Sunbathing in China: China’s Big Announcement And Its Staggering Implications for Silver Demand

By: Justin

China’s most recent goals for a green energy future have BIG implications for the price of silver, and the markets just totally ignored it. China has raised its target for solar generating capacity to more than 35 gigawatts (GW) by 2015, a stunning increase of 67% above the prior target.

Since the days of Mao, China’s leaders have traveled to Beidaihe, a bathing resort on the Bohai Sea where they “calmly debate issues of power and personnel” and presumably bathe together…in the nude.

On Sunday, August 11, while the leaders bathed nude together and relaxed some, they threw together and released a guideline with a simple title: “Opinions of the State Council on Accelerating the Development of Energy-Saving and Environmental Protection Industries.”

In the document, the government outlines that it will upgrade the environmental sector to the tank of a “key industry,” a title that had been heretofore reserved for steel and pharmaceutical industries and biotechnology.

The new guidelines mean the sector is likely to earn $728 billion by 2015. It is expected to grow at twice the rate of the rest of the economy.

Beijing wishes to boost manufacturers of energy-efficient power plant equipment, significantly increase the number of cars and buses running on liquefied natural gas as well as expand the number of wind and solar farms and nuclear power plants.

The biggest climate offender, which also has the world’s second largest economy, is about to shift its energy policy in a direction which will likely benefit Germany, among the biggest producers of solar and leaders in industrial silver demand.

“The new guideline is so important because it uses strictly economic arguments,” says ecologist Zou Ji of the National Center for Climate Change Strategy and International Cooperation.

The slogan? “Environmental protection can make you rich!”

And if you buy silver, you can hedge what the world’s second economy wishes to do for the green sector.

“What’s happening in China is unbelievable,” said Stephan Kohler, the director of the German Energy Agency (dena).

Kohler was in China last week to sign consulting agreements, including a contract with the state-owned Chinese grid operator on how to integrate solar energy into the power grid.

“There’s something that was drowned out in the dispute over punitive tariffs against Chinese photovoltaic facilities,” says the head of dena, referencing this summer’s conflict over the implementation of anti-dumping duties on Chinese solar panels by the EU. “80 percent of all machines used to produce solar panels in China are from Germany.”

Perhaps this will lead EU to reconsider the tariffs.

The month prior, China raised its target for solar generating capacity to more than 35 gigawatts (GW) by 2015, a stunning increase of 67% above the prior target.

On July 4, China’s State Council said that installed capacity for solar electricity will grow 10 GW per year until it reaches 35 gigwatts, which is comfortably above the prior target of 21 GW. In 2012, installed capacity was approximately 7GW. This means a 400% increase.

Photovoltaics are at the center of the solar industry, which is used to generate electrical power by converting solar radiation into direct-current electricity through the use of semiconductors.

Generally, a photovoltaic solar panel uses a fair amount of silver – approximately two-third of an ounce or 20 grams. That’s the same amount as 80 cellphones or 20 laptops.

Photovolaic silver-demand was near-nilch until 2000, when it consumed about 1 million ounces of the devil’s metal. This was very little of silver’s overall demand.

In 2008, this had changed, as the solar industry consumed nearly 19 million ounces of silver. Since 2000, the amount of silver used by solar-panel makers had risen by an average of nearly 50% year-to-year. Demand exceeded 47 million ounces in 2012, and PV consumption now comprises 5.6% of all industrial use of silver.

Germany was the largest user of solar panels in 2012, but soon China will be. Aside from China, India has plans to increase its solar output to 20 GW by 2020, starting from scratch, and on a worldwide basis, solar power generating capacity is thought to be 20 to 40 times the amount of current capacity by 2020.

In 2012, conjectures posit that 50 million ounces of silver will be devoted to just the solar industry this year. China’s proposed boost from 7 to 36 GW in capacity would translate into a global increase of 27%, from 102.2 GW last year to 130.2 GW in 2015.

The Silver Institute estimates that about 80 tonnes of silver are needed to generate just one GW of electricity. Counting only 5.3 GW of new capacity in Japan in 2013 and 30 GW from China (the amount anticipated BEFORE the recent announcement of a green energy plan), 2,824 tonnes – that is, 91 million ounces of silver – will be required over the next three years for just this industry.

That amount is approximately two times the current worldwide demand from the PV industry.

Demand from China and Japan alone could consume nearly 11% of global mining supply. If the world continues to produce as much silver as it did last year, which it will not due to low silver prices and difficulties for mine permits, the price should be affected by the aforementioned data.

Insert “Buy Silver Now” Here.

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