Silicor Materials is a 9-year-old California company that makes the silicon used to produce solar panels. Silicon requires a lot of power to manufacture, so the cost of energy is an important factor in producing silicon profitably.
Iceland has an abundance of cheap electrical power, thanks to abundant hydroelectric and geothermal resources. That has led Silicor Materials to construct a large new silicon factory in Iceland, thanks to $108 million in funding from private investors like the company’s long-time supporter Hudson Clean Energy Partners, as well as Icelandic pension funds. When complete, the new factory will turn out 16,000 tons of silicon a year.
Most of the world’s solar panels are made from silicon, but before silicon metal can be turned into a solar panel, it needs to be purified. Silicor Materials has developed a technique to purify silicon metal by melting it down with aluminum. The process uses less energy and is lower cost than conventional methods. The aluminum byproducts will be sold to local Icelandic companies. Iceland is home to a handful of very large aluminum smelting companies which also depend on the country’s low cost electricity.
The new process can lower the overall cost of solar technology. Silior Materials CEO Terry Jester told Fortune that the cost of the silicon is a little under 20% of the total cost of solar technology. Lowering the cost of silicon is a “real knob turner to reduce costs for the solar industry,” she tells Fortune. She says the company already has commitments to purchase 75% of the silicon the factory will produce every year.
Building in Iceland has other economic advantages. The US and China are currently engaged in a solar panel trade war. The US has filed charges with the World Trade Organization claiming China is “dumping” cheap solar panels on the American market to drive down prices below the cost of manufacture. China has responded by slapping new tariffs on American-made solar silicon. By producing silicon in Iceland, Silicor Materials can avoid paying those high tariffs when it sells its silicon to Chinese solar panel makers.