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Posted on May 20, 2008 by  & 

Photovoltaics - The macroeconomic view

Last week IDTechEx attended the 33rd annual IEEE Photovoltaics (PV) event in San Diego, CA, which had about 500 attendees and 40 exhibitors. The event mainly covered crystalline and amorphous silicon PV but also looked at emerging thin film inorganic and organic technologies. Here Raghu Das, CEO of IDTechEx, who attended the show, summarises the state of the industry in the first part of this two part article.

Photovoltaic subsidies- should more be given?

Development and production of PV have been subsidised for some time, which has had the effect of helping the manufacturing capacity of PV grow by 40% to 50% each year. This has seen the cost of photovoltaic cells tumble to $4-$5 per watt, down from $7 or so three years ago.
 
The trend so far is that with each doubling of manufacture capacity, the cost of PV cells has decreased by about 20%. Undoubtedly the subsidies have helped to kick start the PV sector, and nowhere more so than Germany. About ten years ago Germany passed a law which guaranteed the prices of energy from renewable sources such as solar and wind, paid for by users of grid electricity. This proved to be a good R&D stimulus - companies are promised a long term return and as a result many companies have set up manufacturing facilities in Germany, also helped by further set up subsidies. This model has been widely copied in other European countries.
 
 
In the US, the subsidy can be as much as $4.50 per watt installed depending on region, with the installation costing about $4 on top of the $4 per watt cell price. In addition, companies can claim tax credits. Payback is approximately 10 to 12 years.
 
So should more subsidies be given to continue increasing the rate of growth? Not so, according to Ron Binz of the Colorado Public Utilities Commission, with others including a photovoltaic company, SunPower Corporation, agreeing. They feel the subsidy level is adequate due to the already stretched nature of the value chain, such as lack of installers, frames and more. Too much stimulation encouraging people to adopt PV may induce a short term demand resulting in higher costs.
 
Indeed despite the fall in price of PV over the last few years the price has increased over the last few months as capacity tries to keep up with demand. One attendee at the event pointed out that it is being discussed in Germany that manufacture set up subsidies should be slowly reduced to eventually reach the point where the industry is economically viable without artificial boosts, and new money incentives focussed on undersupplied areas of PV may be increased.

The need for storage

In particular, storage of energy is seen as a key problem to growing the industry beyond current growth rates. Energy generation during the day that is surplus to requirements needs to be efficiently stored for night time use and this area is only now beginning to be addressed in terms of an appropriately scaled solution. Geography is also an issue, with some areas naturally yielding more energy from PV than others and adequate infrastructure is needed.

Installation of photovoltaics

Companies selling PV agreed that installation is more effective in new building constructions and central farms rather than retro fitting to existing buildings, due to the approval process in the latter taking some time. Crystalline silicon cells are used in the latter in custom sized frames, with amorphous silicon in standard size frames for the former offering lower costs. The cost to install each watt is $4 approximately in the US and almost half that in Germany due to more trained workers and higher numbers of installations.

Hope for silicon photovoltaics to reach grid price parity

Developers of non silicon PV often site that they may be able to achieve grid parity costs whereas silicon will not. However, thought on this aspect has been changing for some time. At the event, several papers were given showing roadmaps to achieving this, with developments in concentrators for example, where mirrors are used to increase the intensity of light onto the PV cell, meaning the power output can be increased from the same silicon area.
 
 
Coupled to this, there is an expectation that costs of amorphous silicon structures will continue to fall over the next few years. This technology is expected to see the biggest increase in market share for PV over the next five years, from about 7% of the PV market today to as much as 20% in five years. This is due to the experience of using amorphous silicon for flat panel display backplanes, where the cost of those displays has fallen sharply over the last few years. In addition, many companies and analysts are anticipating that silicon is on its way to oversupply - over one hundred new silicon factories are under construction, mainly in East Asia, and they are scheduled to come online in the next one to two years. In three to four years there will be a huge new silicon production capacity.

The Photovoltaic Bubble?

There was an interesting discussion from a panel of investors and companies about the growth of the industry over the next few years. For the last few years venture capital has broken records in this sector and company valuations are high, but over the next five years supply may exceed demand. Is this the making of a bubble? The panel felt that the technology may experience the Gartner hype cycle as many technologies do, such as nanotechnology, fuel cells and the internet. However, all agree that there is a real opportunity. The consequences of over production will mean a fall in prices, which will see some businesses fail with high production costs while ones with lower production costs or other uniques (such as flexibility) will prevail.

Strategies of market entry for new, potentially cheaper technologies

No matter how potentially cheap a technology may be, it is not cost effective until appropriately scaled up. If we look at printed electronics technologies, we see this in displays today, with OLED TVs costing twenty times more than the equivalent size LCD TVs, and the first RFID tags costing near parity with silicon RFID tags but with a heavily reduced feature set. For the latter companies are differentiating themselves by, for example, adding displays to RFID tags for an incremental amount of money, where doing the same with silicon would be significantly more expensive.
 
 
Dr Billy Stanberry of HelioVolt explained that his company's approach is to ensure the business model is based on value of more than just cost. In addition, he warned that while companies are taking advantage of short term tax credits now they need to realise these are not sustainable. Maurice Gunderson of CMEA Ventures, a venture capital company, felt that almost every PV company has not raised enough money in order to get production to the level where the technology is low cost enough to produce that the companies can make sustainable profit. He feels that where cost is your only differentiator you need to sell at a loss initially to ramp up volume.
 
Tomorrow the second part of the article will cover developments with organic PV and company updates covered at the event.
 
SciReality, an associate company of IDTechEx, together with IDTechEx, is working on a new report giving detailed macro and micro economic assessment of printed and thin film PV technologies and markets. For details and contributions, please contact Raghu Das at r.das@IDTechEx.com. The report will be published later this year.
 
 
For more information, attend the only event dedicated to PV Beyond Conventional Silicon, hosted by IDTechEx in June 17-18 in Denver. The event includes tours to NREL and other local companies for those that register early. For full details see www.IDTechEx.com/pvUSA - register by May 30 and save 10 percent.
 

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Posted on: May 20, 2008

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