What role does silicon play in the energy transition?

News Analysis




What role does silicon play in the energy transition?

The silicon industry has been driven by traditional industries such as steel, in the form of ferrosilicon, as well as aluminium and silicones, in the form of silicon metal – how are energy transition technologies transforming the industry?

Over the last decade, the update of photovoltaic solar energy has boosted silicon metal demand, locking in the metals’ growth outlook into energy transition technologies. Polysilicon is used in the production of silicon wafers, consumed directly in the production of poly-crystalline silicon wafers for use in photovoltaic solar cells, and indirectly in mono-crystalline silicon wafers for use in semiconductors.

Until the mid-2000s, semiconductors were the dominant end-use application for polysilicon. However, demand from this market has since seen only low growth, whilst rapid growth has taken place in the production of photovoltaic solar cells. In 2022, 85% of polysilicon was consumed in solar applications. Semiconductors themselves are important for technology applications and are subject to geopolitical developments. While semiconductor demand for silicon will grow by over 80% of its current levels, the solar industry will more than double its demand and account for over 90% of silicon wafer consumption by 2050.

While the solar industry is set to be the largest growth market for silicon over the next couple of decades, the metal is making inroads in lithium-ion battery anodes. Silicon-carbon composite anodes were first reported in 2002 and adding more silicon in anodes improves the specific capacity of li-ion batteries using graphite. However, batteries using silicon swell significantly and the volume change has been a technical barrier that several R&D teams have been working on to overcome. Nevertheless, the upside in range through the use of silicon has seen the technology take rapid strides to enter the market and several OEMs have announced plans to incorporate silicon in their EV lithium-ion battery technologies.

Project Blue forecasts silicon demand in batteries, which was negligible less than a decade ago, to grow at a CAGR of 25.5% over the next decade. Despite overtaking semiconductor demand volumes in the 2040s, batteries will still only account for less than 5% of the silicon metal market by 2050. If faster improvements are made on the technology barriers, there is a significant upside to this scenario. The potential upside for silicon impacts the outlook for graphite, much like evolving cathode chemistries have significantly changed the outlooks for cobalt, nickel and manganese over the last five years, and now battery technologies like sodium-ion will dampen the upside for lithium demand. In our base case, we see graphite demand slowing its growth before cathode materials, in line with the uptake of silicon in the anode.

Silicon used in energy transition technologies is mainly via its metal form. The larger application for silicon by volume is the steel industry, which uses ferrosilicon primarily to act as a deoxidiser, but also as an alloy. Demand for ferrosilicon in steel has stagnated over the last decade as silicomanganese has been preferentially used in steelmaking, though some upside is returning in niche applications, such as electrical steels, critical in the production of most electric motors on the market. The stagnating growth for ferrosilicon has seen several smelters switch their output from the ferroalloy to the metal, to gain exposure to energy transition markets.

However, as is a common narrative in the ferroalloy industry, the rapid expansion of Chinese smelting output is weighing heavily on the silicon metal market. Silicon metal currently accounts for around 40% of the total silicon market, up from less than 30% a decade ago, and is forecast to overtake ferrosilicon in terms of contained silicon volumes in the late 2030s. Continued conversion of ferrosilicon output to metal is expected to be part of the supply landscape and although there is impressive demand growth for the metal industry, much of it is currently in China.