Thin-film vs. c-Si: No clear-cut winners, yet

by Stephen O’Rourke, Managing Director, Deutsche Bank Securities

Solar photovoltaics (PV) is hardly a one-size-fits-all industry. Crystalline silicon technology has dominated the solar PV industry since its inception, and will likely maintain a commanding presence for the foreseeable future. Its history, safety, cost reduction profile, and material abundance (not to be confused with refining capacity) promise a healthy outlook. However, thin-film technology has finally emerged as credible competition. Cadmium telluride (CdTe) on glass offers the first truly cost competitive thin-film product in the history of the industry. With other thin-film approaches emerging, such as multi-junction micro-crystalline-silicon/amorphous-silicon followed by copper/indium/gallium/selenium (CIGS), thin-film technologies are bound to gain market share in a growing industry.

At the module level, cadmium telluride is proving to be a disruptive technology. First Solar Inc. has shown that in volume production the module cost/watt of CdTe technology can be roughly half that of average crystalline silicon. This is a long term sustainable advantage as both technologies progress down cost reduction curves. However, this is only part of the story. When the analysis is extended to the system level, the 50% cost advantage that CdTe has at the module level shrinks to roughly 10%, because balance of system costs (i.e., other than the modules and inverter) are proportional to the difference in conversion efficiency. So, a higher-efficiency, higher module cost, crystalline silicon-based system will have a significantly lower balance of system cost, and hence a competitive system cost/watt.

Material properties for different technologies result in modest variations in power output for a given amount of sunlight. Some thin-film technologies offer less pronounced temperature effects (i.e., % power degradation/°C that the solar cell operates above standard test conditions), and a wider spectral response (i.e., the absorption of a broader wavelength range of light). And, under certain conditions, these thin-film approaches can generate roughly 5% more power than an identically configured c-Si system.

With more than one viable technology, several variables including space, sunlight, and market efficiencies will determine which technologies are best suited to specific situations. Crystalline silicon will likely win in area-constrained applications in which power density is critical, and CdTe will likely lead a competitive run-off in a non-area constrained, lower-sunlight application. Based upon real data, and reasonable assumptions for technologies soon to enter production, cost/kWh for several solar PV technologies are clustered within 10% of each other. Despite claims of clear-cut winners, the economics of solar PV-generated electricity points toward more than one technology solution.

Looking into the future, we cannot ignore new technologies that could conceivably marry the conversion efficiency of crystalline silicon with the cost profile of thin films, offering game changing products. These technologies are developing the use of new materials, or novel approaches with existing materials like silicon. Suffice it to say that the solar PV industry will marry a host of complementary technologies to address an enormous market opportunity. Over time some will likely become obsolete, but for the near-term it seems clear that thin-film solar PV technologies will not vanquish crystalline silicon, but rather coexist competitively.

With the technology landscape pretty well defined over the next few years, economics becomes the focus. It is a simple fact that incentives drive the industry today, that standalone economic viability is still several years in the future. What is often underestimated, though, is the true value of solar PV generated electricity. Solar PV competes with grid supplied electricity when grid electricity is most expensive — at peak power times. And an assessment of the true cost of grid supplied electricity by location and time of usage indicates that the elusive goal of grid price parity for solar PV may be closer than is commonly believed.

Solar PV electricity will become economically attractive without subsidies. It is simply a matter of time, and no technical breakthroughs will be needed to achieve this. Ultimately the cost of solar PV-generated electricity will determine the industry’s success, and companies throughout the industry must realize that the goal is to sell or enable the sale of cheap energy, not simply a cheaper module.

When comparing the industry to its closest cousin, it is important to recognize a crucial difference between the semiconductor industry and the solar PV industry. The semiconductor industry competes with itself to constantly reduce cost/bit or cost/transistor, whereas the declining cost profile of the solar PV industry competes with the rising cost of grid supplied electricity. Although the solar PV industry has yet to establish its own Moore’s Law, the hurdle rate becomes easier each year. When stand-alone economic viability is the industry’s defining issue, who could ask for more?


First Solar Inc. (FSLR.OQ):

* Does analyst or household member have a direct ownership position in securities issued by this company or derivatives thereof? NO

* Does Deutsche Bank (and/or affiliates) own 1% or more of any class of common equity securities of this company? YES

* Is company an Investment Banking client of DBSI? YES

* Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. NO

* This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services. NO

* Is the research analyst or a member of his/her household an officer, director, or advisory board member of this company? NO

* Are you aware of any other material conflict of interest? NO


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