Photovoltaics industry prepares for explosive growth as demand for solar panels rises

Ready for takeoff

11 July 2008 10:46  [Source: ICB]

Can photovoltaic manufacturers reap the benefits of a world where nonrenewable fuel is no longer affordable?

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Ed Zwirn/New York

DRIVEN BY rising energy costs, increasing government incentives and innovative expertise, companies around the world that manufacture the photovoltaic materials and devices used to extract power from our nearest star may be only at the start of their largest ever growth spurt.

World photovoltaic market installations reached a record high of 2,826 megawatts (MW) in 2007, representing growth of 62% over the previous year, according to Solarbuzz, an international solar research and consultancy company.

And barring an unexpected sharp reversal of present trends, many parts of the world may soon reach a tipping point at which improvements in solar technology and rising nonrenewable fuel costs intersect to produce a grid parity that will actually make it as cheap to generate electricity from the sun as from conventional sources such as oil, coal and nuclear fission.

Europe is leading the way in the world photovoltaic market, with 47% of the global 2007 market situated in Germany alone, where state incentives are the main driver (see page 32).

Spain follows, with 23% of the market Japan, which was once the world leader, and the US, where use is increasing, each account for about 8%. The rest of Europe, 6% and the rest of the world, 8%, according to Solarbuzz.

POLYSILICON DOMINATES

Not only is this market relatively concentrated in terms of geography, it is also far from diverse when it comes to the materials it uses.

More than 90% of the photovoltaic units being supplied today are based on conventional silicon wafers, with much of the rest utilizing thin-film solar cells, according to Mark Thirsk, managing partner at US-based Linx Consulting.

"We expect traditional crystalline silicon photovoltaic to maintain its dominant position in solar markets for some time," says Paul Clegg, a clean technology analyst with US-based investment bank Jefferies, "New polysilicon manufacturing capacity appears poised to help create abundant module supply, and raises questions about the market's ability to absorb new modules without price declines that are faster than incentive digressions in key markets."

"While precise inflection points for silicon and module availability and price changes are difficult to predict, both our US and European analysts build in rapid price decline assumptions in the coming six to 18-month horizons," he says.

Hemlock Semiconductor, a Michigan, US-based joint venture (JV) between US JV Dow Corning and two of Japan's largest single-crystal wafer manufacturers, Shin-Etsu and Mitsubishi Materials, entered the solar market in 2001 as a manufacturer of a grade of polysilicon specifically for the solar industry.

Its output split between semiconductors and photovoltaics, Hemlock nonetheless manages to top the list of the world's producers of polysilicon wafers, at an estimated 14,500 tonnes in 2008, a figure that is expected to rise to 19,000 tonnes in 2009.

The leader in Europe, where most of the solar boom has so far been concentrated, and in the No. 2 position globally, is German chemical group Wacker Chemie. Last year, the company managed to produce 7,000 tonnes of polysilicon wafer, a figure it projects to rise to 10,000 tonnes this year and 11,500 tonnes in 2009. By 2010, the company expects to have boosted its polysilicon capacity to over 22,000 tonnes/year.

Wacker has earmarked €1bn ($1.6bn) for capital spending in 2008, a 43% jump from 2007. A large portion will go toward photovoltaics, the company says.

The firm is investing more than €500m to hike polysilicon capacity at its site in Burghausen, Germany, through to 2010 - €370m to expand solar wafer production at Jena and Alzenau, also in Germany, through to 2012 and $1bn together with JV partner Samsung, the South Korean electronics group, to build silicon wafer production in Singapore up to 2010.

So far this year, Wacker has raised photovoltaic device output by 40%, according to spokesman Bill Toth.

"The first quarter [of 2008] has been very encouraging," says Toth. "We have the technology and the expertise in this area and with our facilities we were already very well positioned even before prices have sky­rocketed for energy." About 80% of Wacker's announced polysilicon capacity has already been sold.

SPREAD IT THIN

Another material coming to the fore is cadmium telluride. While it has a much lower 10.5% efficiency rating than the conventional polysilicon wafer, which weighs in at about 18-20%, it is also much cheaper to manufacture, at $2.48 (€1.58)/watt versus an average $4.35/watt for polysilicon. Its thin layer speeds up the manufacturing timeframe, according to Solarbuzz.

While the crystalline polysilicon wafer remains the material of choice for the relatively decentralized panel applications usually associated with solar installations at individual homes and construction sites, it is this lower cost of production that makes cadmium telluride ideally suited to "a company with a large field of solar cells in a dedicated electricity generating plant," says Thirsk.

US-based First Solar was formed in 1999 to exploit this new technology, attaining commercial production in 2002.

The company claims to have achieved the lowest manufacturing cost per watt in the industry - $1.14/watt - for the first quarter of 2008.

Through its two facilities - one in Perrysburg, Ohio, US, with three 45 megawatt (MW) production lines and the other in Frankfurt Oder, Germany, with four lines - it is the largest manufacturer of thin-film solar modules, having expanded annual manufacturing capacity to an expected 495MW this year.

Adding on to its seven production lines in the US and Germany and in anticipation of accelerated demand in the Asia, the company is building four factories with a total additional 16 production lines in Malaysia.

These facilities are expected to come on stream by the end of 2009, bringing total expected capacity to more than 1 gigawatt (GW), enabling it to handle the more than 3.4GW of photovoltaic modules it has contracted to provide to solar project developers through 2012.

POSITIONED FOR PARITY?

But even as demand ramps up for solar energy, experts agree that the industry will come into its own only when solar becomes cost competitive by reaching grid parity with conventional energy sources, and therefore independent of the political whims of governments providing subsidies.

While Clegg expects these ­incentives to "continue to play a role in stimulating photovoltaic adoption well beyond the threshold of grid parity," there is considerable uncertainty as to their continuation.

In Europe, he notes, the industry is awaiting an overhaul of the existing feed-in tariff program, which expires this September, while in the US, which has a patchwork of varying solar incentives at state level, the main federal solar booster, the investment tax credit, expires at the end of the year.

All the same, Clegg says, given the "growing concern about climate change, rising energy costs and awareness of the potentially negative geopolitical externalities of current energy policies the political environment is ripe for further policy action to incentivize investments in renewables such as solar photovoltaic as part of a portfolio of 'clean tech' energy solutions.

"Without incentives in key markets, most investments in photovoltaic installations would not be made, as photovoltaic is not yet cost-competitive with grid-metered electricity prices in most markets or with traditional energy prices," he says. "In many markets, the political unwillingness to establish incentive mechanisms and programs with long-term visibility creates considerable near-term uncertainty and share price volatility around what appears to be shaping up as a strong long-term secular growth story."

Thirsk, for his part, agrees that "[grid parity is a prerequisite for] when an investment in a solar generation capability is really making sense.

"In some places, like Spain and Italy, where sunshine is abundant and there are high prices for power, grid parity has already arrived," he says. "In the US, it's seven to 10 years away, depending on how you do the amortization."

SHINING CITIES

For the great bulk of recorded history, cities - the great clusters of habitation and commerce that define civilization - have sprung up if not by accident, then at least by default. Indeed, people congregate in municipalities to take advantage of natural resources such as water and proximity trade routes.

More recently, political ideology has driven mankind to plan cities around grand concepts. Political compromise caused the US capital, Washington, D.C., to be carved out of swampland at the turn of the 19th century to become the Western Hemisphere's first planned-from-the-start urban area.

At around the same time, the Russian Czar Peter, looking to modernize his country by turning its back on medieval Moscow, created the ambiguously named Saint Petersburg in swampland conquered from the Swedes.

More recently still than this, Brazil began in the mid-20th century to create Brasilia to demonstrate its mastery over its vast hinterland. The city, finally inaugurated in 1960, serves as the country's capital.

Some of the planning was taken to the extreme in detail. "Graveyards... will be turfed and have plenty of trees graves will be shallow and have plain tombstones, English style, all without any signs of ostentation," according to one of the guide plans.

With the 21st century's new preoccupations leaning more toward environmental and energy conservation, cities throughout the globe are claiming to be carbon-neutral, serving as another example of how governments are leading the way in the stimulation of demand for solar and other forms of renewable energy.

Perhaps the most prominent example of this trend is the unveiling in January by Abu Dhabi, in the United Arab Emirates, of a "Master Initiative" to invest upwards of $15bn (€9.5bn) to establish an international clean technology research center, the world's first carbon-neutral city on which work has already begun, as well as related projects focused on hydrogen, solar, wind power and hydrogen fuel cells.

Elsewhere in the Middle East Gulf, fellow emirate Dubai is planning an eco-friendly community known as the Energy and Environment Park (Enpark), a ­community for both commercial and ­residential use.

The project will be developed on a 743,224 m² (8m square foot) area and will include green commercial office space, manufacturing plants, showrooms for energy-saving technologies and energy-efficient residential units.

But despite all the publicity for Middle East projects, it is China that stands out most in terms of green cities.

The Middle Kingdom plans to build 400 new cities over the next 20 years, adding some 2bn m³ of new buildings every year, equivalent to about 80,000 high-rise structures.

One of the most ambitious of these cities is Dongtan, billed as the world's first purpose-built eco-city. Dongtan will be built over the next 20 years on Congmin Island at the mouth of the Yangtze River, on 86km² (21,000 acres) of agricultural land. It will be separated from an adjacent wetland by a 3.5km "buffer zone" to minimize environmental impact.

Phase One is slated for completion by 2010, in time for the World Expo in Shanghai and will accommodate a population of 50,000, a figure projected to rise to 500,000 by 2040.

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