Solar firms see silicon price fall in coming years

NEW YORK, June 20 (Reuters) - A lack of high-grade silicon used to make solar power cells is crimping growth in the renewable energy sector, but prices for the material will ease in the coming years, industry players said on Wednesday.

After bottlenecks had limited shipments, many companies expected a supply shortage of the ultrapure polysilicon used in 90 percent of solar cells to ease this year. But strong demand driven by the rapid growth of photovoltaic manufacturing capacity has kept the market tight.

The silicon shortage "shrank margins and slowed growth" for solar companies, John Cavalier, head of renewable energy for Credit Suisse, told the Renewable Energy Finance Forum, although the industry is working through those issues.

"We think the constraints are being addressed very effectively," he said.

Solar cell producers have been signing long-term contracts to ensure they receive adequate supplies of silicon, yet some companies are reluctant to lock in prices for the material.

"We prefer, even though we have signed some 10-year contracts, to sign five-year contracts because it's difficult to see what the price will actually be," Yuan-Huai Tsuo, chief executive of Taiwan's Motech Solar (6244.TWO), told the conference.

Tsuo said prices for polysilicon would eventually stabilize at about $40 per kilogram (2.2 lb), compared to a current price of about $250 and the 10-year contract price of about $70.

Alf Bjorseth, chairman of Norway's Scatec AS, said his company had committed to buy only some of its silicon needs.

"We are locking in some long-term supply, (but) the margin in that business is very high, so we would want to make it ourselves," he said.

Even so he agreed current price levels were unsustainable.

"The price will come down in the years to come, I'm pretty sure of that," he said.

Earlier on Wednesday, Norway's Renewable Energy Corp. ASA (REC.OL) said the global supply of silicon would roughly triple by 2010 to 100,000 to 130,000 metric tonnes.