Silver’s price upshoot confirms a sustained solar panel boom even as the metal heads for oversupply

China’s installations have hit a permanent peak, Sam Wilkinson, head of renewables at S&P Global Commodities, told the Redefining Energy podcast recently. With that one country making up nearly half the global market, the world will see connections drop in 2026, he added. Strip out the ‘buffer’ of entirely unexpected demand that BloombergNEF built into its forecasts to account for the way solar routinely outperforms, and it looks like we’re never going to get past the 633GW connected in 2025.

For an alternative view, look at the past year’s hottest commodity. Even after a slump from a record $121.65 per troy ounce in late January, silver prices are up 154% from a year earlier. Trading at $81.60 last Wednesday, the metal has notched more than double gold’s gain.

As with any commodity price spike, that’s the result of speculation as much as anything fundamental. But even speculators ground their bets in the physical market, where 60% of silver consumption comes from industrial users and most of the action over the past decade has come from solar.

Silver’s conductivity makes it essential to photovoltaic modules, where thin printed contacts boost electrical output. About 196 million ounces were used by solar panel manufacturers last year. That’s equivalent to every gram used in jewellery and represents about 17% of the global market.

Much of the recent run-up can be explained by a shift toward TOPCon, a new solar technology that requires more silver. Because the metal is so expensive, though, module makers are experts at reducing the amount they use.

Such thrifting cuts consumption per watt by about 15% a year, to 8 micrograms last year from 73 micrograms in 2011. Silver-coated copper powder, or SCCP, a composite material that’s becoming widespread in the industry, uses 30% to 50% less silver with minimal losses in electrical efficiency, according to the Silver Institute. The current price spike is only going to accelerate those efforts.

Assume ongoing thrifting at the 15% annual rate we’ve seen since 2011, and silver consumption for photovoltaics may be about to fall off a cliff. An industry installing a third more panels in 2035 will only need about a quarter of the silver used last year. On that basis, we’re heading into a silver glut and prices should slide accordingly.

Silver has plenty of other uses, but none look sufficient to make up the shortfall. Electric vehicles have more contacts than conventional cars, but even then the Silver Institute only sees usage increasing to 94 million ounces in 2031 from around 80 million ounces this year—a drop in the ocean next to the 150 million ounces or so disappearing from the solar market. AI is another hot field, but usage in semiconductors is still a relatively modest 30 million ounces or so. Even that consumption may diminish as SCCP becomes more widespread.

Given the historic gains from thrifting, it’s hard to argue that silver prices belong at anything like current levels. At least 80% of mine production comes from pits that would still be making money below $30 per ounce. Many also produce gold or copper—hot metals in their own right. That will keep the bullion pouring, even if demand for silver itself suffers.

If you believe that solar installations have more or less peaked, there is an immense opportunity in shorting the long end of the curve right now. Contracts for delivery next January on the Shanghai Futures Exchange are priced at 19,500 yuan per kg ($87 per ounce), higher than the spot market.

What if current forecasts of peak solar turn out to be as illusory as all the previous forecasts? The IEA has famously been underestimating solar’s potential for almost as long as it has been a significant industry. Photovoltaic panels have spread to all sorts of places once thought implausible. In rich countries, they’ve become so cheap that they’re finding use as fencing panels and plug-in devices that can be hung off a balcony.

Entire national markets have sprung up unexpectedly in places such as Pakistan and Saudi Arabia on scales sufficient to transform the grid. The same process is now repeating itself in sub-Saharan Africa. Plummeting battery prices are even extending solar generation outside of daylight hours, storing energy for the evening and morning peaks. The world’s demand for energy is still nowhere close to being sated. Almost everywhere, solar is the cheapest way of meeting it. Silver’s surge suggests this boom is nowhere close to petering out. ©Bloomberg

The author is a Bloomberg Opinion columnist covering climate change and energy.