Silver Bulls Are Roaring As Controversial Green Energy Transition Gains Momentum

EDITOR'S NOTE: Silver is shining bright as the controversial and widely disputed green energy transition gains momentum. The precious metal is used in a variety of applications in the solar and wind industries, and as demand for these technologies grows, so too does demand for silver. According to Bank of America, silver is the biggest beneficiary of the green energy transition. The bank estimates that global demand for silver from the solar and wind industries could reach 1.2 billion ounces by 2030, up from 400 million ounces in 2020. As the green energy trend continues to gain momentum, silver is well-positioned to benefit, as the precious metal is a critical component in many green technologies, and its demand is only going to grow in the years to come.

(Kitco News) - Next month the U.S. will celebrate the one-year anniversary of the passage of the Inflation Reduction Act, and according to analysts at Bank of America, its impact on the economy is already evident.

In BofA's latest ESG research published last week, the analysts said that in the 11 months since the legislation was passed more than 270 new clean energy projects have been announced, with investments totaling $130 billion.

"Of this investment, half was earmarked for new renewable energy projects, representing 25 GW of capacity – enough to power over 22 million homes. Alongside the IIJA and CHIPS Act, the IRA has contributed to a doubling of real manufacturing construction spending since late 2021, boosting US GDP growth by 500 bps since Q2 of the previous year and driving manufacturing employment to its highest level since 2008," the analysts said.

According to the research, prices could remain well-supported for the next ten years, with Bank of America seeing silver as the precious metal with the most significant supply deficit as the U.S. establishes itself as the leader in green technology and the global center for electric vehicles.

The analysts noted that silver plays a crucial role in solar power and is a critical component in photovoltaic solar panels. Silver is also needed in electric vehicles and the general electrification of the economy. Bank of America said silver's supply deficit is expected to reach 125% by 2030.

In comparison, copper, another metal critical to the green energy transition, is expected to see a supply deficit of 17%, while the lithium market is expected to have a supply deficit of 65%.

"Did you know, a typical EV needs six times the minerals of a conventional automobile and building an onshore wind plant requires nine times the minerals that would go into a gas-powered installation? According to our Global Commodity Research analysts and Metals & Mining analysts, the IRA's energy transition incentives are set to boost demand for the critical minerals used in batteries as well as for steel, which is needed for onshore and offshore wind as well as solar," the analysts said in their report.

While the green energy transition continues to support silver's long-term potential, investors might have to wait a little while before demand from the solar sector picks up. BofA said that rapid growth in the industry is expected to start in 2025 and beyond.

Looking at electric vehicles, analysts said that the U.S. is on the verge of becoming a global hub, outpacing China because of the IRA legislation.

"Automakers and their suppliers have announced more than $62bn of investments, that's more than double the amount of domestic EV investments announced in 2020. Newly announced projects would expand annual battery production capacity by over a million EV batteries, while also increasing production capacity for EV chargers and EVs," the analysts said.

The analysts noted that companies in Asia and Europe are looking to build battery facilities and increase EV production in the U.S.

"With newly added capacity, our industrial analysts expect the center of gravity for EV related investments to shift away from China and more towards North America and Europe," the analysts said. "In fact, North American BEV market growth between 2022-35 is expected to be roughly 20%, which is the highest growth among regions and 2x that of Greater China."

Originally published by: Neils Christensen on Kitco News