The Key Future Silver Price Factor: Investment Demand, Not Solar

There seems to be a great deal of hype put forth by the market that rising solar demand will be a key factor in determining the price of silver in the future.  While silver consumption in the solar industry may increase going forward, the real cause for much higher silver prices will be investment demand.

Why? Because the actual data proves investment demand is the largest growth sector in the silver market.  I’ll get to the figures in a moment.  But, before I do that, let’s discuss the supposed wonders of solar photovoltaics.

Unfortunately, people continue to believe that high-tech gadgets and renewable energy will save us from the impact of peak oil.  As Jim Kunstler states over and over, “Americans want another way to continue running Wal-Mart, Walt Disney World and the Interstate Highway System.”  I am not saying this isn’t a worthwhile thing to do, but the study of the EROI – Energy Returned On Invested proves IT CHAIN’T GONNA HAPPEN.

Of course, a lot of intellectuals would disagree as they continue to push for more renewables, but they fail to comprehend the simple math called EROI.  However, we can’t blame them as there is a great deal of what I call collective brain damage taking place here in the good ole US of A and abroad.

You see, evidence is finally coming out that confirms solar power isn’t the energy savior we once thought.  Charles Hall, one of the leading experts on the study of the EROI and Pedro Prieto wrote a book titled, Spain’s Solar Revolution: The Energy Returned On Invested.  I haven’t yet read the book, but read a review by EnergySkeptic.com website.

Now, if a person had an open mind (rare these days) and could invest ten minutes reading the article, they would realize without a doubt… Spain’s solar industry is a financial disaster.  According to the article:

To kick start the solar revolution, the Spanish government promised massive subsidies to solar PV providers at 5.75 times the cost of fossil fuel generated electricity for 25 years (about a 20% profit), and 4.6 times as much after that. Eventually it was hoped that solar power would be as cheap as power generated by fossil fuels.

….. The end result was a massive transfer of public wealth to private solar PV investors of about $2.33 billion euros per year, and businesses that depended on cheap electricity threatened to leave Spain.

Despite these measures, the government is still spending about $10.5 billion a year on renewable energy subsidies, and the Spanish government has had many lawsuits brought against them for lowering subsidies and profit margins.

Solar companies went bankrupt after the financial crash, including the Chinese company Suntech, which sold 40% of its product to Spain. About 44,000 of the nation’s 57,900 PV installations are almost bankrupt, and companies continue to fail (Cel Celis), or lay off many employees (Spanish photovoltaic module manufacturer T-Solar).

You see, a great deal of solar panel demand was due to the huge government subsidies in countries such as Spain, Germany and the United States.  And as the article above states, 44,000 of Spain’s 57,000 PV installations are almost bankrupt.  This really isn’t surprising as Germany is dealing with the very same issues.  I wrote about this in my article last year titled, GERMANY: Renewable Energy Policy “Complete Failure”… Bring On The Dirty Coal Monsters:

In a stunning admission, the German Government recently announced that its transition to Renewable Energy was, “On the Verge of Failure.” This blunt statement was released by Germany’s Economic Minister and Vice Chancellor to Angela Merkel, Sigmar Gabriel at an event at SMA Solar… Germany’s leading manufacturer of Solar technology.

Germany decided to shut down eight of its Nuclear Power Plants after the disaster at Fukushima. Unfortunately, renewable energy isn’t filling the void. To make up the difference… in come the COAL MONSTERS.

This is a picture of the Bagger 288 Bucketwheel Excavator being transported to its new home at the massive Garzweiler open-pit Lignite (brown coal) mine in Western Germany.

These massive strip-mining machines are up to 315 feet high and 721 feet long, weighing 13,500 metric tons and consuming 16.5 megawatts of electricity during a typical day of operation. It can excavate 240,000 tons of coal or 240,000 cubic meters of overburden in a single day — the equivalent of a football field, 98 feet deep (Wikipedia).

Unfortunately, solar will not be the great energy savior many are hoping for.  Instead, solar is just another fossil fuel derivative with a very low EROI when you factor in all the other energy inputs other than just the solar panels.  Again, according to the Energy Skeptic article:

Prieto and Hall conclude that the EROI of solar photovoltaic is only 2.45, very low despite Spain’s ideal sunny climate. Germany’s EROI is probably 20 to 33% less (1.6 to 2), due to less sunlight and less efficient rooftop installations.

We must remember, Charles Hall estimates that a modern society needs at least a 10/1 or even higher 12/1 EROI to be sustainable.  Basically, our modern complex system of living needs an EROI north of 10/1 to function.  Here we can see that solar doesn’t meet he minimum EROI requirements that we need.  This is probably why 44,000 of the 57,000 Solar PV installations are going belly up.

Silver Investment Demand Will Be The Key Factor To Determine Price In the Future, Not Solar

Okay, let’s get back to discussing one of my favorite subjects… SILVER.  Now that we realize solar will not be a viable long-term economic energy source in the future, I believe silver consumption in the solar industry will decline, not rise in the future.  Oh, it might take a few years before the brain-damaged folks realize solar is just another WAY TOO EXPENSIVE ENERGY GADGET before global production of solar panels declines.  Unfortunately, it takes time for stupidity to be either cured or replaced by wisdom.

If we look at the chart below, it’s plain to see that the real driver of silver demand is coin and bar investment, not solar:

Before the entire U.S. Investment banking system went the way of the Dinosaur in 2008, total world solar PV silver consumption was approximately 9 million oz (Moz) compared to 51 Moz of coin and bar demand in 2007.  However, a lot of people suddenly found SILVER RELIGION when the world’s financial system stood at the brink of collapse. Silver coin and bar demand surged in 2008 to 187 Moz, up from 51 Moz in 2007.

Even though silver coin and bar demand declined in 2014 compared to 2013, it was still a hefty 196 Moz (all figures from Thomson Reuters GFMS & Silver Institute).  Now compare this to the 60 Moz of solar PV demand in 2014.  Over the past seven years, silver coin and bar demand increased 145 Moz versus solar PV rising 51 Moz.  Basically, three times as much silver went into physical silver investment than was consumed by the solar PV industry.

Now, I would bet my bottom silver dollar that silver coin and bar demand will skyrocket even higher in the future due to the collapse of the highly leveraged debt based fiat monetary regime as silver consumption in the solar PV industry plummets.  So, Main Stream analysts out there who still like to waste time producing forecasts on how Solar PV silver consumption will grow like gangbusters in the future, it’s time to get some GOOD OLE SILVER INVESTMENT RELIGION.

Why?  Because silver coin and bar investment demand will be the key factor pushing the price of silver to new record highs in the future, not solar.

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