The surge in silver prices is putting additional pressure on solar panel manufacturers trying to end more than two years of losses in a brutal industry competition.

Spot silver prices soared to a historic high of over $93 per ounce this week, continuing the surge. According to BloombergNEF, this means that the trace amount of silver used in solar panels now accounts for 29% of the total cost of a panel, up from 3.4% in 2023 and 14% last year.

The response from panel manufacturers is to raise prices and accelerate plans to replace silver with cheaper materials like copper. The cost increase occurs against the backdrop of a widening industry loss, as the sector suffers from severe overcapacity after experiencing a frenzy of factory construction in previous years.

"The surge in commodity prices has put irresistible cost pressure on solar manufacturers," said Bloomberg New Energy Finance analyst Yali Jiang. "This could drive up the prices of solar components, as manufacturers have little room to absorb additional costs after enduring two years of depressed market prices."

According to InfoLink Consulting, in the world's largest market, China, component manufacturers have raised prices this week to over 0.8 yuan per watt, an increase of 1.4% to 3.8% from last week, reflecting the increase in silver costs. This brings the price of a typical 500-watt panel to about 400 yuan (57 USD).

Several major solar companies warned this week that they expect to see net losses again in 2025. This performance guidance indicates that despite a year of self-discipline in the industry and government-led actions to curb overcapacity and halt price wars, the industry's downturn has not yet bottomed out.

Silver in slurry form is a key material for solar panels, used to manufacture conductive electrodes to transmit the electricity generated by the cells. Manufacturers have been working to reduce its usage to cut costs. According to Bloomberg New Energy Finance, the average usage per watt is 8.96 milligrams in 2025, down from 11.2 milligrams in 2024.

These efforts are currently accelerating. Longi Green Energy Technology Co. announced last week that it will soon start replacing silver with cheaper metals in its batteries, joining companies like Jinko Solar and Shanghai Aiko Solar Energy Co. in making such transitions.

Engineers can adopt various methods to replace part or all of the silver in batteries with cheaper copper, but for manufacturers, a rapid and significant pace of substitution may pose risks. Customers typically require warranties of 20 years or more, and increasing the substitution ratio carries the risk of shortening product lifespan, as the time for testing new materials is shorter.

"If the battery panel fails after ten years but the warranty is twenty years, the manufacturer could face huge liabilities, potentially leading to bankruptcy," said Gregor Gregersen, founder of precious metals dealer Silver Bullion Group.

Nevertheless, Shanghai Nonferrous Metals Network pointed out in a research report this week that even limited substitution efforts, coupled with a slowdown in global battery panel installations, mean that the industry's silver usage this year could decrease by about 17%. The annual demand in 2025 is estimated to be around 6,000 tons.

According to the Silver Institute, the solar industry accounted for about 17% of total silver demand last year, more than double its share a decade ago, and comparable to the share used in jewelry manufacturing. A significant slowdown in consumption may threaten the long-term sustainability of this round of silver's price surge, which has largely been driven by increased speculative interest and a broader rotation of funds into commodities.

"At today's silver price levels, more substitution can happen," said Nikos Kavalis, managing director of consulting firm Metals Focus. "Given that investment demand remains strong, I don't think this will affect prices in the short term, but it does mean that silver consumption in the industrial sector will decrease in the future."