariffs on imports of Chinese solar cells and modules. As a result of this decision, a so-called "minimum price agreement" was negotiated between Brussels and Chinese manufacturers. This means that Chinese manufacturers are guaranteed a volume quota for the import of solar cells and modules into Europe, covering part of the European market - if they sell their products at a specified minimum price. This fixing of unnecessarily high prices unjustifiably burdens consumers and investors in Europe and prevents the price reductions of solar modules that are possible in free competition. As a result, and in the absence of low-cost solar modules, the European solar market has collapsed drastically. Also the implemented tenders of open space plants in Germany will thus not be awarded with the potential already achievable today, but will inevitably lead to higher than necessary and also already achievable costs. Another consequence is that the 2.5 GW expansion target of the Federal Government for photovoltaics since 2014  has not been achieved by far. It makes sense for the remuneration model for solar power still in force at the moment under the EEG to have an automated reduction mechanism for the remuneration. However, if the remuneration falls continuously, but the prices for solar installations are frozen at the bottom by minimum prices and can no longer follow the remuneration downwards to the same extent, a standstill naturally arises. In March 2017, the EU Commission extended the measures again by 18 months after a phase-out review had been carried out on the measures and against the will of a broad opposition from the entire solar industry. President Juncker and Commissioner Malmström, however, announced at the same time that the measures would finally expire after this period.

Outlook

It should not be concealed here that solar power is fluctuating and, of course, is only produced when the sun is shining. This means that we also need conventional power plants for round-the-clock power supply or to cover the residual load. We must give high priority to developing ways of "steadying" fluctuating power sources. The widely discussed options such as battery storage, pumped storage, power-to-gas or power-to-heat are making very good progress. However, we also need the national and European expansion of transmission networks. It should also not be concealed here that with every additional kilowatt hour of electricity produced from renewable sources, conventional power plants will come under further pressure. This will result in economic disadvantages for these operators and a relocation of jobs will take place. And last but not least, the goal of ensuring a secure power supply at all times and at minimal cost during the transformation of our energy system in order to safeguard jobs is the overriding factor in the entire issue. But the costs of solar power, which have already fallen enormously to date and are continuing to fall, mean that photovoltaics will be able to take on the supporting role in the energy turnaround that has been assigned to it. And we should always keep in mind that every kilowatt hour of solar power generated saves CO2 and thus counteracts global warming.

Wacker Chemie AG

Wacker Chemie AG celebrated its 100th anniversary in 2014. Its roots and still its most important production site, with around 10,000 employees, are in Burghausen, Bavaria, on the border with Austria. Five business divisions generated annual sales of around €5.4 billion in 2016. This makes WACKER by far the largest Bavarian chemical company. Around 80% of sales are based on downstream products from the raw material silicon (mainly the WACKER SILICONES, WACKER POLYSILICON and SILTRONIC divisions). The WACKER POLYSILICON division has been producing high-purity polycrystalline silicon for over 60 years - the world's purest industrially produced material and also a key raw material for semiconductor elements (computer chips) and solar cells and modules. With nearly EUR1.1 billion in annual sales in 2016, WACKER POLYSILICON is the global No. 2  in sales and a leader in quality.