OK, so here’s the deal. You give me an 8 year guaranteed purchase order, with a deposit for two years worth. I return the deposit in 1.5 years yet you must replace that with another deposit for the following two years before I do so.
That is the bottom line talk today of crystalline cell makers. And by the way, prices can be increased at anytime at their full discretion. If you’re wondering what kind of industry this is, actually, despite 18 years in it, so am I.
The whole thing stems from the cost of a new silicon feedstock facility. When you pay hundreds of millions to put up a 5000tonne facility, you need assurance that the industry for which you are doing so gives you a handsome return. It is not abnormal and totally fair.
The challenge is that there is no “market” control in this which compares crystalline to other technologies. Its almost like they are still operating under old premise that no technology will replace crystalline for the coming 5 years or so.
I have a strange feeling that, as with other markets, the solar market is about to be radically spun on its head. Never have I seen so many new technologies coming out all at once. And when ONE of them hits big, the crystalline folks are in for a surprise.
So “bottom line”, hold onto your hats. The price of solar is not about to come down anytime soon (in fact yet more increases were announced in pricing here at the conference) and the fact is that they are totally right in doing so because when the market flips on the suppliers, they will be back to an oversupply, competitive situation.
What does this bode for solar stocks? They are secure for at least two years IMHO. After that, it will be the strong that survive and the weak will be taken over. Having complete vertical integration has its merit for the next two years. After that, some companies need to make sure that their markets are growing fast enough to handle their own capacity improvements otherwise they will be laden with huge capital investments in a market which takes no prisoners.
I’m leaving Hawaii now, so a final ALOHA to all my friends (particularly those that took care of my wife on her birthday while I was away)…
Sass
5 Comments
Crystalline technologies advance as do non-crystalline technologies.
Non-crystalline technologies have, what, a 5% market share? In order for non-crystalline technologies to capture 51% of the market in the next 5 years, they’ll have to at least double production each year for the next 5 years (assuming crystalline technologies continue to experience 30% to 40% growth rates).
The market won’t become oversupplied unless production growth rates significantly increase. Japan can consume on the order of 5GW of production a year at current prices installing PV on new construction. As the industry approaches producing 6GW of PV per year, profit margins will have increased sufficiently (manufacturing costs will have decreased sufficiently) that they can afford to cut their prices in half. Of course, price drops simply make PV more attractive and expand the market that is willing to buy the PV.
When you map the size of the market willing to buy PV at each price point, it doesn’t look like PV supply is going to overpower demand for at least the next 5 years and possibly not for the next 30 years.
At 24cents/kwh, your market is Japan. At 12c/kwh, you add in New York, California, and most of Europe. And every time you increase production by a factor of 10, the price drops in half. Japan was the market back in 2003/2004 when production was around 600MW/year. When the industry produces 6GW/year, the manufacturing cost will support applications willing to pay only 12c/kwh.
Good posting Chuck, nice to see some math, the postings by Sass are interesting but don’t seem to appreciate scale up issues for new technologies – takes longer, costs more, and needs a supply chain cascade to become mainstream. The only missing point in your posting is the marginal rate in CA for peak hours, we are competitive at 24 cents if you want to run a lot of equipment during peak hours.
Bo,
I would dare say that I fall somewhere in the middle, if you read my posting about the Spheral Solar fiasco that just occurred. While I do not discount the lead time required for disruptive technologies its clear that more and more companies see thinfilm and nano-organics as a huge part of the future which has been discounted to date by an “establishment” in the business. I am a firm believer in “horses for courses” approach to technology. There is no single one which is the best for all apps and the disruptive ones will tend focus on niche apps at first until they can get their real world outputs in the neighborhoods of the thick film players. While thin film has grown from 2% to 13% today, thick film has gone from 11% to 20% in twenty years as well. The issue becomes the limit of thick film improvements and the higher growth rates of the thinfilm power outputs (ie. micromorph amorphous, CIGS, CdTE, etc…)
Sass
I agree with Chuck. Non-crystalline technologies are hip but if you look at the rate of increases.
(just read the transcript of the latest Suntech Power earnings release for Q1 2006).
Good example would be the Evergreen Solar which uses the mantra of “35% less silicon than standard” as it’s main marketing engine.
However, this “35%” is the comparison of 9g/watt ESLR uses and the so-called 13g/watt industry average.
But from what i see happening and companies raising their efficiencies month on month ESLR will lose its’ “competitive advantage” in 2 years tops
Suntech for one is going over to 20% efficiencies by the end of next year (optimistically) and the other players in the market aren’t sitting still, are they?
So, imho the market share situation between the various solar cell types won’t change much until 2010.
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And the demand might grow much faster than we expect now so the large players in the industry might stay in advantageous situation through the end of the decade.
SASS COMMENT:
I think we’ll still see exponential market share growth of thin film and other technologies. However, I do respect the opinions that are being expressed, and as I always tell my team “I hope to be corrected for that is a way in which I continue to learn”…
Silicon or carbon (or both) nano fibers embeded in plastic resin? Just a guess but I think this is the future of solar PV.
The recent production of electrical conductive plastic with metal fibers made me think of this.
Also, has anyone considered the advent of room temp superconductors? Would they make PV more efficient? maybe approaching 90+%?
SASS COMMENT:
Your thoughts represent some of the “disruptive thinking” currently happening in the solar world as it matures from one that has been using rather old base technology to one which explores the use of nanotechnology and other means to create power from light. Thanks for your valued comment. In fact, “power plastic” is a material we are currently working with to develop the nextgen of portable solar products. Sass
These “power plastics” are the focus of a hot investment buzz right now. Rumor has it that major manufacturers are testing it right now by molding parts for various products. Mass production is coming soon, so they say.
But the potential of having solar PV film rolling out of mills onto rooftops would seem to be re-evolutionary to energy production. Going right back to the discovery of the PV effect and moving forward from there.
Silicon nano fibers embedded in plastic with the correct doping might well replace solid silicon. Would chlorosilane gas then be liquified and spun and chopped into nano fibers instead of formed into a solid substrate?
That would make chlorosilane production a very safe investment no matter which way the science steers the technology.
SASS COMMENT:
Dear Amazing,
I think for better reference on what is happening in this field you should refer to http://www.nanosolar.com or http://www.konarka.com as they are both going down similar paths yet with difference base chemistry.
SP