Lear Capital Outlines What Activity in the Green Energy Sector Could Mean for Silver in 2024

Spread the love

In recent years, the growing interest in green energy has helped fuel the demand for some precious metals — including silver, according to Kevin DeMeritt, founder of Los Angeles-based gold and precious metals firm Lear Capital.

“Silver has become a highly in-demand asset, yet the available supply hasn’t vastly increased,” DeMeritt says. “At times, it’s very difficult for dealers to go out and get silver bars and coins in big quantities.”

Silver possesses several favorable qualities. In addition to resisting corrosion and oxidation, it’s fairly malleable and can be shaped into sheets or other formats. It has antimicrobial qualities, which have allowed it to be utilized in medical applications. Silver also has reflective purposes and is used in mirrors. 

It also happens to be an excellent thermal and electrical conductor — and, as a result, is utilized in electrical applications such as solar photovoltaic power production, which involves converting sunlight to energy.

“Silver is growing as an industrial asset,” Kevin DeMeritt says. “Batteries have silver in [them]; solar [elements have] silver — the industrial uses are just going through the roof.”

Green Energy’s Influence

Solar photovoltaic power currently is the top source of green electricity. Silver is a key component in the panels used in the power production process, contributing to the overall demand for the metal. At least 100 million ounces of the element are consumed annually through the usage of a silver paste within solar cells, which helps direct electrons into either storage or consumption, according to Lear Capital.

In 2022, the need within the solar photovoltaics industry for silver totaled roughly 140 million ounces on a global scale. As of late 2023, solar photovoltaics-related silver usage was estimated to be approximately 161 million ounces for the year.

As the energy-related demand for silver increased, investors took notice. In 2021, physical asset-based investment, involving silver coin and bar sales, rose 36% to its highest level since 2015. Investment demand increased in 2022 by 22%.

Photovoltaic power production’s use is expected to grow in the future — which could equate to further silver demand growth. Between 2017 and 2022, the U.S. basically tripled its solar photovoltaic capacity; another 63 gigawatts is expected to be added by the end of 2024, which would boost the country’s solar abilities by 84%, according to a Deloitte report.

Solar power could, in fact, become the largest installed power capacity on a global scale by 2027, according to an International Energy Agency estimate — which noted solar photovoltaic power is anticipated to eventually surpass both coal and natural gas use.

“Because there’s this drive for green energy around the world, solar has grown, and so has the demand for silver,” Kevin DeMeritt explains. “I don’t think solar [power use] is going away — so there’s going to be [a] demand for silver, regardless if investors purchase it or not. You really can’t have solar without some silver in those panels.”

Availability Interruptions

Despite increases in production, meeting the growing demand for silver has been challenging in recent years.  

In 2021, production expanded by more than 5%, with 827.6 million ounces put into circulation, compared to 782.2 million ounces in 2020 — the biggest rise in silver excavation activity in several years, according to the Silver Institute.

Although mining-related production declined in 2022 by 5 million ounces, production is anticipated to be higher this year. The Silver Institute’s approximation, as of December, was that 842.1 ounces will have been mined in 2023.

Recycling practices — which include refineries melting down items like jewelry or coins, or chemically separating them from their alloys — have also reportedly increased. 

In 2021, global silver recycling rose approximately 6% from the year before, and it has continued to grow since. In 2022, 180.6 ounces were recycled. This year, the Silver Institute’s estimate, as of December, was that 181.1 ounces would ultimately be put into circulation.

However, even with the uptick in recycling and fairly strong production, the total supply of silver hasn’t surpassed the demand since 2020.

In 2022, due in part to lower output from mines in locations such as China and Peru, the silver market showed the most significant supply deficit on record, according to the Silver Institute.

Silver’s Future Potential

When the need for a precious metal outpaces the available amount, prices for the asset can rise — potentially significantly, according to Kevin DeMeritt.

“If you add an increase in demand onto that physical supply that’s fairly limited, usually what you’re going to find is prices go up,” the Lear Capital founder says. “It’s economics 101.”

Except for 2020, when the COVID-19 pandemic caused widespread disruptions in a number of sectors, silver’s value escalated from 2017 through 2022; it has generally remained above $20 per ounce since reaching that level in 2020.

In the coming year, with continued interest from the solar and other sectors, silver demand could likely remain elevated. 

Driven in part by investment in photovoltaics, power grid and 5G networks, consumer electronics growth, and greater vehicle output, industrial demand alone is expected to rise 8% by the end of 2023 to a record 632 million ounces, according to the Silver Institute.

“You have the industrial side of the market that’s starting to increase, and then you have the investment side of the market that’s also starting to look very, very good,” Lear Capital’s Kevin DeMeritt says. “The silver market is an incredible opportunity for a long-term investor [who’s] looking to get a great inflationary hedge — but also some great results with appreciation from the market.”