The solar energy industry is driving an increased demand for silver, creating a supply deficit for the metal. 

Advancements in solar panel technology are resulting in more efficient cells that require higher amounts of silver, leading to a significant rise in consumption.

According to a report from The Silver Institute, solar energy is projected to account for 14 per cent of silver consumption in 2023, a substantial increase from the 5 per cent recorded in 2014. 

China is a key contributor to this growth, with the country expected to surpass the total solar panel installations in the United States this year.

The solar industry has been seen as a prime example of the inelastic demand for silver.

While the industry has previously found ways to use smaller amounts of the metal, the shift towards more efficient cells is changing the situation.

The introduction of tunnel oxide passivated contact and heterojunction structures is set to outpace the standard passivated emitter and rear contact cells within the next two to three years, according to BloombergNEF. 

These advanced structures require 13 milligrams and 22 milligrams of silver per watt, compared to the 10 milligrams needed by PERC cells.

Simultaneously, the supply of silver is becoming tighter. 

Despite a 19 per cent increase in demand last year, production remained flat, as indicated by figures from The Silver Institute. 

This year, production is projected to rise by only 2 per cent, while industrial consumption is expected to climb by 4 per cent.

The challenge for silver buyers lies in the difficulty of increasing supply due to the scarcity of primary mines. 

Approximately 80 per cent of silver supply comes from projects focused on lead, zinc, copper, and gold, where silver is merely a by-product. 

The reluctance of miners to undertake new projects, combined with lower margins for silver compared to other precious and industrial metals, further hampers the supply response.

The University of New South Wales has conducted a study forecasting that the solar sector could deplete between 85 per cent and 98 per cent of global silver reserves by 2050. 

Experts say that the increased silver usage per cell will take five to ten years to return to current levels.

Chinese solar companies are exploring alternative materials like electroplated copper to reduce costs. However, the results have been mixed thus far.