Chapter 3. Energy Conversion and Minerals Used for Materials
C. Analysis of the stability of the materials supply
1) Trade structure and stability of the materials supply in Korea
Korea is a major importer of silicon metal and an exporter of polysilicon. Korea is the world’s third largest silicon metal importer (as of 2016) following Germany and Japan. In 2016, Korea imported 168,000 tons of silicon metal, 83% of which was imported from China. Also in 2016, Japan imported 181,000 tons of silicon metal, 91%
of which was imported from China.53 Around 40%54 of all silicon metal imports worldwide come from China, but the reason Korea and Japan rely so heavily on China is not only because it is the world’s greatest silicon metal exporter, but also because of geographical factors.
As for polysilicon, which is used as the base material for silicon metal, Korea is the world’s top exporter. In 2016, Korea exported around 80,000 tons of silicon metal, representing 30% of all global silicon metal exports.55 China received about 79% of these exports in 2016.56 In summary, Korea imports most of its silicon metal from China and exports most of its polysilicon to China.
Figure 3-22. Silicon metal (Si<99.99%) Import Volume by Importing Country (Unit: 1,000 tons)
Source: Roskill (2017), Figure 26.
52 Roskill (2017), Figure 3.
53Roskill (2017), Table 14.
54 Calculated by the author using Roskill (2017) Table 14.
55Roskill (2017), Table 15.
56Roskill (2017), Table 16.
Figure 3-23. High Purity Silicon (Si≥99.99%) Export Volume by Exporting Country (Unit: One thousand tons)
Source: Roskill (2017), Figure 28.
Germany, the U.S., Taiwan, and Japan are major exporters of polysilicon, whereas South Korea, Germany, Japan, and the U.S. are major importers of silicon metal. Many of these countries have similar industrial structures as Korea in that they import silicon metal and export polysilicon.
As mentioned previously, Korea’s polysilicon industry relies heavily on China for its procurement of silicon metal. The fact that Korea depends on China for 80% or more of its silicon metal means that Korea is exposed to a supply risk, even though China is currently a major producer and within close geographical proximity.
The European Union57 identifies basic materials that may pose procurement challenges to European industries and minerals that could face supply risks, and list them as Critical Raw Materials. Each of the materials included on this list have economic significance and face potential supply risks. In 2017, the EU officially listed silicon metal as a Critical Raw Material.58 Korea faces even greater silicon metal supply risks than the EU because it depends more heavily on a single country (China) for its imports, and the advancement of the Korean PV industry has continued to increase the economic importance of silicon metal domestically.
Korea’s heavy reliance on polysilicon exports to China may also pose industrial risks. Korea’s heavy export dependence on a single country (China) may have significant adverse effects on the domestic economy because any negative economic changes in China could impact Korea.
2) Assessment of the stability of materials supply for the achievement of PV proliferation goals As outlined in its Renewable Energy 3020 Implementation Plan (December 2017), the Korean government plans to install new renewable facilities with a capacity of 30.8 GW (63% of its total goal) by 2030 through PV
57 In response to resource shortages worldwide, the EU Commission, in 2008, proposed a comprehensive strategy to: (i) improve access to material substances in the global market; (ii) improve conditions for the exploration of material substances in the EU; and, (iii) reduce consumption of material substances through improved efficiency and recycling (Source: Korean Embassy in Belgium and Mission to the European Union, http://overseas.mofa.go.kr/be- ko/brd/m_7566/view.do?seq=753734&srchFr=&srchTo=&srchWord=&srchTp=&multi_itm_seq=0&am p;itm_seq_1=0&itm_seq_2=0&company_cd=&company_nm=&page=9, accessed on October 24, 2018).
58European Commission (2017), p.11.
proliferation. In this section, we will examine the possible supply constraints associated with polysilicon—needed for the manufacture of solar cells—that threaten to impede the proliferation of PV as proposed by the Korean government. In order to effectively address the issue of Korea’s polysilicon supply, we must first estimate the polysilicon facility capacity needed to achieve 30.8 GW solar cells. To complete this estimation, we will take into consideration Korea’s polysilicon production capacity. Polysilicon can be imported from other countries, but this study aims to determine whether a stable supply of materials can be provided by domestic companies.
The polysilicon needed to manufacture solar cells can be calculated as follows:
Polysilicon demand = New PV demand × Average Polysilicon Consumption per Unit
If demand for new PV is 30.8 GW in 2030 and the average polysilicon consumption per unit as of 2018 is 3.8g/W59, the demand for polysilicon in 2030 would be 117,000 tons. As of 2018, Korean polysilicon companies produced an annual total of 82,000 tons of polysilicon: 52,000 tons by OCI, 15,000 tons by Hanwha Chemicals, and 15,000 tons by Korea Silicon.60 Even if solar cells are manufactured and supplied domestically using only locally produced polysilicon, Korean companies can supply enough polysilicon to achieve the government’s 2030 PV proliferation goal. Therefore, the Korean government’s PV proliferation goal doesn’t face any constraints in terms of the polysilicon supply provided by Korean companies.
Global polysilicon facility and production capacities show that there is currently an oversupply of polysilicon (refer to Figure 3-24).61
Figure 3-24. Polysilicon Facility Capacities Worldwide and by Country
Source: Roskill (2017), Figure A46.
Several countries, including Korea, installed additional facilities after 2010, and now the total capacity of global facilities is greater than actual polysilicon production. This means that in the short term, the polysilicon supply is more than able to meet current demands for solar cell materials.
Next, we will examine the stability of the silicon metal supply in terms of the procurement of polysilicon materials. In terms of long-term supply and demand, even though the production of silicon metal is concentrated
59 These estimates are based on the average polysilicon consumption per unit as of 2018 (BNEF (2018d) p.5).
60OCI’s annual production volume includes 52,000 tons of domestic production and 20,000 tons produced in Malaysia, OCI Website (https://www.oci.co.kr/sub/business/poly.asp) accessed on October 23, 2018 (BNEF(2018d) pp.6-7).
61Roskill (2017), Figure A46.
in a few regions around the world, the abundance of these reserves suggests that there is less a possibility that silicon metal availability will pose a threat to the quantitative supply of materials than a sudden disruption in supply. However, both the fact that silicon metal is produced in high-purity quartzite mines, and the fact that there is such a heavy reliance on China signifies a very high supply risk.
According to the outlook on silicon metal prices illustrated in Figure 3-21, silicon metal prices are expected to decline and stabilize; therefore, the possibility of any problems related to the silicon metal supply, from an economic perspective, is very low. However, China, a major importer of silicon metal, is continuously strengthening its environmental regulations. Given that electricity costs account for the largest share of production costs, increased electricity costs—resulting from changes in the power mix due to stricter environmental policies—may impact production costs. Changes in silicon metal prices may influence polysilicon prices to a certain degree62, but the impact of silicon metal prices on PV system prices is estimated to be less than 1%.
Therefore, fluctuations of silicon metal prices are not expected to have a large impact on the proliferation of PV systems.
2. Secondary cells and materials