The silver-solar connection

Climate finance and advances in solar technology will shape the future of the energy industry

Silver, or rather silver paste, is a critical part of the solar industry, currently accounting for 7 per cent of the cost of panels. Solar cell makers have managed to almost halve the consumption of silver paste per piece over the last six years, but next generation technology will require a lot more of the metal.

“The solar industry is now more exposed to silver price trends than it ever was in the past,” said Yali Jiang, BloombergNEF’s lead analyst tracking solar technologies.

Breakthroughs in solar technology come thick and fast. PERC, or passivated emitter and rear contact, panels, which are currently widely used, only became the dominant product in 2019. Expect to hear a lot more about the more efficient TOPCon, or tunnel oxide passivated contact technology. Some companies are hoping to jump straight to heterojunction cells. New technology cells use far more silver: Against PERC’s 8.6 milligrams per watt, TOPCon uses 12 milligrams, while heterojunction cells need 22 milligrams.

These shifts would enable solar module efficiency to rise from about 21 per cent now to over 25 per cent by 2030, and cross 40 per cent by the 2040s. Higher solar module efficiencies usually mean lower costs.

The photovoltaic industry consumed over a 10th of the global silver supply in 2022, according to The Silver Institute. BNEF sees demand for key metals multiplying as the energy transition gathers pace. It would mean, for instance, two to four times more steel being used a year in 2050, compared with 2022. The multiples are even higher for aluminium, copper, lithium, nickel, manganese, and rare earths.

Subsea power links

Indonesia may soon be exporting low-carbon electricity to Singapore with the latter’s Energy Market Authority giving the go-ahead to an initial set of projects. The aim is to progressively install, for exports, about 11 gigawatts of solar plants and 21 gigawatt-hours of storage systems.

“This will be big,” Indonesia’s Deputy Coordinating Minister for Infrastructure and Transportation, Rachmat Kaimuddin, told BloombergNEF in an interview. “We have traditionally been an energy exporter. We are an exporter of coal. We are starting with Singapore, a model for when coal is no longer in demand.”

The two countries will be connected via subsea cable. This is one of multiple subsea link projects being readied around the world, including UK-Germany, Morocco-UK, and Australia-Singapore.

Indonesia also committed to increase investment in renewables and retire coal plants early under the so-called Just Energy Transition Partnership, or JETP. A $22 billion package has been put together by developed countries and multilateral institutions to help green its power sector. Indonesia has identified more than 1,000 projects that can be part of the JETP. “Most of the projects will be positive IRR  (internal rate of return), positive NPV (net present value). The question marks will be on lower return projects — coal retirements and transmission,” he said.

Climate finance

Financing for the energy transition will be in focus as COP28 gets underway. The recently published 2022 Joint Report on Multilateral Development Banks’ Climate Finance shows three things:

1. Climate-related financing is up, both to low- and middle-income economies, and high-income economies. In 2022, it crossed $60 billion for the former, and was almost $39 billion for the latter.

2. The World Bank Group (WBG) is the largest financier to low- and middle-income economies, while the European Investment Bank (EIB) dominates financing to high-income economies.

3. Investment loans are the main channel for financing, with others being policy-based financing, grants, guarantees, lines of credit, equity and results-based financing.

The report covers, in addition to WBG and EIB, the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB), African Development Bank (AfDB), Council of Europe Development Bank (CEB), European Bank for Reconstruction and Development (EBRD), Islamic Development Bank (IsDB), the New Development Bank and the Inter-American Development Bank Group (IDBG).

Separately, the World Bank announced a $1 billion loan for South Africa last week to enable unbundling and improved efficiency of utility Eskom Holdings, and supporting a low-carbon transition by encouraging private investment in renewable energy.

Corporate disclosure

California has become the first state in the US to have a law that requires companies operating in the state to report Scope 1 and 2 greenhouse gas emissions from 2026 and Scope 3 from 2027. Reporting Scope 3 emissions — indirect upstream and downstream greenhouse gas emissions from sources the reporting entity does not own or directly control —is the most contentious element of the new act.

Companies opposed to the law have argued that obtaining accurate information on emissions from supply chains they do not control can be costly, inaccurate, and misleading for investors. Supporters argue that a company’s emissions are fully represented only if Scope 3 is included, as they make up the largest chunk of the carbon footprints of most companies.

Another law passed concurrently requires companies operating in the state with over $500 million in annual revenue to report climate-related financial risks.

The writer is New York-based senior editor – global policy for BloombergNEF; vgombar@bloomberg.net