polysilicon market update_150331_goran bye-bruno ceccaroli

Polycrystalline Silicon Market,Selected Updates©AMMS | 31 March 2015

Gøran ByeAdvanced Materials

Management Solutions, LLC(AMMS)

Bruno CeccaroliMARCHE AS

Gøran Bye | Advanced Materials Management Solutions, LLC (AMMS)[email protected]

www.AdvancedMaterialsManagement.com

About this presentation

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• The purpose of this presentation is to provide selected updates on the global market for polycrystalline silicon as industry data for 2013 and 2014 has become available.

• The updates should be seen in conjunction with the article:

Solar grade silicon: Technology status and industrial trends by Gøran Bye and Bruno Ceccaroli,

Solar Energy Materials & Solar Cells 130 (2014) 634–646(http://dx.doi.org/10.1016/j.solmat.2014.06.019)

• In the original article, the authors indicate that...…the polysilicon industry will continue to grow with the photovoltaic industry provided that cost and price reductions in PV and polysilicon can continue, which the authors believe to be the case

…it is difficult to argue for a long term polysilicon price above US$20/Kg, and they believe future price will be set top‐down by the market and not as a function of supply (as in the past)

…the polysilicon supply side will consolidate (back) to a limited number of larger players as these can exploit economics of scale from de‐bottlenecking and incrementally expand existing capacity

…China will be the most important market for, and potentially producer of, polysilicon…there will be a need for significant new capacity, potentially already from 2017, to serve the future growth of PV and to replace non‐sustainable existing capacity

…the only apparent challenger for TCS/Siemens as dominant technology seems to be Silane/FBR – especially for greenfield developments, upgraded MGS may display even better economics, but is generally unavailable

Gøran Bye | ©AMMS | Polysilicon Market Update | 31 March 2015

About the authors

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• Advanced Materials Management Solutions LLC (AMMS)was established in 2009, to leverage the accumulated knowledge of a number of professionals from the photovoltaic, silicon materials and other advanced materials industries. AMMS delivers a wide spectrum of services ranging from strategic advice to operational involvement. AMMS engages with both companies and investors in renewable energy, photovoltaic, silicon materials and associated industries.

• The company's principal is Mr. Gøran Bye, who has many years of active participation in the target industries. Associated with the firm are a number of other professionals with deep and wide experience.

• AMMS' particular strength is the combination of width and depth of knowledge and experience. Having been for years, and indeed continuing to be, integral and active parts of the industry, AMMS' resources have amassed a valuable insight that stretches from the strategic, via technology and down to the details of how to set up operations to squeeze the most return out of the considerable production assets that go into polysilicon and related materials and products.

• The professionals under the AMMS‐umbrella have a wide net of contacts and relationships in both the photovoltaic‐industry in general and the polysilicon‐industry in particular, and amongst the analysts and investors following it. And they do enjoy a certain respect and trust based on achievements in the past and soundness of previous decisions made.

• Since its inception, AMMS has provided services to many investors and businesses in the target industries.


• Dr. Bruno Ceccaroli incorporated MARCHE AS as a Norwegian based, private investment holding company. Through MARCHE Ceccaroli has contributed to the foundation and the development of several high‐tech startup companies within material technology i.e. n‐TEC AS (carbon nanotubes), Isosilicon AS (silicon and other light stable isotopes), Polysilan AS (specialty silicon gases) and Combined Properties Materials AS (silicon‐carbon composite materials). MARCHE is constantly evaluating new investment cases. A selection requirement is our ability to contribute to the case with technology and competency.

• In 2007 MARCHE extended its activities to provide industry and technology advices.

• Business and technical areas: Metallurgical grade silicon, polysilicon, solar grade silicon, solar cells, solar energy value chain, advanced materials

• Activities: Support companies to develop technology and business strategy, to select technology, take active part in advisory boards, manage R&D projects, execute due diligence studies.

• Clients: More than 30 worldwide clients during the past 7 years including large industrial companies, investments funds, startup companies, board of executives.

• MARCHE’s principal is Dr. Bruno Ceccaroli, docteur‐ès‐sciences in nuclear chemistry; has international business/industrial experience in at least three regions: France, Norway and North America including more than 25 years in the silicon and solar industry; has written several popular articles and chapters in handbooks on solar grade silicon industry.

PV‐GROWTH, PRICE AND COST DEVELOPMENTSPolycrystalline Silicon Market, Selected Updates

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PV growth and geographical diversification continue:2013: ~40 GWp / 2014: 41~47 GWp (US$ 100+bn global market)

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Detailed geographical breakdown TBD

• In the past, annual PV‐installations have proven to exceed most industry forecasts even in “crisis‐years”

• Europe’s declining volume is more than outweighed by other geographies

• Rather than attempting accurately to forecast future growth in PV‐installations, we have chosen to devise two scenarios that may serve as descriptions of lower and higher boundaries for the market developments over the next ten years

• Higher growth scenario: prolonging the historical growth trend from 2003 until 2025

• Lower growth scenario: assuming a flattening of annual growth to 15% 2015‐2020 and 5% 2021‐2025

Cost reductions continue along the established trend;PV is steadily becoming more competitive;

continued growth is dependent on continued price reductions

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$0.10

$1.00

$10.00

$100.00

1 10

100

1,000

10,000

100,000

1,000,000

Mod

ule

Pric

e in

US$

/Wp

Cumulative PV Module Production in MWp

PV Experience CurveModule Price vs. Cumulative Product

Trendline 1975-2004

1980, 20 MWp,US$ 12.40/Wp

Start of feed-in tariff in

Germany

1990, 274 MWp,US$ 6.45/Wp

2000, 1,452 MWp,US$ 3.50/Wp

2008, 15,773 MWp,US$ 3.75/Wp

1975, 2 MWp, US$ 47.80/Wp

2012, 98,000 MWp,US$ 0.79/Wp

Sources of analysis/chart: Princeton Tech Research/Paul T. Leming; and AMMSSources of data: ARISE Technologies Corporation, PVNews, Solarbuzz, PTL estimate

2014, 172,000 MWp,US$ 0.63/Wp

• PV growth is driven by attractive economicsto system owners as prices are reduced

• 2008‐14 price development is dramatic, but in fact brought module ASPs back to the experience trend


Continued growth is dependent on continued price reductions; it is difficult to argue for long‐term polysilicon price above US$ 20/Kg

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• For PV‐modules at USD 0.55/Wp to…• …sustain polysilicon prices on or above USD 20/Kg; and…

• …yield 10% gross margin (5.5 USD‐cents/Wp gross profit pool – ingot through module)…

• …You have to believe that…• …silicon usage can be reduced to 4.5 grams/Wp or less, and that…

• …conversion cost – ingot through module – below USD 0.405/Wp is achievable…soon


POLYSILICON INDUSTRY DEVELOPMENTSPolycrystalline Silicon Market, Selected Updates

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China’s growing prominence in polysilicon, 2014:Chinese firms consumed ~90% and produced ~50% of global

volumes to PV; prices vacillate around US$ 20/Kg as predicted

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• In 2013, China introduced tariffs on polysilicon imports. Wacker( GER): 0%, OCI (KOR): 2.4%, REC Silicon, Hemlock Semiconductor & SunEdison (all USA): 57%. At first glance, the reported import prices seem to reflect the differences in tariff levels for the exporters.

• However, one could speculate that the tariffs to date in practice have had no significant effect on import prices, because:1. the general price dip in late 2012 and 2013 is the result of the price pressures on PV and excess supply in the market.2. around 75% of the 2013‐14 imports exploited the tariff loophole of Export Production Zones (EPZ) to avoid tariffs – e.g. none

of REC’s volumes into China in 2014 suffered the punitive levies.3. REC heavily discounted FBR‐material in 2012‐14, FBR was a significant share (60%–72%) of the volumes from the USA.

• China announced the intention to close the EPZ‐loophole from Sept. 2014, with some transition time for existing supply agreements. By Nov. more than 70% of imports had been made through EPZs. In Dec. the EPZ‐share fell to ~55% (Jan. 2015: ~65%).

• It is difficult to predict how this will develop, but REC has announced a change in sales strategy to shift volumes from China to other geographies – indicating that even so ~20% of their 2015 polysilicon sales will be subject to Chinese tariffs.


90% of PV‐systems are built on polysilicon, and PV consumes 90% of all polysilicon

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Fraunhofer Institute for Solar Energy Systems ISE:

Photovoltaics Report

Freiburg, 24 October 2014


Supply/demand balance in 2014–16 (US$ 5.5‐7bn global market);demand grows and capacity is (re‐)started;

net new capacity needed from 2017 and onwards

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Demand estimate is disregarding: 1. PV‐installations that are not silicon based2. Electronic semiconductor demand3. Changes in value chain inventories (we have reason to believe that current value chain inventories may be

sufficient to offset the apparent need for new capacity in 2015 and 2016 in the historic growth trend scenario)

The polysilicon industry is indeed (re‐)consolidating: based on plans to cancel or execute on expansions – announcements still appear to be of varying veracity – three capacity tiers emerge towards 2018

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Not a complete list of “believable suppliers”;the authors have made judgement calls on the accuracy and timing of some expansion initiatives

SOLAR SILICON TECHNOLOGY DEVELOPMENTSPolycrystalline Silicon Market, Selected Updates

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By 2018, TCS/Siemens will remain the dominant technology, but Silane/FBR may be ~20% of total capacity

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• For capacity to become operational by 2018, it should currently be identifiable as idled capacity to be restarted, or as an expansion or a new‐build initiative. The above identified initiatives commenced before Silane/FBR generally had proven itself viable and while the technology was proprietary to a few producers and thus may not be valid as indicators of preferred technology for future capacity initiatives.

• The interesting question is whether Silane/FBR will overtake TCS/Siemens when the large new capacities needed 2018–2025 are built and put into service. For this to become reality, FBR’s claims of superior economics must be substantiated and the technology become more generally available.


Side by side cost comparisons for greenfield capacity indicate an advantage for Silane/FBR over TCS/Siemens – but incremental plant

upgrades and de‐bottlenecking somewhat skew the picture

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Best In Class TCS/Siemens HC,

existing/ debottlenecked

TCS/Siemens HC greenfield, PRC ?

Best In Class uMGS existing

Most advanced uMGS greenfield,

PRC ?

Best In Class SiH4/FBR already

existing

SiH4/FBR greenfield, PRC ?

-10 20 30 40 50 60 70 80 90

100 110 120 130 140 150 160 170 180 190 200

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Cap

ital E

xpen

ditu

re p

er K

ilogr

am C

apac

ity (U

SD)

Variable cash cost of production, finance cost & maintenance; but excluding SG&A (USD/Kg)

USD 27.50 per KilogramUSD 22.50 per KilogramUSD 17.50 per KilogramUSD 12.50 per Kilogram

Cost lines assume:10 years' straight line depreciation; maintenance expense = 4% of initial capex; financial cost = 4% of 50% of capex

Sources: Industry announcements; REC presentation dated May 17, 2012; Elkem Solar; AMMS estimates

Technology developments and status seem to follow our previous predictions

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• As stated above crystalline silicon is and will remain (at least until 2020) the workhorse of the PV industry with 85‐90% market share.

• Within crystalline silicon, there is a healthy competition between single crystal and multicrystalline. Both classes of substrates show a constant development toward improved performance. The current PV market strongly influenced by the construction of large centralized power plants stimulate both families of technology. A shift toward more urban disseminated PV‐systems may favor one or the other.

• A trend is the continuous decrease of the specific material consumption (Si g/Wp). State of the art is close to 6 g/Wp. Thick and thin film cells architectures predict lower material consumption. However, these technologies are premature as compared to the sliced substrate technology and we cannot see any significant influence of such within 2020.

• Polysilicon by the simplified, relatively lower energy TCS/Siemens is the dominant technology, a position this technology will keep at least for the earlier part of our forecast period (until 2018‐2020). However, we conclude that silane/FBR will increase its share because of lower cost and energy/CO2 footprint. Finally, the year to come will be decisive for UMG silicon to penetrate the market. The merge between Elkem Solar and REC Solar and the resulting vertical integration is expected to give an answer to this interrogation.


POLYSILICON SUPPLY AND DEMAND BALANCE –CONCLUSION: STILL A BRIGHT FUTURE AHEAD

Polycrystalline Silicon Market, Selected Updates

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Continued price reductions are necessary to realize PV‐growth;cost reductions for PV force prices on polysilicon downwards;current & future price level is below production cost for some

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Polycrystalline Silicon Market,Selected Updates©AMMS | 31 March 2015

谢谢

Gøran Bye | Advanced Materials Management Solutions, LLC (AMMS)[email protected]

www.AdvancedMaterialsManagement.com

Gøran ByeAdvanced Materials

Management Solutions, LLC(AMMS)

Bruno CeccaroliMARCHE AS

polysilicon market update_150331_goran bye-bruno ceccaroli

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