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.

Massive Bucket Excavator

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:

Silver Demand Solar vs Bar & Coin

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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12 Comments on "THE KEY FUTURE SILVER PRICE FACTOR: Investment Demand, Not Solar"

  1. Steve,

    I totally agree…silver is one of the best chances going forward but I think most don’t understand what is driving the debt creation and the ongoing financial crisis we are experiencing…and why we are only in the 3rd inning of this game…sorry to repost but the causes of our troubles just doesn’t seem to generally be well understood.

    In 2008, the 25-54 yr/old segment of the US population began outright shrinking (the Ponzi had run out of new “investors”)…the market implications were decidedly not good. As Bush said in Dec. ’08, “free market principles were abandoned to save the free market”. In the next year or two, the 25-64 yr/old population segment will likewise begin shrinking and do so for 5 to 8 years. And this is happening across almost all advanced economies (started in ’01 in Japan, ’04 in Germany, etc. etc.).

    The Fed and CB’s are simply running a con game to avoid outright panic of the masses and meanwhile stuffing the pockets of the greatest among us at the expense of the vast majority…this was a system premised on ever more population, consumption, investors. The entire premise was always in trouble but now it is totally broken. We are presetly in the full on fucking Wile E Coyote moment.

    Economists and Fed chiefs enjoy explaining the growth of the US population as a part and parcel of the US “exceptionalism” meme. But the truth of our economic troubles (and OECD nations alike) lies in slowing population growth and the components of that slowdown. The core populations are shrinking…the old are swelling…the young are barely growing.

    http://econimica.blogspot.com/2015/05/the-truth-of-great-financial-crisisand.html

    When you have demographics against you, interest rates at zero, record debt to GDP, and you are likely beginning a recession while in the midst of the greatest asset bubble of all time…below are some things to consider while Wall St. and the Fed tell you all is well!?!

    http://econimica.blogspot.com/2015/05/reality-check.html

  2. You keep too much trust in great energy supliers, I would think. As you do not honour any “overpay” for safty…

    As someone who lived in diff so-called 3rd world countries (no, not USA), I am used to power failures.
    My work is with computers and when the power switches off, you are happy to have a laptop (with battery) instead of a PC (which dies immediately killing your last 20 min work).

    So I feel this short review is maybe a little too short. Because it is not about how much EROI is getting out but how much it is worth to you to have power(security). I would love to have a house under solar panels knowing my fridge food is save, my computers will run, maybe AC will work, light and alarmsystem is sure etc.
    I talk about the difference of price and value of energy.

    So would I invest in solar with EROI of 2? Yes. I love to have energy at all times and I do not trust any state suppliers. As I think anyway, that the future will be in small(er) entities with small power plants (some neighbours, a villiage etc), I see people go alone or in small groups and they will not care for the EROI that much.

    I agree that the big subvention market is dead – but I expect another one (i.e. many small ones) to come up. Wrongly?

  3. Wanderer, i’m sure solor and wind power has their niche applicaton and will never go out of style but for the masses and in my remaining life, i will make do with centralized power grid.

  4. Silverwillwin | May 22, 2015 at 5:59 pm | Reply

    Just out of curiosity where do the rest of the areas of need regarding physical silvers demand uses fall ,
    Steve ?
    You have solar as part in the bar graph display , along the side of Bar & Coin . Where do the other areas such as electronics , medicine , industry , chemicals , and so on fall to be compared vs. Bar & Coin ?

    Seems to me that that would be a huge sector that’s missing here.

  5. Steve,

    Being a silver investor I completely agree that silver investment will outperform solar consumption for the time being. Despite the subsidies for solar initiatives that lessen the EROI isn’t it imperative that as declining oil production occurs we develop alternatives that lessen the dependence on oil in general? The planet’s population only gets larger and therefore the need for additional energy will increase as well. What I heard recently was that about 90% of everything that goes from point A to B requires petroleum and of that about 70% is used for transportation. Can you confirm this? I’ve been hearing more about fuel cell technologies that may become more mainstream once affordable and has infrastructure to support it.

    What I like about solar is that it drives up overall demand for silver and can only help investors to reach profitable status sooner than later. I heard silver has about 10k uses (only behind oil) as the 2nd most useful commodity. Solar is far from the only thing silver is needed for and should become more relevant to everyday citizens as the financial climate changes for the worse.

  6. Please correct me if I am wrong, but my understanding is that you can buy a silver contract, 1,000 oz../contract, and, If you take delivery, they deliver a 1,000 oz. bar.

    JP wouldn’t waste any money on anything, much less silver eagles and their premium. It would also alert a lot of the wrong people. With their cover of being a hugh broker/dealer they could easily have 100,000 contracts in their system and no one would be the wiser.

    IMHO, I think they are buying big time as the time is soon coming. It is the time to backup the truck and fill it. With premium, it is still at cost.

    Buy for cash and stash.

    SteveW

    • They’d BETTER send you the 1000oz bar!…Don’t buy it ANY other way….PHYSICAL Silver is what you want…NO “Paper” contracts because it no better than buying paper.
      Best yet…Buy ONLY from a “Metals Broker” close to where YOU live and buy in PERSON (Its the way I do every month since 2013!)…This way you also leave NO :Trail” back to You when you do buy….Brokers NEVER ask for your name or address…I’m sure you can understand WHY its wise to buy it that way.

      • But even when you bought it visa internet and they had a bill, they don’t know what you have done with your silver in the meantime.It’s possible that you have sell it.Who and how can controll this?

        The effort for the government to spy out somebody who has bought something about 20-30kg
        silver is in no relationship to the benefit.

        But one thing I had done.The delivery adress and the bill adress are different.

  7. Ha Ha the HUI is in one row falling.When the stock market break down, we see 10$/Oz.
    Funny – the save haven silver.

    You can use your silver as paper weight.Not cheap but original.

  8. UPDATE: Comments Lost

    Hello everyone. For those who have been following this post and a few other recent ones may have noticed that some comments disappeared. No, they weren’t erased. However, I had to upgrade the SRSrocco Report site because traffic and resource usage had increased to the point my old server was too small.

    The site transfer is now complete and I fear some of the comments were lost… including mine. I am going to see if they can be re-instated, but they may just be lost to the great digital sky up above.

    I had to upgrade the site as I am planning on adding the NEW REPORTS PAGE. I tried to keep the site optimized to be able to stay on the old server, but you can only postpone the inevitable so long. Just to let you all know, I receive between 75-90,000 unique views per month. Basically, that’s brand NEW EYEBALLS. That’s a lot of new folks each month.

    So, anyhow… sorry about the loss of comments, but I do believe the site upgrade will be good for several years at least.

    steve

    • “So, anyhow… sorry about the loss of comments, but I do believe the site upgrade will be good for several years at least.”

      Assuming free speech about the powers that be is allowed for years. That’s a lot to assume.

  9. Silverwillwin | May 26, 2015 at 6:18 pm | Reply

    I wanted to say something about Greece and the huge problems that their people are having right now.
    The overall population is hard pressed for cash. It is drying up everywhere ! Take a hard look at what is happening there . It is a prime example of the central banks owning the currency. This is when the ugly shows itself folks !
    If you are not already in some physical gold or silver , let the Greece disaster be a reminder why it is a necessary thing to do A.S.A.P !!

    http://davidstockmanscontracorner.com/the-street-level-greece-is-grinding-to-a-halt/

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