By Phil LoPiccolo, Editor-in-Chief, Solid State Technology
Over the past 30 years, photovoltaics technology has made its share of false starts, and has earned a reputation as being impractical without government subsidies. However, recent advances and conditions are converging to create what this time promises to be a sustainable market — and a significant business opportunity market for the semiconductor industry. That was the message delivered by photovoltaics industry veteran, SunPower president and CTO Richard Swanson, in his keynote address at The ConFab event, a three-day meeting of leading semiconductor manufacturers and suppliers, sponsored by Solid State Technology and our parent company PennWell.
Photovoltaic solar cells, which work by absorbing photons to energize electrons in a semiconductor, first attracted national attention during energy crisis of 1970s. To deal with this threat, which President Carter viewed as “the moral equivalent of war,” the administration set an agenda for the rapid development of solar power that, among other ten-year goals, called for the use of solar energy in 2.5 million homes in the US by 1985.
At the beginning of the program, the technology was viewed as hopelessly impractical, Swanson noted. In fact, given the expensive materials (polysilicon was $300/kg) and existing manufacturing processes, the cost of making solar cells out of silicon wafers was projected to be about $100/W, with installation expenses estimated to be that much or more. Also, the expectation was for giant solar farms, gigawatt-size plants in the desert that would transmit electricity to population centers.
This vision turned out to be wrong. The Department of Energy’s efforts to fund research in silicon-based technology aimed at reducing manufacturing costs were incredibly successful, said Swanson. Moreover, the killer application for photovoltaics was not for massive standalone solar farms, but instead for millions of small residential and commercial rooftops. “You never know where technology is going to lead you,” he said, “and often it’s not the path you initially anticipated.” So, benefiting from these unexpected turns, the first ten years of the PV industry, from 1975 to 1985, was characterized by extremely rapid growth of small start-up companies.
However, during the next ten years, the PV industry suffered massive losses, as technology R&D stagnated (largely the result of a change in the presidential administration) and start-up companies were acquired by large oil companies. Unfortunately, the oil companies used the solar companies as little more than “green veneer” — they liked the idea of having pictures of solar plants in their annual reports, but they offered little to the PV companies in terms of R&D funding, Swanson said. Consequently, the PV industry remained in start-up mode, and the level of manufacturing expertise fell decades behind the world-class manufacturing practices that evolved in the IC industry.
Then in 1995, with the serious entry into the PV market by Japanese companies, particularly Sharp, the industry began to mature and develop a true manufacturing mentality. Costs continued to follow a “progress ratio” of about 80%, such that each time the cumulative solar energy production doubled, the cost was reduced to 80% of what it was, Swanson explained [SEE CHART, ABOVE]. The rooftop market, especially in Germany and Japan, emerged as the “killer app.” And since this time, the industry has been growing at a compound annual growth rate of more than 40%.
During the last few years, PV technology has passed a number of milestones. In 1999, the industry had produced a cumulative 1GW of power since 1975, approximately equivalent to one large conventional power plant. “I liken that to the emergence of the solar industry as a serious energy player,” Swanson said. The next milestone came in 2001, when the solar industry used more square inches of silicon wafers than the entire microelectronics industry. By 2004, it was generating 1GW/year. This year, the solar industry is projected to consume more tons of silicon than the microelectronics industry and expand its solar power-generating capacity at the rate of 2GW/year. In addition, in the last few years, the efficiencies of the solar cells have increased dramatically. In fact, after virtually no improvement in from 1975 to about 2000, cell efficiency has recently climbed from about 14% to as much as 20% for commercial cells, and to much higher levels in lab units. [SEE CHART, BELOW]
Thus, the photovoltaics industry has now entered an entrepreneurial phase, and a huge influx of venture capital is pouring into the industry, thanks in part to these recent milestones — but even more to the view of what is on the horizon. At the most recent Industry Strategy Symposium, hosted by SEMI, featured presenter Alexander Wong, head of venture capital at DE Shaw & Co., provided a longer-term view of the industry, from an investment perspective, and outlined some opportunities for semiconductor companies.
Perhaps the most dramatic statistic Wong presented is that in less than 35 years, the solar industry is projected be bigger than the oil industry. That’s because traditional fossil fuels will not be able to meet future energy demands. In fact, he projected that the world will consume more energy in the next 60 years than in all prior recorded history.
“We’re starting to see solar becoming a real market,” Wong said. Over the next five years, revenues will grow from $10 billion to more than $50 billion, according to his estimates. In terms of new installations for energy during this period, PV will grow from 1% to more than 5% of the total, and over the next ten years, new power-generation installations will grow from 1% to 18% of the total.
Of course, government-supported initiatives could accelerate the adoption of solar power in the US and other countries. For example, Germany’s Feed-in Tariff program for photovoltaics, adopted in 2000, has proven to be enormously successful in spurring demand by consumers for grid-connected rooftop systems and production of systems by German companies. Under the plan, the power companies agree to pay solar system owners a fixed fee for the power they upload to the grid, which is of great value to the utilities during peak load times, as it reduces the need for the utilities to maintain excess plant capacity to meet high demand. Each year, that guaranteed fee for new buyers is reduced by 5%, which encourages consumers to jump into the market sooner rather than later, and it encourages the utilities to lower the cost and improve the efficiencies of the systems to attract new buyers.
As a result of the program, Germany’s installed solar power capacity exploded from approximately 100MW in 2000 to 1500MW by 2005, according to Hans-Josef Fell, a member of the Deutcher Bundestag (German national parliament) and architect of the German Feed-in Tariff program for PV, speaking at the Photovoltaics Manufacturing track at the recent SEMICON Europa conference. In the last year alone, Germany increased solar power capacity by 600MW, a 40% gain over 2004, and the country’s share of the global solar market topped 55%.
This growth is creating significant opportunities for semiconductor equipment suppliers, which is not surprising, given that PV manufacturing is similar to chipmaking in terms of wafer processing, diffusion, oxidation, metallization, and other operations. But the differences are that the PV industry requires much higher volumes and larger areas, yet with much lower tolerances and defect requirements. So as the demand for equipment optimized to meet these new parameters grows, the PV tool market is expected to expand from about $1billion in 2010 to about 10 billion by 2020.
Another opportunity is in materials, particularly for polysilicon, which has risen in price from about $24/kg in 2003 to $36/kg in 2005 because of a steep rise in demand. Because silicon represents roughly 30% of solar cell cost, materials cost savings would have a major impact, Wong noted.
Finding synergies between PV and IC industries will also be needed. In fact, Swanson is looking to exploit the IC manufacturing expertise of SunPower’s parent Cypress Semiconductor to further reduce costs and improve performance of next-generation of PV technology. We’re moving away from the start-up garage shops and out from under the oil industry, and starting to inject the mentality found in the IC industry of rapid cost reduction and performance improvement, he says. “It’s a little harder in PV because we can’t just shrink the device; it wouldn’t collect as much sunlight. But there are many other levers that we have to pull.”
PV manufacturing is, indeed, similar to that of IC manufacturing, but it has high volumes like in the CD and disk markets and large surface areas, as in the display markets. So to meet these requirements, tools are now being designed and manufactured specifically for the PV industry. “If you go back ten years, that was not the case,” Swanson noted. “We used hand-me-down semiconductor equipment and made do with it. Now there’s a nascent industry serving us.”
Given new equipment and technology developments, current manufacturing costs will drop from current levels of about $2/W to $1/W by 2012, according to Swanson. “That is the tipping point at which PV will be a very attractive business, can be widely used without any sort of incentive and will be a very attractive business.” Extending the curve another 10 years, out to 2022, and PV panels should cost $0.65/W.
In the meantime, the PV tool market alone is expected to grow from about $1billion in 2010 to about 10 billion by 2020. This is not huge, though it is big enough to warrant some interest, Swanson said. More important, this time the PV industry is positioned to continue growing for a long period at a very high rate. By applying their skills, semiconductor suppliers and manufacturers not only stand to benefit by expanding their markets, they can also play a major role in moving this key renewable energy market forward. — P.L.