Is the future thin?07 / 2012, Industry & Suppliers | By: Jonathan Gifford
Thin film: Polysilicon prices have fallen dramatically in the past 12 months and IHS iSuppli predicts that they will be lower than US$22 per kilogram by the end of this year. One of the obvious consequences is that crystalline silicon-based (c-Si) module manufacturers are able to reduce costs and prices on an aggressive road map, so much so that much of the competitive advantage of thin film producers has been eroded. Does a market still exist for thin film and which manufacturers will survive this period of intense price competition? pv magazine investigates.
Oscar Wilde famously defined a cynic as one “who knows the price of everything and the value of nothing.” And as thin film producers face a PV market where falling module prices have eroded their competitive advantage and global demand has softened, they have had to shift their value proposition from being one based on price, to one based on value and thus become a little less cynical, so to speak.
First Solar’s announcement in April that it would bring its manufacturing capacity in line with its demand forecast, by closing its Frankfurt (Oder) operations and reducing its global production by 30 percent, gave a real signal that thin film capacity expansions may be on hold for now. But in fact that is not strictly what is occurring with other players continuing with expansion plans in an attempt to reach a GW scale. German CIGS producer Avancis completed and opened its second 100 MW fab in Germany in December, 2011; Japan’s Solar Frontier continues to ramp up its new 900 MW Kunitomi fab; GE chose CdTe thin film for its 400 MW move into PV manufacturing, which should begin producing modules this year; and Silicon Valley’s MiaSolé is pursuing “accelerated” plans to ramp up to 150 MW– however not using the silicon its location is named after.
Loss or not
A key question pertaining to the thin film market at present seems to be: what is the risk of expanding production in this market? “I would assume that they do sell at a loss,” says Renewable Analytics’ Dirk Morbitzer at the Thin Film Industry Forum, held in Berlin in April. “Utilization rates are too low, because the current market conditions do not allow them to sell a lot of quantity,” the U.S.-based German explains. Morbitzer adds that he believes that First Solar may be the only exception to this. GTM research, in its Thin Film 2012–2016: Technologies, Markets and Strategies for Survival report, estimates that utilization rates for 2012 will fall well below the already anemic 52 percent level recorded in 2011.
The report observes how venture capital (VC) funding has fallen away from the highs of 2008, when over US$1 billion flowed to thin film producers. Although VC is far from having dried up, this is actually symptomatic of the selling of modules below cost. GTM Research writes that US$584 million of VC funding was invested in thin film producers in 2011. Lux Research’s Matt Feinstein, at the Berlin Thin Film Industry Forum said that, “on the VC front, coming into the industry is a lot of late-stage ‘keep you afloat’ funding.” Thin film producers have a double prerogative to continue to sell modules below cost, firstly to clear inventories and keep production moving, but more importantly to build bankability and get modules into the field. Morbitzer sums up the situation: “Most of the thin film manufacturers need to provide proof of concept, and they need to provide their end customers with sample cases of installations showing that their modules actually perform, not only in the laboratory but also in real life and real environments.”
The big survive
Burning cash is far from the ideal position for many producers to find themselves in, but it’s the reality for many. Because of this situation, having a large, wealthy parent company may well prove to be a decisive factor. And of those thin film manufacturers adding manufacturing capacity, it seems like that is the norm.
To take a snapshot: GE needs little introducing, as one of the world’s biggest companies; Taiwan’s TSMC began shipping CIGS modules from its new fab in March, leveraging its 25 years of semiconductor experience to enter solar; there are very few question marks over energy giant Showa Shell’s economic credentials as a support to Solar Frontier; and Avancis has glass giant Saint-Gobain in its corner. Californian-based MiaSolé is continuing along its road map to expansion however without the guiding hand – or rather hefty pocketbook – of a parent company.
GTM writes that this makes it extremely likely that it will be “snatched up by a large Asian investor (most likely Samsung, but perhaps AUO).”
There are still geographic locations where thin film has a competitive advantage and this is where development is taking place. Both Morbitzer and Feinstein agree that utility-scale applications still favor thin film technology. MiaSolé announced in April that it is developing projects worth 8 MW in India, some of which are supported by loans from the Export-Import Bank in the U.S.
The U.S. market continues to be one where thin film modules are actually increasing market share rather than shedding it. This is largely due to the strong market share that First Solar has developed. First Solar claimed in its Annual Report (2011) earnings call that it has a 2.6 GW pipeline, with a number of major projects in the U.S. (see below). Analyst Morbitzer predicts the Tempe-based company will pick up 20 percent of a total market of around 4 GW in 2012.
CIGS is also making somewhat of an impact in North America with Solar Frontier recently heralding its deal to supply a 150 MW power plant project in Kern County, California. When completed it will be the world’s biggest CIGS project – Solar Frontier continues to call its technology CIS, despite the presence of gallium. The Kern County project is with France’s EDF Energies Nouvelles and the company hopes for 60 MW to be completed by the end of this year, with the remainder by June 2013.
First Solar’s major projects under development
Desert Sunlight Solar Farm
NextEra Energy Resources, FE Financial Services
Topaz Solar Farm
MidAmerican Energy Holdings
Agua Caliente Solar Project
MidAmerican Energy Holdings
AV Solar Ranch One
Silver State North Solar Project
Stateline Solar Farm
Matthias von Armansperg from strategic PV consultants Accelios Solar believes that in India and some other countries in Asia, thin film’s advantages will become apparent. “Thin film comes into play in sunbelt countries, with very diffuse light conditions and hot temperatures,” he explains. “There you have technologies with better temperature coefficients and better energy conversion efficiencies, that have advantages over c-Si.” The home-market advantage may too favor Solar Frontier with Japan’s revamped feed-in tariff (FIT) legislation and potential electricity market deregulation opening the door to large-scale installations suitable for thin film installations. With cadmium banned, CdTe products cannot compete with Solar Frontier’s CIGS modules, in the thin film space.
Japan’s revamped FITs have proposed prices of 42 yen/kWh over 20 years for industrial installations (larger than 10 kWp) and 42 yen/kWh over 10 years for residential systems (smaller than 10 kWp). Based on these proposed figures at the time of print (they had not been officially enacted by the appropriate government ministry), Bloomberg New Energy Finance predicted returns to investors as high as 44 percent. Jefferies were also bullish about their predictions for the Japanese market, with analyst Jesse Pichel writing: “On the heels of the new FIT, a new master energy plan is being revised in Japan, and it may target up to 100 GW of cumulative PV capacity by 2030, from 4.7 GW installed at the end of 2011.” Solar Frontier’s Marcom GM Peter Rolufs says that the company is uniquely situated to benefit from the new-look FITs: “Japan’s turn in the solar spotlight is also advantageous to Solar Frontier as a Japanese company manufacturing its modules 100 percent in Japan.” Solar Frontier says that it is on track to produce 600 MW of modules in 2012, and it hopes for as much as 60 percent of this to supply the domestic market, which comes to 15 percent market share in the country. In 2011, 30 percent of its production, from its base in Miyazaki in southern Japan, went to the domestic market. Utility-scale projects are also emerging as a new market segment in Japan, presumably benefiting thin film producers. Called “mega solar” projects in the country, some as large as 200 MW are being proposed by companies such as telecommunications giant Softbank.
Sharp could also be a prominent supplier in Japan, says Accelios Solar’s von Armansperg. “Sharp has a long-standing history in the solar industry so they have strong distribution ties in Japan, Europe, the US and emerging Asian markets.” Von Armansperg continues, “their biggest thin film installation of 78 MW was in Thailand.” The Southeast Asian market may also open up to thin film utility scale projects, although PV in much of the region is only in a formative stage.
India is also a land of opportunity. In April, First Solar announced that it had supplied 500,000 modules to a 40 MW project in Rajasthan in India. Reliance Power was First Solar’s customer on the project, which was part of a larger 100 MW supply agreement signed in 2011.
While perhaps being overshadowed by the announcement to close its German operations, First Solar’s clearly enunciated strategy is to pursue its own projects, as engineering, procurement and construction (EPC) firm and integrator. For an organization the size of First Solar, says Lux Research’s Feinstein, taking control of the entire project development makes sense. Accelios’ von Armansperg says that this kind of downstream integration and control over the process could deliver major cost reductions on a system level. “If a company has the system engineering competence to design integrated systems – and that would mean for PV that such a company integrates the module, the inverter and the mounting system into the PV system – this would reduce the cost further than any individual manufacturer could do.” Solar Frontier has entered into a joint venture (JV) to deliver downstream capacity and safe harbor for some of its production. Belectric is Solar Frontier’s partner on the new JV, which goes by the name PV CIStems (see pp. 24, 25). Solar Frontier has confirmed to pv magazine that it expects the project to develop a pipeline of around 100 MW in the middle term.
Major integrator and EPC Belectric has certainly not lost any faith in thin film technology and plans to continue working with First Solar and Solar Frontier as suppliers in the future. Having installed around 1 GW, predominantly in utility-scale applications in Europe, Belectric has significant experience that it is not ready to walk away from, despite the competitive prices offered by c-Si manufacturers.
Belectric CEO Bernhard Beck says it is a matter of long-term sustainability rather than short-term price advantage. “Yes there is a major change in the price point of silicon modules, but I would not see the price points as being sustainable price points,” says Beck, “if you look to the real cost of the unit, then thin film is still ahead.” Beck continues that the purchasing decision process for Belectric is a complicated one where warranty also plays a major role. “If we go out and we give warranties to our customers, then we want to make sure that the module producer is still there in a couple of years – in at least 10 years.” Emphatically he concludes: “This is why a low price point on a product from a company that is making a loss, does not give me the confidence that I can trust the warranties long term.” Value from thin film may then come in the form of the various companies’ chances of survival and modules’ performance in diffuse-light or high-temperature conditions.
Few doubt that 2012 will be a difficult year for thin film producers as consolidation occurs and thin film players without sufficient strength on their balance sheets will fall by the wayside. Thin film equipment manufacturer Oerlikon Solar has already been purchased by Tokyo Electron for US$275 million and, as GTM Research points out, other players may be prime for the taking. In its most recent report GTM writes that not all failing thin film producers will be so lucky, with thin film silicon manufacturers most likely to see their assets sold after bankruptcy.
However while the thin film market will retract in 2012, GTM also forecast it to rebound in 2013 and then to continue to grow in 2014 and beyond. While it predicts thin film producers not capturing more than 20 percent market share in the future, that’s enough demand to sustain those who survive.