Greetings from Long Beach California, home of the Queen Mary, some of the most attractively-camouflaged offshore oil rigs in the world, and the Solar Power 2007 conference. Beside the record crowd of over 11,000 hard-core solar types, this year’s event should be remembered as the last year that the Great Silicon Shortage of 2005 was the limiting factor in an industry facing a seemingly unlimited demand for its products. With silicon supplies about to ease, all players in the solar-electric market are going to be adjusting to some dramatically different economic realities that will re-shape the technology and the folks that make it.
It will be sometime in mid-2008, when the current materials vendors expand their capacity and several new ones come on line, that we’ll begin to get an idea of what the actual demand for solar panel production looks like. Most likely, the pent-up hunger for solar power will soak up most of the production capacity of the 50-odd PV manufacturers I saw on the show floor - at least for a while. I’d expect that some time in early 2009 year there will be enough overcapacity to finally start putting some real price pressure on panels, inverters, and other solar-related products. As solar products start their journey towards commodity pricing, the folks who make them will face the same tough realities that semiconductor manufacturers are facing today. In fact, there are several important lessons that players in the solar industry can learn from their chip-making cousins that will help them survive, and even thrive during the inevitable consolidations, price wars, and boom/bust cycles that solar power will experience as it moves into the mainstream of the energy economy.
Here’s a sampling of what it’s going to take to make it in a rapidly-maturing solar market:
- Focus on lowering overall solution cost and grab a bigger chunk of the value chain. With the price of solar panels expected to finally start dropping again, they will constitute an increasingly smaller fraction of the cost of an installed system. Even today, Dick Swanson, CEO of SunPower, estimates that around half the cost of a solar system is the installation labor and materials. Rather than jumping on a cost-cutting treadmill, smart companies are concentrating on designing solar panels and mounting systems that dramatically reduce the labor it takes to put a system onto a roof. This allows them to maintain a higher price for their panels while still saving their customers money. Sharp’s new OnEnergy mounting system is an excellent example of a mechanical system that has been carefully engineered to reduce the number of steps it takes to install and align the framework and to make the necessary mechanical and electrical connections to the panels it holds. SunPower takes a slightly different approach by using high-efficiency solar cells that reduce the number of panels required to deliver a given amount of power. Other manufacturers are working on new packaging and mounting systems that will make so-called solar shingle installations almost as quick and easy to install as their asphalt and sheet metal counterparts.
- Innovate to control costs. With several manufacturers predicting the price of a residential solar installation to drop from an average of $9/W today to a bit over $3/W by 2012, traditional incremental cost-cutting measures will not be enough to remain competitive. The companies that thrive will likely be the ones who gain control of costs by developing technologies that reduce material costs, manufacturing costs, or preferably both. The current high prices of semiconductor-grade silicon are driving manufacturers to re-tool their assembly lines and cell mounting technologies to handle thinner, more fragile solar cells that have driven the amount of silicon it takes to produce a watt from 15 grams in 2003 to well under 7 grams today with further significant improvements still expected. The future also looks bright for companies like Evergreen Solar, whose continuous string ribbon wafer extrusion method dramatically cuts the amount of energy and material required to make a solar cell. The same high silicon prices have stimulated renewed interest and research in thin-film technologies that has helped drive their conversion efficiencies up (as high as 10%) and their production costs down (as low as $1.25/W for a finished panel). With companies like Applied Materials and Uni-Solar bringing their deep knowledge of thin film technologies to bear on the market, we can expect to see new developments that will keep traditional mono- and poly-crystalline solar cell manufacturers aggressively pursuing their own next-gen innovations.
Happily, the opportunities for innovation and profits don’t stop at the solar panel. On the other end of the system, the growing volume of grid-tied solar systems will also present opportunities for conventional semiconductor manufacturers to produce highly-integrated specialized ICs and power devices that keep the cost of inverters in line with falling system costs. But that’s a topic big enough that I’ll have to save it another column.
Comments? Questions? Promising solar technologies you want to share? Write me at lhg at en-genius dot net or post your comments on the blog via the link below.
