Japan’s Tokuyama has firmed up plans to spend $680 million on a plant on the island of Borneo that will produce polysilicon for use in solar cells. The capacity of the plant is twice what the company envisioned when it announced the expansion just a few months ago.
Tokuyama’s move comes as industry analysts report a softening in the market for solar cells, whether based on silicon wafers, which are made from polysilicon, or on thin-film silicon. California-based iSuppli, an electronics market research firm, is warning of a serious oversupply in the solar energy market.
“The solar industry in 2009 has been undermined by a collapse in demand due to the decision by Spain—which accounted for 50% of worldwide installations in 2008—to change its ‘feed in tariff’ policies,” says iSuppli photovoltaics industry analyst Henning Wicht. Last fall, Spain decided to cap the amount of new solar energy generation capacity that it is willing to subsidize.
Separately, New Energy Finance reported last month that the price of polysilicon for solar wafers is half of what it was just one year ago. The firm, a provider of market intelligence on the energy industry, noted that further price reductions are likely.
Tokuyama says it expects that supply and demand will be in balance by the time it opens the Borneo facility in 2013, a prediction seconded by iSuppli. “Polycrystalline silicon for solar cells is expected to enjoy high-level growth over the medium to long term,” according to a statement from Tokuyama. The plant will have an annual production capacity of 6,000 metric tons.
Located near the city of Kuching, in the Malaysian part of Borneo, the site Tokuyama selected for its new plant has access to ample industrial water and electrical power. The company, one of the world’s top silicon producers, currently produces only in Yamaguchi, Japan. Tokuyama’s lack of expansion in recent years has cost it market share, according to iSuppli.