Since they were first developed in the 50’s there have been no major changes to the basic crystalline silicon solar cell. But significant improvements are now taking place with several competing innovations vying for position. Crystalline silicon cells, which come in mono and poly crystalline forms, are now being referred to as “first generation” PV. These mature technologies have experienced dramatic growth in volumes. But with shortages of silicon and high prices affecting finished costs, the volumes are dropping. If silicon prices drop further we could yet see more competitive prices for these solar PV modules. But there’s only so much that prices can drop with that technology.
Second generation PV, or thin film technology, holds out the real promise of more price competitive systems because they can be manufactured with dramatically less material, shorter supply chains and cheaper, faster processes. Thin film is still a nascent industry and competition between players is much more about intellectual property and access to capital than the manufacturing efficiencies that drive the first generation PV makers. So there are lower prices from improved efficiency to be anticipated still.
There are three main approaches to thin film technologies based on different materials that can be used for the semi-conductor of a PV cell. The first to be established was amorphous silicon pioneered by United Solar Ovonics (NasdaqGS: ENER) which sells under the brand Uni-Solar. This technique, now used by a few dozen manufacturers around the world, relies on a small amount of amorphous silicon alloy and accounts for about 60% of the thin film PV made today. These systems have been sold for several years as building-integrated PV offering the advantage of nearly undetectable systems on rooftops for both commercial and residential buildings. United Solar sales amounted to 73 megawatts in 2008 and their sales pipeline has $1.8 billion. Their production capacity is currently at 118 Mega Watts (MW) with planned growth to 1 GW by 2012.
XsunX, (XSNX.OB) is also manufacturing thin-film modules using amorphous silicon and has taken aim at utility scale and grid-tied commercial installations. XsunX has developed proprietary techniques that have enabled it to achieve outstanding efficiency levels for amorphous silicon. The company plans to have production capacity of 25 MW in 2009 and is aiming for 100 MW in a few years. It has also recently contracted to supply 15 MW of its solar modules, worth over $37 million, over 2 years. XsunX and United Solar Ovonics are the only listed companies that are real investment plays on silicon based thin-film technology. Yes, Canon, Sharp and even Mitsubishi are in the game, but those companies are diversified into so many other products that investing in them wouldn’t be a play on solar. Other companies manufacturing amorphous silicon thin film include Auria Solar in Taiwan, EPV in New Jersey, Free Energy Europe in France, Heliodomi in Greece, Polar PV in China, Shenzhen Topray in China, Sinonar in Taiwan, TerraSolar in New York and VHF-Technologies in Switzerland.
The next approach to thin film uses cadmium telluride (CdTe) as the semi-conductor material. While CdTe modules are cheaper and faster to produce, so far they are much less efficient at around 10%. For utility scale installations, that seems not to be a critical factor however. The leader in this field is First Solar (FSLR) with over 1 gigawatt of production capacity, over 600 megawatts shipped so far, and over 3.8 gigawatts of contracted sales, worth $6.3 billion through 2013. According to their annual report, First Solar’s gross margins are 56%, which is twice that of most of their competitors’ costs. And they claim their cost per Watt to be $1.29, half to a third of their competitors. First Solar’s objective, though, is to be at $0.65-0.70 per Watt by 2012. After a tremendous run through 2007 up to May of 2008, when the stock went from about 28 to over 300, it tumbled to 85 for a brief while in November of 2008 only to rebound recently to around 130. One of the other CdTe developments was an Ohio company, Solar Fields, which was bought last year by Q-Cells, a German company. Ava Solar, in Colorado, has recently secured $104 million in funding and plans to large scale manufacturing in 2009.
Another group of companies is manufacturing cells with Copper Indium Gallium Di-Selenide (CIGS) as the semi-conductor. These include ICP Solar in Quebec, Solyndra in California, Global Solar in Arizona, MiaSole in California, Heliovolt in Texas, TerraSolar in New York and Nanosolar in California. All of these companies remain private. One of the biggest efforts currently is coming from Honda, who is a major player in crystalline silicon cells. CIGS systems have demonstrated efficiencies that approach 20%, which is significantly higher that CdTe modules and close to the efficiency of crystalline silicon modules. However, to date at least, the manufacturing processes are less tolerant to change.
All of the thin-film technologies have the advantage of requiring much less semiconductor material. It can be less than 1 percent of silicone used in crystalline cells. And they can be manufactured using high-speed techniques such as roll-to-roll printing. Their disadvantage is their lower efficiency. Even so, many new manufacturers in each three types are coming online every month.
Third-generation PV technologies includes approaches such as dye-sensitized solar cells, quantum dots, nano-antennaes, nanomodified materials and organic cells. These all offer the promise of higher efficiencies and lower costs than even second generation technology. But none is yet clearly established as a leader, and none of these technologies is yet available as an exchange traded investment.
Both second and third generation solar technology companies are highly concentrated in the US. So some observers have concluded that there will be a shift back to the US of the solar cell manufacturing that went to Asia. However, as the companies in this sector scale up their operations they’ll be tempted to manufacture where prices are lower to keep their costs down. But it’s by no means clear since as fast as companies shift manufacturing to Asia, overseas companies are building facilities in the US. For instance, SolarWorld (SRWRF.PK) from Germany has opened what they say is the US’s largest solar cell factory in Hillsboro, OR. Meantime, Sanyo Electric (SANYY.PK) from Japan is building a factory in Salem, OR.
Thomas Friedman, author of “Hot, Flat and Crowded”, has said that energy technology is the industrial sector where global leadership will be established in the next several years. With the rush of new innovation taking place in advanced solar technologies in the US, there’s still a chance that the US can claim that leadership position. But the game is still wide open.
Paulo J. Nery
Disclaimer: Nothing in the above article in no way constitutes a recommendation to buy or invest in these or any other stocks. You should always seek professional financial advice when planning your investments or trading in the stock markets.