Basic Research Report 18-19
Strategy to Secure Resources against Changing Demand in Materials in an Era of Energy Transition
Tae Heon Kim & Tae Eui Lee
Research Staff
Co-Head Researcher: Tae Heon Kim
Co-Head Researcher: Tae Eui Lee
ABSTRACT 1. Research Purpose
The government has set the goal of energy policy as 'the transition to safe and clean energy' and is promoting the expansion of supply of renewable energy as core policy tasks. Many countries, as well as Korea, are promoting energy conversion policies, and the major policy task is to promote renewable energy. Recently, electric vehicle battery demand is increasing due to technological development and expansion of electric vehicles. Demand for new resources is expected to increase sharply due to the expansion of renewable energy and electric vehicles, and bias in resource distribution can cause uncertainty about energy conversion. Stable acquisition of new materials is an important condition for achieving efficient energy transition, and it is necessary to review strategies for securing resources to secure materials. Therefore, this study proposes a resource securing strategy that reflects the changes in the energy and resource market environment caused by energy transition policy and technology development.
2. Major Content
The main findings of this study are as follows. First, metal silicon required for manufacturing polysilicon, which is the core material of solar panels, is highly dependent on China. It is clear that this is exposed to supply risks.
Second, there is uncertainty about securing metal silicon as raw material even though there is no problem with polysilicon production capacity, which is a necessary material for achieving PV supply target. Polysilicon demand is expected to reach 117,000 tons by 2030, and the domestic polysilicon production capacity is expected to be 82,000 tons per year. Metal Silicon, a raw material for polysilicon, is unlikely to be constrained in terms of raw material supply, rather than a sudden supply risk, due to its abundant reserves. However, metal silicon is produced in quartz mines of high purity and there is a supply risk due to the high reliance on China.
Third, lithium and cobalt, the core minerals of rechargeable batteries, have a common point in that long-term supply instability is implicated since both minerals are concentrated in producing countries. In the case of lithium, there are projects that can be supplied in large quantities from 2019, so supply will not be a problem in the short term. In the case of cobalt, the supply shortage is likely to occur in the short term and there are no development projects that can expect long-term supply growth. Therefore, we need to secure a long-term strategy for lithium and both short and long term strategy for cobalt.
3. Policy Implications
Strategies to secure the necessary materials for the transition to clean energy are as follows. First, it is the use of stockpiling to cope with short-term risks. In terms of supply risk and economic importance, metal silicon should be stockpiled. Currently, the Public Procurement Service includes silicon in the reserves, but actually only ferrosilicon is being used, and metal silicon is not being stockpiled. In terms of both supply risk and economic importance, metal silicon is not less important than ferrosilicon. Therefore, it is necessary to actively examine the stockpile of metal silicon.
Unlike metal silicon, lithium and cobalt have been selected as stockpiles for stockpiling by the Public Procurement Service. Lithium reserves are not much bigger than the stockpile target, and cobalt reserves only forms of cobalt metal and powder, not cobalt, which shows a sharp increase in demand. Basically, there is a need for a flexible target amount selection method that can reflect the rapid increase in demand for the minerals required in the transition period.
Second, it is the revitalization of urban mining that can reduce environmental pollution while substituting natural resources through pre-existing resources. The biggest issue in the domestic urban mining business is how to collect waste for recycling. Korea is collecting waste batteries through municipal collection instead of European producer responsibility system. However, the management system after the recovery is inadequate. Therefore, it is necessary to establish a battery reuse center in order to build a unified propulsion system from recovery of waste batteries to utilization.
Third, it is a long-term response through overseas resource development. Currently, loans for development of overseas mineral resources include bituminous coal, uranium, iron, copper, zinc, nickel, chromium, manganese, lithium, rare earths, tungsten and molybdenum. In the case of metal silicon that is not currently included in the
loan target, it should be considered to include it in the object of loan. In the case of cobalt, it is not included directly, but it is a by-product of copper and nickel mines and can actually be seen as an object of financing.
Lithium needs to be given advantage like strategic minerals.
Table of Contents
Chapter 1. Introduction ... 9
Chapter 2. Changes in Energy Markets: Energy Transition ... 9
1. Increased proliferation of new and renewable energy ... 9
Trends and outlook on the expansion of new and renewable energy ... 10
Declining costs of new and renewable energy ... 11
Domestic policies promoting new and renewable energy ... 12
2. Increased proliferation of electric vehicles (EV) ... 13
EV markets and policy trends ... 13
Current status and policy of EVs in South Korea ... 17
Chapter 3. Energy Conversion and Minerals Used for Materials ... 18
1. Photovoltaic (PV) materials ... 18
A. Materials used for PV systems and solar cells ... 18
B. Market trends for PV facilities and materials ... 25
C. Analysis of the stability of the materials supply ... 33
2. Secondary cells and materials ... 36
A. Secondary cells and core mineral materials ... 36
B. Characteristics and price trends of mineral materials ... 39
C. Outlook on the supply and demand of mineral materials ... 43
D. Analysis of lithium supply and demand ... 46
E. Analysis of cobalt supply and demand ... 48
Chapter 4. A Strategy to Secure Materials in Response to Energy Transition ... 50
1. Emergency stockpiling ... 51
A. Stockpiling of mineral resources in South Korea ... 51
B. Evaluation criteria to determine rare metal domestic stockpiling eligibility ... 54
C. Stockpiling of mineral materials needed for energy transition ... 56
2. Urban mining ... 60
A. Urban mining in Korea and other countries ... 60
B. Establishment of a Management System for the Recycling of Spent Products ... 63
Chapter 5. Conclusion ... 67
References ... 69
List of Tables
Table 2-1. Outlook of Total Energy Demand by Energy Source (New Policies Scenario) ... 10
Table 2-2. Outlook on Generation Amount by Source (New Policies Scenario) ... 10
Table 2-3. Plans to Phase out Gasoline and Diesel Vehicles by Country ... 14
Table 2-4. Environmental Regulations (Tentative) to be Adopted by Major Countries ... 14
Table 3-1. PV System Composition and Component Functions ... 18
Table 3-2. Types of Lithium Ion Batteries ... 37
Table 3-3. Types of Lithium Ion Batteries ... 38
Table 3-4. Global Lithium Production ... 39
Table 3-5. Global Cobalt Production ... 40
Table 3-6. Current Status of Lithium Projects ... 44
Table 3-7. Current Status of Cobalt Projects ... 46
Table 3-8. Lithium Supply and Demand Scenarios ... 47
Table 3-9. Changes in EV Battery Cobalt Content (according to the BNEF) ... 49
Table 3-10. Cobalt Supply and Demand for EVs by Scenario ... 49
Table 4-1. Types of Minerals Stockpiled by PPS and KORES ... 51
Table 4-2. Types and Specifications of Minerals Stockpiled by PPS ... 52
Table 4-3. Types and Specifications of Minerals Stockpiled by KORES ... 53
Table 4-4. Criteria and Method for Selecting Stockpiling Targets and Establishing Stockpiling Goals ... 54
Table 4-5. Evaluation Items and Description of Global Risk ... 55
Table 4-6. Items to Evaluate Weakness in Responding to Supply Risks ... 55
Table 4-7. Evaluation Items and Description of Economic Importance ... 56
Table 4-8. Silicon Metal and Ferrosilicon Imports (as of 2017) ... 56
Table 4-9. Urban Mining Policy Trends in Major Countries ... 60
Table 4-10. Estimation of Waste PV Facilities ... 62
Table 4-11. Estimation of EV Waste Batteries for Disposal ... 62
Table 4-12. Investment Activities by Korean Businesses for Mineral Materials ... 64
Table 4-13. Loan System for Mineral Resources Development ... 65
Table 4-14. Special Taxation Policies for Minerals Resources Development ... 66
List of Figures
Figure 2-1. Trends in Average Global Costs by Technology (New Policy Scenario) ... 11
Figure 2-2. Current State of the Proliferation of Renewable Energy in Korea ... 12
Figure 2-3. Renewable Energy Generation Proliferation Goals ... 12
Figure 2-4. Generation Equipment Proliferation Goal by Renewable Energy Source ... 13
Figure 2-5. Trends and Outlook of EV Battery Prices ... 15
Figure 2-6. Total Cost of Ownership of ICE vehicles and EVs ... 15
Figure 2-7. Outlook on Accumulated EV Sales ... 16
Figure 2-8. Proportion of EVs in New Vehicle Sales ... 17
Figure 2-9. Current Status of EV Proliferation in South Korea ... 17
Figure 3-1. Solar Cell Types ... 19
Figure 3-2. Global Production Trends of Solar Cells by Type (GW) ... 19
Figure 3-3. Principles of Photovoltaic Generation Using Solar Cells... 20
Figure 3-4. Crystalline Solar Cell Supply Chain ... 22
Figure 3-5. Silicon metal Production Cycle ... 23
Figure 3-6. Polysilicon Production Process (Siemens Method)... 23
Figure 3-7. Supply Process from Polysilicon to Photovoltaic Modules ... 24
Figure 3-8. Trends and Outlook on the World’s New Additional Installations ... 25
Figure 3-9. Trends and Outlook on the Base Prices for Home PV Systems ... 26
Figure 3-10. Trends and Outlook on the Base Prices for Generation PV Systems ... 26
Figure 3-11. Assumed Module Production Costs in a Vertically Integrated Business (4Q 2018) ... 27
Figure 3-12. Trends/Percentages of Polysilicon Production by Country ... 28
Figure 3-13. Trends/Percentages of Solar PV Cell Production by Country ... 28
Figure 3-14. Polysilicon Supply Curve in 2018 ... 29
Figure 3-15. Polysilicon and Silicon metal Price Trends (USD/tons) ... 29
Figure 3-16. Global Silicon metal Production Trends by Country ... 30
Figure 3-17. Trends in Silicon metal Exports by Major Exporters (Si<99.99%) ... 30
Figure 3-18. Average Cost and Share of Silicon metal Production Factors ... 31
Figure 3-19. Cost of Silicon metal Production Factors (USD/tons) by Producing Country ... 31
Figure 3-20. Global Silicon metal Consumption Trends and Outlook by Purpose of Use ... 32
Figure 3-21. Silicon metal Price Trends and Outlook ... 32
Figure 3-22. Silicon metal (Si<99.99%) Import Volume by Importing Country ... 33
Figure 3-23. High Purity Silicon (Si≥99.99%) Export Volume by Exporting Country ... 34
Figure 3-24. Polysilicon Facility Capacities Worldwide and by Country ... 35
Figure 3-25. Four Elements of Batteries ... 36
Figure 3-26. Outlook on the Commercial Viability of Developing Battery Technologies ... 38
Figure 3-27. Lithium Development Process ... 39
Figure 3-28. Cobalt Development Process ... 41
Figure 3-29. Changing Trends in Lithium and Cobalt Prices ... 42
Figure 3-30. Increases in Lithium Demand ... 43
Figure 3-31. Outlook of Lithium Supply and Demand ... 43
Figure 3-32. Increases in Cobalt Demand... 45
Figure 3-33. Outlook on Cobalt Supply and Demand ... 45
Figure 3-34. Outlook on Additional Lithium Supply and Demand after 2017 (1) ... 47
Figure 3-35. Outlook on Additional Lithium Supply and Demand after 2017 (2) ... 48
Figure 3-36. Outlook on the Additional Supply and Demand of Cobalt for EVs after 2017 ... 50
Figure 4-1. Natural Mining vs. Urban Mining ... 61
Figure 4-2. Laws on Secondary batteries for Subsidized EVs ... 63
Chapter 1. Introduction
The Moon Jae-in Administration, inaugurated in 2017, adopted the slogan “Transition to Safe and Clean Energy”
to describe its energy policy goals. As its core energy tasks, aimed at achieving this goal, the Korean government has pursued a nuclear phase-out policy and promoted the expansion of renewable energy supply. This year, the Administration also announced its Renewable Energy 3020 Implementation Plan, which seeks to raise the proportion of renewable energy in total energy to 20% by 2030.
South Korea is not the only country that has been pursing energy conversion policies. Many countries are also adopting similar policies that focus on dramatically increasing the supply of renewable energy. The focus of Germany’s climate change and sustainable energy policies is the proliferation of new and renewable energy; as a result of these policies, Germany has been experiencing a rapid increase of its new and renewable energy supply.
The United Kingdom also plans to transition to a low carbon economy by phasing out its use of coal and increasing its use of new and renewable energy.
Another change in the global energy market is that technological developments and the promotion of electric vehicles (EVs) have led to increased demands for EVs worldwide. Up until recently, there were only five or six EV models available in South Korea, which meant that consumers had a limited number of EVs from which to choose. However, in 2018, the nation’s EV selection saw marked improvement with the introduction of ten new EV models. The Korean government has also adopted an EV promotion policy that aims to put 430,000 EV vehicles in operation by 2022.1 Countries such as the Netherlands, Germany, and India have similarly announced plans to phase out the use of gasoline and diesel vehicles by 2030, while the United Kingdom and France aim to achieve this same goal by 2040. If these policies are implemented as planned, it is estimated that pure EVs will account for around 50% of all new vehicle sales worldwide by 2040.
In terms of energy supply, renewable energy facilities are replacing traditional energy facilities. Likewise, in terms of energy demand, oil consumption used for transport is being replaced by storage devices (EV batteries) and electricity. The increased replacement of traditional energy with new and renewable energy and the increased supply of EVs are expected to boost the demand for new materials. However, the unequal distribution of resources may act as a factor that heightens the uncertainty surrounding energy transition. The demand for solar panels, ESS (Energy Storage Systems), and vehicle batteries, among other things, is prompting demand for minerals, such as quartzite, lithium, and cobalt. These mineral resources are buried in specific places in countries such as China, and most of the materials required domestically for new energy devices can only be obtained through imports. In the case of lithium, which is used for the production of batteries, 88% of the world’s lithium reserves are located in three resource-rich countries: Chile, China, and Argentina. China also produces around 70% of the world’s silicon metal, which is used to make solar panels.
The stable supply of new materials is critical to achieving efficient energy conversion, making it necessary to develop and review a strategy to secure a stable supply of resources. This study aims to propose a strategy for Korea to secure resources by taking into account changes in the energy and resources markets resulting from energy conversion policies and technological developments.
This study is presented as follows. After the Introduction (Chapter 1), Chapter 2 briefly analyzes changes in the global energy market, which is increasingly emphasizing new energy. Chapter 3 reviews the impact of energy conversion on the minerals markets and analyzes the stability of the supply of materials. Chapter 4 proposes directions for stockpiling, the re-use of resources, and the overseas development of resources, among other things, that can be strategically adopted by Korea to secure a stable supply of material minerals to effectively implement its proposed energy transition. Chapter 5 presents the conclusion of this study.
Chapter 2. Changes in Energy Markets: Energy Transition 1. Increased proliferation of new and renewable energy
1Ministry of Trade, Industry, and Energy (2018), p.1.
Trends and outlook on the expansion of new and renewable energy
According to the World Energy Outlook (WEO) (November 2017) issued by the IEA (International Energy Agency), natural gas and new and renewable energy are expected to drive future global energy demand. New and renewable energy accounts for 40% of the incremental increase of the world’s total energy consumption and the proportion of new and renewable energy in total energy consumption is expected to grow from 12.9% in 2016 to 19.6% by 2040.
Table 2-1. Outlook of Total Energy Demand by Energy Source (New Policies Scenario)
Energy demand (Mtoe) Proportion (%) Change rate
(%)
2000 2016e 2030 2040 2016e 2040 2016e–2040
Total energy 10,035 13,760 16,011 17,584 100 100 1.0
Coal 2,311 3,755 3,896 3,929 27.3 22.3 0.2
Petroleum 3,670 4,388 4,715 4,830 31.9 27.5 0.4
Gas 2,071 3,007 3,737 4,356 21.9 24.8 1.6
Nuclear 676 681 897 1,002 4.9 5.7 1.6
Hydro 225 350 459 533 2.5 3.0 1.8
Bio 1,023 1,354 1,630 1,801 9.8 10.2 1.2
Other forms of new and renewable energy
60 225 676 1,133 1.6 6.4 7.0
Source: IEA (2017) p.648.
Decreased costs have been a driving factor behind the rapid increase of new and renewable energy worldwide.
Since 2010, generation costs for new photovoltaic and wind facilities have fallen by 70% and 25%, respectively, and rechargeable battery costs have decreased by 40%.2 The demand for power is also rising quickly due to the electrification of energy and increased demands for electric vehicles. With its increased proliferation, the proportion of new and renewable energy in total power generation is expected to rise from 24.3% in 2016 to 39.9%
by 2040 (refer to Table 2-2).3 It is also forecasted that China and India will lead the proliferation of future photovoltaic generation.
Table 2-2. Outlook on Generation Amount by Source (New Policies Scenario)
Generation amount (TWh) Proportion (%) Rate of change (%)
2000 2016e 2030 2040 2016e 2040 2016e–2040
Total 15,477 24,770 32,864 39,290 100 100 1.9
Coal 6,005 9,282 9,880 10,086 37.5 25.7 0.3
Petroleum 1,259 1,006 621 491 4.1 1.3 -2.9
Gas 2,753 5,850 7,581 9,181 23.6 23.4 1.9
Nuclear 2,591 2,611 3,440 3,844 10.5 9.8 1.6
New and
renewable 2,869 6,021 11,343 15,688 24.3 39.9 4.1
2IEA (2017), p.650.
3IEA (2017), p.650.
Hydro 2,619 4,070 5,344 6,193 16.4 15.8 1.8
Bio 164 570 1,036 1,424 2.3 3.6 3.9
Wind 31 981 2,837 4,270 4.0 10.9 6.3
Geothermal 52 86 197 349 0.3 0.9 6.0
Solar 1 303 1,827 3,162 1.2 8.0 10.3
CSP 1 11 89 237 0.0 0.6 13.8
Marine 1 1 12 53 0.0 0.1 17.0
Source: IEA (2017) p.650.
Declining costs of new and renewable energy
According to the IEA (2017), the cost of photovoltaic (PV) generation projects has declined considerably. In the case of utility-scale solar PV projects, the global average levelized cost of energy (LCOE) decreased by 70% from 2010 to 2016.4 The significant variance of the LCOE by region can be attributed to differences in costs—such as for PV modules, land, labor, and infrastructure—and regulatory systems. In its World Energy Outlook (WEO), the IEA projected that the LCOE will decrease by 60% by 2040 Figure 2-1.
Figure 2-1. Trends in Average Global Costs by Technology (New Policy Scenario)
Source: IEA (2017) p.60.
Supported by the latest technological advancements, electric vehicles (EVs) are rapidly being released, and petroleum used for transportation purposes is expected to soon be replaced by other forms of energy. According to the WEO, there were more than 750,000 recorded EV sales in 2016, for a total of more than two million in accumulated sales. China is leading EV technology and accounts for around half of global sales. Although EV sales currently rely heavily on support policies, the WEO expects the proliferation of EVs to increase significantly with further technological developments.
4The LCOE only includes the direct costs of projects. It does not include system integration costs or costs related to the proliferation of PV.
Domestic policies promoting new and renewable energy
The Moon Jae-in Administration, inaugurated in 2017, has adopted the slogan “Transition to Safe and Clean Energy” to describe its basic energy policy goals. In December 2017, the government announced its tentative
“Renewable Energy 3020 Implementation Plan,” aimed at increasing the proliferation of renewable energy.
Figure 2-2. Current State of the Proliferation of Renewable Energy in Korea
Source: Ministry of Trade, Industry, and Energy (2017) p.1
원별발전량비중 Generation amount by energy source
수력 Hydro
풍력 Wind
해양 Marine
태양광 Solar
폐기물 Wastes
바이오 Bio
원별누적설비용량 Accumulated facility capacity by source 신규설비용량 New facility capacity
태양관+풍력 Solar + wind
기타 Other
Figure 2-3. Renewable Energy Generation Proliferation Goals
Source: Ministry of Trade, Industry, and Energy (2017) p.2.
재생에너지 발전비중 Proportion of renewable energy generation 재생에너지 설비용량 Capacity of renewable energy facilities
According to the Korean government’s Renewable 3020 Implementation Plan, renewable energy generation in Korea accounted for only 7% of the country’s total power generation and 12% of its facility capacity in 2016.
Wastes accounted for more than half (58%) of renewable energy generation, but more recently, there has been an increase in solar and wind power generation.
The renewable energy proliferation goal of the Renewable 3020 Implementation Plan is to increase the share of renewable energy in total power generation to 20% and increase the capacity of renewable energy facilities from 13.3 GW in 2016 to 63.8 GW by 2020.
Figure 2-4. Generation Equipment Proliferation Goal by Renewable Energy Source
Source: Ministry of Trade, Industry, and Energy (2017) p.2.
2017년: 총 15.1GW 2017: Total 15.1 GW
수력 Hydro
풍력 Wind
태양광 Solar
폐기물 Wastes
바이오 Bio
신규(2018~2030): 총 48.7GW New (2018–2030): 48.7 GW total
2030년: 총 63.8GW 2030: 63.8 GW total
A closer examination of generation facility goals by renewable energy source shows that more than 95% of the new facilities will be used to supply clean energy, such as solar and wind energy. PV generation facilities will add a capacity of 30.8 GW by 2030, up from the current capacity of 5.7 GW (as of 2017), and an additional capacity of 16.5 GW will be installed for wind power by 2030.
2. Increased proliferation of electric vehicles (EV) EV markets and policy trends
In addition to the increased use of new and renewable energy, the greatest change in worldwide energy conversion trends is seen in transport. Out of all the traditional types of fossil fuels, petroleum is the one most commonly used for transport. The expansion of electric vehicles (EV) is spurring a transition from traditional oil energy to electric energy. The IEA’s Global EV Outlook announced that EVs recorded 1.1 million (USD) in sales in 2017, up by 54% compared to the previous year, and an accumulated supply of 3.1 million worldwide.5
This proliferation of EVs was made possible largely due to policy support. In 2009, the EVI (Electric Vehicle Initiative) established an international policy forum that called for greater focus on the proliferation and expansion of EVs. The forum, led by Canada and China, also has thirteen member countries including Finland, France, Germany, India, Mexico, the Netherlands, Norway, Sweden, the United Kingdom, and the United States. South Korea is among an increasing number of non-member states that are also actively involved in EVI
5IEA (2018) p.9.
activities.6Policies aimed at expanding the global supply of EVs have continued to increase. Some of these policies include the ban, led by the EU, on the operation of ICE (Internal Combustion Engines) vehicles in downtown areas, and the proposed ban, led by the Korean government, on the sale and production of ICE vehicles in South Korea.
Table 2-3. Plans to Phase out Gasoline and Diesel Vehicles by Country Country Phase-
out Year Notes
UK 2040 Around 40,000 early deaths per year related to air pollution
France 2040 The ban on the acquisition of additional licenses for the exploration of oil and gas in France and overseas territories is included in the Plan.
Netherlands 2030 Prohibits exhaust gas from vehicles. The Netherlands has the highest number of EV rechargers per capita.
Germany 2030 Passed a resolution prohibiting the registration of ICEs after 2030. The country’s goal is to supply one million EVs by 2020.
India 2030 Around 1.2 million deaths per year related to air pollution. The costs associated with air pollution are estimated to represent 3% of the nation’s GDP.
Austria 2020 Adopted a ban on the sale of gasoline and diesel vehicles after 2020.
China 2040 Adopted a ban on the sale and production of ICE vehicles.
Ireland 2030 Only zero-emission vehicles to be sold as of 2030, and the scrapping of all fossil fuel vehicles to be completed by 2050.
Taiwan 2035/
2040
Use of EVs for all public corporation vehicles and buses by 2030, and gradual sales ban on fossil fuel scooters starting from 2035 and fossil fuel vehicles. Starting from 2040.
Source: https://climateprotection.org/actions-by-countries-phase-out-gas/2018.5.12, summarized by the author.
Due to the latest environmental regulations and hard-line policies, such as those prohibiting the sales and production of fossil fuel vehicles, the automobile industry has no choice but to increase the proportion of EVs in the market. Given that the fuel efficiency of ICEs can only be improved to a limited extent, many countries may be unable to meet environmental standards if they do not increase their proportion of EVs.
Table 2-4. Environmental Regulations (Tentative) to be Adopted by Major Countries Environmental
regulations U.S. EU China Japan South Korea
Fuel efficiency regulations
(Date of effect)
23.2 km/ℓ (2025)
95 g/km (2020)
20.0 km/ℓ (2020)
20.3 km/ℓ (2020)
24.3 km/ℓ (2020) Sanctions for
incompliance
Levying of fines
Levying of fines
Levying of fines, ban on production
Disclosure of vehicle, levying of fines
Levying of fines
Source: Byounggeun Gwak (2017) p.89.
In addition to policies supporting the proliferation of EVs, EV sales have also begun to increase dramatically due to technological advancements that have lowered EV prices. EV batteries, which account for the majority of EV costs, dropped to half of the entire vehicle price by mid-2010, and currently represent around one third of the
6IEA (2018) p.17.
vehicle price. The IEA (2018, p. 66) lists the price of EV batteries in 2017 as USD 150–350 /kWh, and USD 274 /kWh7as the median price.
Figure 2-5. Trends and Outlook of EV Battery Prices
Sources: BNEF (2018b) p.13
If this decline in battery price continues, it is expected that the total cost of vehicle ownership—including the price of the vehicle and maintenance costs—for EVs and ICE vehicles will reach parity within a decade. The battery price needed to reach parity for a three-year total cost of ownership, as calculated by domestic conglomerates, is USD80–116 /kWh for long-distance (distance of around 500km) vehicles and USD111–157 /kWh for short-distance (distance of around 300 km) at a consistent rate of speed.8 The price of a battery pack is expected to eventually reach around USD 100. At a seminar hosted in Seoul in 2017, the BNEF (Bloomberg New Energy Finance) forecasted that Germany will reach parity by 2024, and the United States will reach parity by 2026.9
Figure 2-6. Total Cost of Ownership of ICE vehicles and EVs
Source: BNEF (2017c) p.39.
7The data in the figure above has been calculated by comparing vehicles produced in both ICE and EV models, such as the Volkswagen e-Golf.
8Based on internal calculations extracted from a presentation at The Battery Conference 2018.
9Based on large sedans.
On April 2018, the United States Environmental Protection Agency (EPA) lowered its greenhouse gas emissions criteria for vehicles sold from 2022 to 2025. According to the EPA, the reason for these changes was that the emissions standard established during the former Barrack Obama Administration were excessively high from the perspective of technological readiness.10 This change of criteria suggests that the consumption of traditional ICE vehicles in the U.S. will continue for a longer period than in Europe. However, several states, mainly California, are adopting policies to support the proliferation EVs. The adoption of EV policies by individual states suggests that technological readiness is not the only reason that delays the U.S. from reaching parity in total cost of ownership.
Figure 2-7. Outlook on Accumulated EV Sales
Source: BNEF (2018a) p.6.
There is a general consensus worldwide that the number of EVs will continue to rapidly increase. However, there are different opinions regarding how fast the EV market will grow. Major oil corporations and OPEC, which have significant rights and vested interest in oil reserves, have made lower EV forecasts than other institutions. In contrast, institutions such as BNEF, which have a great interest in new and renewable energy, have forecasted high growth. Meanwhile, BP, which has a vested interest in the gas market, maintains a relatively neutral outlook.
This is illustrated in Figure 2-7.
Differences of opinion can also be seen in forecasts made about the EV share of new vehicle sales. BNEF foresees a rapid increase of EVs in new vehicle sales after 2025, whereas other institutions forecast a steady increase of the proportion of EVs in new vehicle sales.
10https://www.epa.gov/regulations-emissions-vehicles-and-engines/midterm-evaluation-light-duty-vehicle-greenhouse-gas, accessed on August 20, 2018.
Figure 2-8. Proportion of EVs in New Vehicle Sales
Source: IHS (2018) p.19, BNEF (2018a) p.6, summarized by author.
Current status and policy of EVs in South Korea
Lately, South Korea has also seen an accelerated increase in EV sales. In case of the Ionic, produced by Hyundai, which has produced EVs since 2016, domestic sales have grown rapidly as the preferred type of EV has continued to shift from a small/compact car to midsize sedans and SUVs (Smart Utility Vehicles). The Korean government currently offers a subsidy of KRW14 million for the purchase of a pure EV. On top of this, local autonomies offer a subsidy of KRW 3–12 million for the purchase of EVs. Furthermore, deductions of KRW 2 million from individual income tax, up to KRW 600,000 from education tax, and up to KRW 2 million from acquisition tax are being offered to contribute to the proliferation of EVs.
Figure 2-9. Current Status of EV Proliferation in South Korea
Source: https://www.ev.or.kr/portal/board/9/3147/?pMENUMST_ID=21560, accessed on October 26, 2018.
0 5 10 15
2011 2012 2013 2014 2015 2016 2017
1,000 vehicles
Chapter 3. Energy Conversion and Minerals Used for Materials 1. Photovoltaic (PV) materials
A. Materials used for PV systems and solar cells I). Categorization of PV systems and composition of devices
Photovoltaic (PV) is a generation technology11 that converts light energy from the sun into electricity, which is supplied to users through a PV system comprised of various devices and equipment, such as solar cells. The devices and equipment that make up PV systems include solar cells, junction boxes, solar inverters, batteries, monitoring systems, and auxiliary generators. The function of each component in a single PV system is shown in Table 3-1.
PV systems can be categorized as stand-alone, on-grid, or hybrid. Stand-alone systems are utilized on islands and mountains and in remote areas, while on-grid systems are used in buildings and for large-scale generation systems in regions connected to the power grid. A hybrid system is a generation method that combines different energy sources, such as wind and diesel.12
Table 3-1. PV System Composition and Component Functions
Component Function
Solar cells Absorbs solar energy and generates electric currents
Junction box Gathers direct currents (DC) generated in the module and transmits them to the inverter
Inverter Changes the DC generated in the solar cell to alternating currents (AC) Battery Stores electricity so that the electricity generated during the day can be used at
night
Monitoring system Monitors the state of the system and diagnoses any malfunctions or errors Auxiliary generator
(additional equipment)
Used as a backup in case the solar cells cannot operate for long periods of time due to weather conditions (i.e. during the rainy season or typhoons)
Source: https://www.knrec.or.kr/energy/sunlight_intro.aspx, accessed on October 22, 2018.
II) Solar cell types and PV principles
Solar cells are categorized into silicon-type solar cells or compound semiconductor solar cells depending on the materials used. Silicon-type solar cells can be classified into crystalline or amorphous silicon thin-film solar cells.
Crystalline silicon solar cells are further categorized into circuit-type or thin-film solar cells. Circuit-type solar cells can be divided into single crystalline Si or poly-crystalline Si. Crystalline silicon-type solar cells currently dominate the global solar cells market (refer to Figure 3-2).
11Korea Energy Agency (https://www.knrec.or.kr/energy/sunlight_intro.aspx), accessed on October 22, 2018.
12Korea Energy Agency (https://www.knrec.or.kr/energy/sunlight_intro.aspx), accessed on October 22, 2018.
Figure 3-1. Solar Cell Types
Source: https://www.knrec.or.kr/energy/sunlight_summary.aspx, accessed on October 22, 2018.10.22.
태양전지 Solar cells
Si계 Si-type
결정질 Si Crystalline Si
기판형 Circuit-type
단결정 Single crystalline Si
다결정 Poly-crystalline Si
박막형 Poly-crystalline Si Thin-film
비경정질 Si 박막 a-Si Thin-film
화합물반도체 Compound semiconductor
Ⅱ-Ⅵ족: CdTe, CIS 등 GroupⅡ-Ⅵ: CdTe, CIS, etc.
Ⅲ-Ⅴ족: GaAs, InP, InGaAs등 Group Ⅲ-Ⅴ: GaAs, InP, InGaAs, etc.
기타: Quantum Dot Cell, Dye Cel등 Other: Quantum Dot Cell, Dye Cel, etc.
Figure 3-2. Global Production Trends of Solar Cells by Type (GW)
Source: Roskill (2017), Figure A48.
Electricity is produced using silicon-type solar cells as illustrated in Figure 3-3.
Figure 3-3. Principles of Photovoltaic Generation Using Solar Cells
Source: Taehyeon Kim (2016), Understanding the Solar Photovoltaic Industry and Global Trends13, Hanwha Advanced Materials, p.7.
태양빛 Sunlight
전류 Electric current
N-type 실리콘 N-type silicon
PN 접합 PN junction
P-type 실리콘 P-type silicon
광자 Photon
전자흐름 Electron flow
정공흐름 Hole flow
13http://cbe.snu.ac.kr/sites/cbe.snu.ac.kr/files/board/LectureBoard/%2820160527%29공학기술과%20경영_HAMC_김태현 -송부용_0.pdf, accessed on October 22, 2018.
Crystalline silicon solar cells create contact with p-type silicon and n-type silicon semiconductors to convert sunlight energy into electric energy. When the sunlight is absorbed, the electrons and holes in the semiconductor move freely, and when they enter the electric field generated by the PN junction, the electrons (-) reach the n-type semiconductor, and the holes (+) reach the p-type semiconductor. Then, they create an electrode on the surface of the p-type and n-type silicon semiconductors that allows electrons to flow to the external circuit and generate electric currents.14The direct current (DC),converted in the solar cells, has a very small electric current; therefore, this current must be expanded through modules so that the amount of electricity transmitted to the system can be adjusted.15
III) Solar cell materials and the value chain
This paper has adopted solar cell materials as a targeted area of study and resource security analysis because solar cells are commonly used to replace other existing forms of energy. Resources with greater economic importance have a larger impact on resources security. For example, petroleum is a critical component of energy security because it has a significant economic impact.
The solar cell material analyzed in this study is silicon metal, which also includes polysilicon.16 High-purity polysilicon is the base material used to create the silicon-type solar cells that are currently being supplied to the global solar cell market. Any uncertainty in the supply and demand of polysilicon or any rapid increase in its price has the potential to have a considerable impact not only on the solar cell industry but also on the economy as a whole.
Silicon metal (MG-Si) is the main material used to create high-purity polysilicon. Silicon metal is produced by reducing and melting quartzite and silicon dioxide (SiO2), which is the main ingredient of silica sand.
Below is a brief explanation of the process through which polysilicon (a main material used for the production of solar cells) is produced from its mineral form. Polysilicon is high-purity silicon that is produced by refining quartzite andSiO2in several stages.
Silicon (Si) is a non-metal element that belongs to the carbon group (Group IVB) on the periodic table.17Si is one of the most common elements on Earth, second only to oxygen, and mostly exists in combination with oxygen in the form SiO2. The crystalline form of pure SiO2 is quartzite. Silica18, which is the base material of SiO2, exists in abundance around the world, but there is no statistical data on silicon reserves. In the natural world, silicon exists in the form of quartzite or silica and is found combined with oxygen, aluminum, or other metals.19 The development of SiO2deposits depends on the quality of the deposit and the location of processing equipment. In most major SiO2 producing countries, silica sand mines and quarries are located within 300 miles of refineries.20
14Korea Energy Agency (https://www.knrec.or.kr/energy/sunlight_summary.aspx, accessed on October 22, 2018).
15SK hynix Blog(http://blog.skhynix.com/1786).
16Some solar cells use rare metals, such as Copper, Indium, Gallium, and Selenium (CIGS) thin film solar cell, but alternative materials are being developed due to concerns of hiking prices.
17Korea Mineral Resource Information Service (KOMIS)
(https://www.kores.net/common/pdfPreview.do?fid=mineralPdf&mc_info_seq=2527, accessed on October 22, 2018)
18Silica refers to a compound comprised mostly of SiO2.
19Ibid
20Ibid.
Figure 3-4. Crystalline Solar Cell Supply Chain
Source: Seongchan Park (2010): p.1021.
원재료(규석) Basic materials (quartzite) 실리콘메탈(습도 99%) Silicon metal (humidity: 99%) 모노실란(SiH4) Monosilane (SiH4)
삼염화실란(SiHCl3) Trichlorosilane (SiHCl3) 폴리실리콘 Poly-silicon
다결정잉곳 Poly-crystalline ingot 다결정웨이퍼 Poly-crystalline wafer 태양전지 Solar cell
단결정잉곳 Single-crystalline ingot 단결정웨이퍼 Single-crystalline wafer
Silica sands or quartzite are refined to produce silicon metal and ferrosilicon. Silicon metal is used to make aluminum-based alloy, compounds, and polysilicon, while ferrosilicon is used to manufacture special steel.
Silicon metal is made up of at least 97% silica. By processing raw SiO2 ore (quartzite) and auxiliary materials (electrodes, coal tar, carbon, woodchips, etc.) in an electric furnace, a metallurgical silicon with a Si purity of 99.3% or more can be produced.22 The purity of the silicon metal produced depends on the purity of the raw SiO2ore and the characteristics of its impurities.
21http://www.keei.re.kr/keei/download/seminar/101210/DI101210_a05.pdf.
22 INI R&C Website
(https://www.inirnc.com:40126/prop/bbs/board.php?bo_table=ini_column&wr_id=33&page=3),accessed on October 22, 2018.
Figure 3-5. Silicon metal Production Cycle
Source: INI R&C website23.
The SiO2 in quartzite is reduced and melted into a carbon compound to produce silicon metal (MG-Si). The silicon metal is then used as a base material and is reacted with hydrogen and hydrochloric acid, among other things, to produce mixed silane. Next, the mixed silane goes through a distillation process to produce high-purity trichlorosilane (TCS). This is then used for chemical vapor deposition to produce high-purity polysilicon in solid form.24 Polysilicon is high-purity silicon that has been physically or chemically refined. For solar cells, the purity of the polysilicon used must be higher than 6N (Si>=99.9999%) grade, and for semiconductors, the polysilicon used must have a purity of 11N-12N grade.25
Figure 3-6. Polysilicon Production Process (Siemens Method)
Source: Seonghwan Kim (2008) p.23.
23https://www.inirnc.com:40126/prop/bbs/board.php?bo_table=ini_column&wr_id=33&page=3),accessed on October 20, 2018.
24OCI Website (http://www.oci.co.kr/sub/business/poly.asp),accessed on October 23, 2018.
25Korea Silicon metal (http://www.korms.kr/kms/bbs/content.php?co_id=MGSiPowder&act=1),accessed on October 23, 2018.
규소 SiO2
추출 Extraction
석영 Quartz
탄소화합물 Carbon compound
가열 Heating
금속실리콘 Silicon metal 실란가스 Silane gas
정제 Refining
폴리실리콘 Polysilicon
Silicon, the base material used to make solar cells, reacts well to light and boasts high electrical stability, used to convert light energy to electricity. Ingot is a material produced by processing silicon and melting it down to make pillar-shaped blocks. A wafer is produced by thinly slicing and polishing ingot26 and is used to manufacture photovoltaic solar cells. Modules are made by connecting small solar cells in a parallel structure or electrical series. The cells are connected to a strong frame because they are extremely thin and can be easily damaged.27
Figure 3-7. Supply Process from Polysilicon to Photovoltaic Modules
Source: Taehyeon Kim (2016) p.9.
QCELLS (https://www.q-cells.com/kr/main/solarproject/how_works~how_works~. html), accessed on October 20, 2018.
27SK Hynix Blog(http://blog.skhynix.com/1786), accessed on October 22, 2018.
B. Market trends for PV facilities and materials28 1) Trends and outlook on increasing PV capacity
Figure 3-8 illustrates the global trends and outlook on the increased installation of PV facilities. Solar power generation is growing rapidly worldwide and is expected to continue to do so well into the future. According to BNEF (2018e), new PV facilities had a recorded capacity of 7.7 GW in 2009 and had jumped significantly by 99.0 GW by 2017; the significance of this jump suggests that additional facilities were constructed during this time. In addition to capacity increases, there has also been a change in the main countries leading new PV facility installations. Up until the beginning of 2010, European countries led PV facility installation; however, starting in 2013, China rapidly increased its number of PV facilities and now leads the expansion of PV facilities worldwide.
In 2017 alone, China installed 53GW of PV facilities,29 accounting for 53.5% of the world's total capacity expansion (refer to Figure 3-8).
BNEF (2018e), which adopts a more conservative outlook than other institutions, anticipates 146.4 GW of new PV installations by 2020 (refer to Figure 3-8]. Although China’s dramatic increase in PV capacity has slowed down, China is still expected to spearhead the PV installation movement until 2020. PV capacity increases are also anticipated in India and throughout the rest of the world.
Figure 3-8. Trends and Outlook on the World’s New Additional Installations
Source: BNEF (2018e) p.2.
2) PV system prices and cost structure
One of the main reasons for the recent increase of PV system capacities worldwide is the rapid fall of PV system prices. According to BNEF (2018e), the costs of PV systems, both for home use and generation purposes, dropped significantly and, by 2017, were one third of the price they were in 2010. In the case of home PV systems, prices fell from USD 4.70 /W in 2010 to USD 1.44 /W in 2017. In the case of PV systems used for generation purposes,
prices fell from USD 3.28 /W in 2010 to USD 1.01/W in 2017.30
28Related statistics and forecast figures were based on data published by the Bloomberg New Energy Finance (BNEF) and Roskill (2017). There are only a few institutions that release market information on PV materials, and it is generally accepted that these two institutions provide the most reliable information.
29BNEF (2018e) p.2.
30Home PV system prices were based on the BNEF (2018e) data file, and generation-purpose PV system prices were based
The drop in PV system prices can be attributed to the reduced costs of the devices used to make each system.
The costs associated with PV systems include the prices for modules, inverters, and auxiliary equipment, as well as the costs associated with engineering, procurement, and construction (EPC). From 2010 to 2017, the price of solar cells for home purposes fell from USD 2.45 /W to USD 0.40 /W, meaning that in 2017, the price was approximately one sixth of what it was in 2010. Similarly, the price of solar cells for generation purposes fell from USD 1.89 /Win 2010 to USD 0.38 /W in 2017, meaning that the price in 2017 was only one fifth of what it was in 2010 (refer to Figure 3-9 and Figure 3-10).31The costs of inverters, auxiliary facilities, and EPC also showed a relatively significant drop. However, the decreased cost of PV systems can be largely attributed to the sharp decline in the price of modules, which represent the largest proportion of PV system costs. By 2017, module costs, which account for more than one half of PV system costs, had fallen to around one third of what they had been in 2010. This great price decrease, compared to the price decreases of other parts, suggests that module cost decreases were the largest factor in bringing down PV system costs.
Figure 3-9. Trends and Outlook on the Base Prices for Home PV Systems
Source: Created by the author based on BNEF (2018e) data.
Figure 3-10. Trends and Outlook on the Base Prices for Generation PV Systems
Source: BNEF (2018e) p.18
on BNEF (2018e) p. 18.
31BNEF (2018e) p.18 and data file.
2.45 1.79
1.19 0.87 0.81
0.62 0.51 0.40 0.32 0.26 0.24 0.22 0.20 0.19 0.18 0.17 4.70
3.73
3.28
2.76 2.52
1.80 1.64 1.44 1.31
1.21 1.14 1.08
1.02 0.96 0.91 0.86
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2018 $/W(DC) Title
Module Inverter BOP EPC Other
In recent years, the proportion of module costs in PV system costs has declined significantly. In the case of PV systems used for generation purposes, in 2017, module costs represented the largest cost of a single component and accounted for 37% of the overall system cost. However, in the case of home PV systems, in 2017, module costs accounted for only 27% of the overall system cost, which was less than the proportion of EPC costs (29%).32
Modules are produced using various materials and in several stages. In order to analyze the impact of changes in material prices on PV systems, we examined the proportion material costs represent of module production costs.
As of the fourth quarter of 2018, polysilicon costs were estimated to represent around 22% of total module production costs in a vertically integrated business (refer to Figure 3-11).33 Based on these estimates, polysilicon costs can be calculated as representing around 6-8% of overall PV system costs, which is fairly insignificant compared to the total system cost.
Figure 3-11. Assumed Module Production Costs in a Vertically Integrated Business (4Q 2018)
Source: BNEF (2018c) p.8.
According to BNEF (2018e) forecasts, the 2017 prices of PV systems for both home and generation purposes are expected to fall by 60% by 2025 (refer to Figure 3-9 and Figure 3-10).34 Similarly, 2017 solar cell module prices for both home and generation purposes are expected to fall by around 43% by 202535; if these forecasts are correct, module prices will then represent an even smaller percentage of PV system costs. By 2025, the cost structure for a PV system for generation purposes is expected to be as follows: module 27%, inverter 5%, auxiliary facilities 25%, engineering, procurement, and construction (EPC) 29%, and other 14%. In the near future, EPC costs are expected to surpass module costs.36
3) Supply structure of polysilicon
The global production of polysilicon has increased rapidly due to an increased demand for PV systems.
Polysilicon production increased 51% from 304,000 tons in 2014 to 459,000 tons in 2017. By country, China produced 52%, more than half, of the world’s polysilicon in 2017.37 South Korea is the world’s second largest producer of polysilicon, accounting for 22% of all global production in 2017 (refer to Figure 3-12). The total capacity of Korea’s production facilities is 82,000 tons: OCI has a 52,000-ton polysilicon capacity; Hanwha Chemical has a 15,000-ton capacity; and, Korea Silicon has a 15,000-ton capacity.38 In 2017, Korea exported about 66,000 tons39 of polysilicon, which means that a considerable part of its production is exported to other
32Calculated by author using BNEF (2018e) data.
33BNEF (2018c) p.8.
34drelateddata.
35Calculated by the author using BNEF (2018e) data.
36Calculated by the author using BNEF (2018e) data.
37BNEF (2018f) p.3.
38BNEF (2018d) pp.6-7, OCI Website (https://www.oci.co.kr/sub/business/poly.asp), accessed on October 23, 2018.
39Korea Customs Service Trade Statistics (https://unipass.customs.go.kr:38030/ets/), accessed on October 29, 2018.
countries.
Figure 3-12. Trends/Percentages of Polysilicon Production by Country
Source: BNEF (2018f) p.3.
Figure 3-13. Trends/Percentages of Solar PV Cell Production by Country
Source: BNEF (2018f) p.3
In 2017, the global production of PV cells was 95 GW, which is double the production over the previous three years, thereby showing a rapid increase(refer to Figure 3-13).In 2017, Korean companies were responsible for around 5 GW of all solar cells produced globally40, which is markedly lower than Korea’s production of polysilicon (22%).
In 2018, Korea’s production of polysilicon is expected to reach 514,800 tons. Based on this assumption, Korea will be able to produce around 128 GW41 of crystalline silicon modules, which exceeds current demand by around
40According to BNEF (2018f) p. 12-13, in 2017, Hanwha Q Cells produced 4,250MW of solar PV cells, and Hyundai Heavy Industries produced 800 MW of PV cells.
41BNEF (2018d) p.5. This takes into account the 30,000 tons of polysilicon used in the semiconductor industry, and applies
18–28%.
Figure 3-14. Polysilicon Supply Curve in 2018
Source: BNEF (2018d) p.5.
An examination of price trends shows that polysilicon prices fluctuated between USD 50–70 /kg from 2010–
2011, but declined sharply thereafter. Prices hovered at around USD 15 /kg from 2016 to the first half of 2018 (refer to Figure 3-15).42 In 2017, the price for silicon metal, the base material used to make polysilicon, was USD 1.5 /kg (based on the export price of China), which is about 40% lower than it was in 2010 (USD 2-2.5 /kg) (refer to Figure 3-15). Polysilicon prices dropped approximately 80% during this same period, but at a steeper rate. The price of silicon metal was around 10% that of polysilicon as of 2017; however, the impact of silicon metal on PV system prices is estimated to be lower than 1%.43
Figure 3-15. Polysilicon and Silicon metal Price Trends (USD/tons)
Source: Roskill (2017), Figure 41.
polysilicon consumption at an average of 3.8 g/W.
42Roskill (2017), Figure 41 (Roskill resources are not available online).
43In the text above, polysilicon was calculated as representing around 6-8% of PV system costs.
4) Outlook on and challenges of the supply and demand structure of silicon metal44
The global production of silicon metal reached 2.72 million tons in 201645, representing an increase of 56%
compared to 2007. Figure 3-16 shows that the increase in silicon metal production worldwide over the past ten years can be attributed to increased production in China. In 2002, China accounted for 35% of global production;
China’s share of global production peaked in 2015 when it produced 1.83 million tons, or 67%, of the world’s silicon metal.46 Roskill (2017) forecasts that China’s production will continue to grow and represent around 70%
of the global market within the next five years.47
Figure 3-16. Global Silicon metal Production Trends by Country (Unit: tons)
Source: Roskill (2017), Figure 2.
Many of the world’s major silicon metal producers, such as China, Brazil, Norway, and France, are also major exporters. China, in particular, is both the world’s greatest producer and exporter of silicon metal. China represents about half of all silicon metal exports worldwide. In 2016, China produced 1.75 million tons and exported 72,0000 tons of silicon metal.48
Figure 3-17. Trends in Silicon metal Exports by Major Exporters (Si<99.99%) (Unit: one thousand tons)
Source: Roskill (2017), Figure 24.
44Roskill has proven to be the most reliable source in terms of statistics and data on metal silicon market trends. It was difficult to find other institutions with a similar level of reliability.
45Roskill (2017), Table 1.
46Roskill (2017), Table 1.
47Included in the explanatory data of Figure 9, Roskill (2017).
48Roskill (2017), Table 11.
The following examines the cost of each production factor for silicon metal. Silicon metal is produced by heating quartz and a reducing agent, and this refining process consumes a large amount of power. Figure 3-18 shows the share of each factor in silicon metal production based on global averages. The cost of electricity represents the largest share (33%) of silicon metal production costs, but the cost of quartzite represents a mere 8%.49Cost structures differ somewhat between silicon metal-producing countries (Figure 3-19). Norway, the EU, North America, and Russia showed relatively low electricity costs but recorded higher labor costs. In contrast, China recorded high electricity costs but low labor costs.
Figure 3-18. Average Cost and Share of Silicon metal Production Factors
Source: Roskill (2017), Figure A1.
Figure 3-19. Cost of Silicon metal Production Factors (USD/tons) by Producing Country (USD/tons)
Sources: Roskill (2017), Figure A10.
49Roskill (2017), Figure A1.
Let us take a closer look at the demand for silicon metal. Silicon metal is used as the base material for aluminum, silicone, and polysilicon. Figure 3-20 illustrates the trends and outlook on silicon metal consumption by purpose of use after 2000. Demands for silicon metal increased for all uses, but of these uses, the demands for silicon metal for the manufacture of polysilicon increased at the highest rate. In 2000, the demand for silicon metal for the manufacture of aluminum and silicone accounted for 96% of total demand. However, in 2016, the manufacture of aluminum represented 46% of all silicon metal demand, organosilicon represented 31% of demand, and polysilicon represented 21% of demand, showing a rapid increase in silicon metal demand for the production of polysilicon (refer to Figure 3-20).50 This increased demand can be attributed to the increased manufacture of solar cells.
According to Roskill’s (2017) outlook for the next decade, the demand for silicon metal is expected to increase steadily for all uses; in particular, the demand for silicon metal for the manufacture of polysilicon for solar cells is expected to increase to around 24% of total demand.51
Figure 3-20. Global Silicon metal Consumption Trends and Outlook by Purpose of Use (Unit: tons)
Source: Roskill (2017), Figure 19.
Figure 3-21. Silicon metal Price Trends and Outlook (Unit: USD/tons)
Source: Roskill (2017), Figure 3.
50 Calculated by author using Roskill (2017) Table 35.
51 Roskill (2017), Table 35.
Silicon metal prices fluctuated but continued to trend upward from 2000 to early 2010, a period during which international prices for natural resources also increased. Silicon metal prices began to decline again from 2011 until 2016, and stabilized thereafter. Roskill (2017) forecasts that the price of silicon metal will continue to trend downward for the next ten years.52
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
A. Secondary cells and core mineral materials
Battery packs, which are devices that store electricity, are the most important part of an EV. Primary cells, often called “batteries,” are not reusable after they are discharged, but secondary cells are rechargeable. EV battery packs are made of secondary cells. Secondary cells are made up of positive and negative electrodes, electrolytes, and a separator. When a battery is recharged, electrons from positive electrodes, which determine battery capacity and average voltage, are delivered to negative electrodes, thereby storing energy.
Figure 3-25. Four Elements of Batteries
Source: http://www.samsungsdi.co.kr/column/all/detail/55269.html, accessed on May 20, 2018.
62As of 2016, metal silicon prices were around 10% those of polysilicon.
