The solar application wars: Is there a clear winner?

by Paula Mints, Navigant Consulting

Feb. 6, 2009 – A skirmish is taking place among manufacturers of crystalline and thin-film technologies. Thin-film manufacturers state (an assumption) that large fields suffer less from area penalty (that is, technologies that are lower in efficiency require more area) and are more economical to install than higher efficiency crystalline — which, according to the proponents of this theory, belongs on rooftops. Not to be left out, CSP (solar thermal) is re-emerging as competition for large (>1-MWp) installations.

There are flaws, of course, to this thinking. First, thin films must be less expensive in price at the module level to compensate for lower efficiency as more area, be it on the ground or on the roof, and more balance-of-system (BOS) is required for the same efficiency reached by most crystalline technologies. Second, there is not yet enough data to prove that thin films are cheaper to install in large fields. Third, with falling crystalline modules prices (some as low as $2.75/Wp), the cost of installing crystalline systems could fall significantly. Could is emphasized in this case, since a module price is less a function of the cost of production than on what the market will bear.

The metrics that define a technology, be it crystalline, thin-film, or concentrating solar (thermal or CPV), as appropriate for an installations >1MWp are site specific — that is, based on the needs of the installation (insolation, BOS, cost of module, or system), the requirements of the investors (primarily rate of return), and the price at which the electricity will be sold to the end user. (This article discusses investment systems where electricity is sold, not system sales where end users own the means of electricity production.) The argument for one technology vs. another eventually becomes one of marketing. In marketing, the best story wins, not necessarily the best technology — recall the demise of Sony’s Betamax technology and the domination of VHS. So, may the best solar marketer win.

In 2007 and 2008 the large field (or utility scale) installation became extremely popular in Europe because of feed-in tariff driven markets in Spain and Germany, and in the US because of the PPA business model. In terms of megawatts installed, large field (utility scale) installations took a significant share of the utility and commercial applications in 2007 and 2008. In 2009, these large installations — along with requiring a more favorable credit climate and lower cost of money — will need to prove profitability and lessen risk for investors. Vertically integrated technology manufacturers may have an edge now, as these companies can cut the module cost significantly and reduce the module portion of the system investment to manufacturing plus transfer costs.

In any case, as with everything these days, it’s the economy that matters. Every industry and product is or will experience a slowing of demand. For solar, this will affect all manufacturers of technology, investors in and buyers of systems, system integrators, installers, retailers — and in particular, new entrants. All is not doom and gloom, however, as downturns typically spawn technology and business innovation. For the photovoltaic (solar) industry, already high-tech, manufacturing cost reductions will accelerate, efficiencies will improve, module and system prices will decrease (primarily due to softening demand), BOS innovations in cost and design will come, and business models will become refined.

Along with business and manufacturing innovations, soft demand and frightened credit are spawning cuts in module prices. This downward trend in pricing, while welcome to system integrators and investors, will be painful for manufacturers of technology, whether thin-film or crystalline. Tighter margins are coming — and in fact, they are here already.

The assumption of unlimited demand brought many companies to enthusiastically enter the PV industry. Now that these companies face hard times, some will falter, some will exit, and some will innovate and persevere. The figure above provides a forecast to 2013 of global industry demand. The table that follows provides data on expected application demand (note as the grid connected application is a majority of demand and sales, it takes a prominent place).

Currently in the US there is great optimism about assumed support for solar by President Obama, and also for an up-tick in demand by utilities for solar. The solar industry hopes for a continued boom in demand for systems >1MWp, despite the recession. President Obama is committed to renewables and to necessary upgrades in US transmission. On the other hand, his energy secretary has stated that he wants to fast-track nuclear. Moreover, the new administration needs to focus on many diffuse directions at once, all of them in crisis: the economy in a tailspin and no agreement on how to stop a potential crash landing and thus a years-long recession, along with healthcare needs, hunger, extremely high unemployment, and cuts in education, not to mention the continuing expenses of Iraq and Afghanistan. As for utilities, foreclosures, unemployment, and other concerns are having a negative affect on revenues and may force some project rethinking.

A downturn, of course, provides a perfect foundation, again, for innovations of all types — including marketing. For most products, the company that tells the best story typically wins. As solar becomes a more visible energy choice, the industry will need to mature its storytelling. In this context, the selling of thin films as more appropriate for large installations than crystalline, and CSP (solar thermal) as thin film’s true competitor in this regard, is interesting — though again, not strictly accurate. However, the current slowing in demand gives the solar industry, and all its participants, an opportunity to hone marketing skills. In a couple of years demand will accelerate, and solar technologies should emerge as competitive with all energy technologies. The industry will need strong marketing then, even more than it does today. For that time, may the best story win. And let it be a solar story.

Paula Mints is principal analyst, PV Services Program, and associate director of the energy practice at Navigant Consulting. E-mail: [email protected].


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