Dyesol on new investment, grid competitiveness and why silicon’s limitations have been exposed


On February 28, Dyesol Limited announced that it had secured strategic investment from The National Industrialization Company of Saudi Arabia, or Tasnee, worth A$4 million in the form of a 15 month redeemable loan note, convertible into Dyesol shares at $0.166 cents per share.

The two companies laid out a six month exclusivity period in which they will consider partnership and investment opportunities, R&D collaboration and Middle Eastern demonstration projects. During this period, Tasnee may also decide to up its investment to A$20 million, which would be convertible at $0.18 cents per share.

Executive chairman, Richard Caldwell speaks to pv magazine about the partnership, and recent company developments.

pv magazine: How has Dyesol managed to raise funds in the current economic climate?

Richard Caldwell: The solar market has been very challenging in the last 18 months, not only in terms of profitability for production companies, but also for pre-revenue companies like Dyesol, which have been developing new technologies. It’s been challenging for us to raise funds, so we’ve had to tighten our belts a bit. Saying that, we’ve come through it well and have had two or three reasonably good raisings from our very loyal existing shareholder base.

We’ve [also] scoured the world looking for opportunities amongst potential strategic investors. It’s fair to say a lot of the big MNC investors have found it very tough in this environment, so a lot of them are shedding jobs and winding back R&D investment. Very few of the multinationals in traditional investment areas have the ability to fund new activities. Unfortunately, what happens in this period is that all R&D, irrespective of their quality, comes under close and sometimes unreasonable scrutiny. So it’s really refreshing to work with a company like Tasnee that has money to invest in its future. Tasnee is perfectly positioned to diversify and build new industries at the expense of its competitors.

Why is Tasnee an appropriate partner?

Tasnee has an international subsidiary structure, and [subsidiary] Cristal is a company we have been working with since 2009 in the U.K. on fine particle titania. Overall, Tasnee is profitable, aggressive, and has developed markets. There are multiple opportunities in terms of working with Dyesol, including finding new revenue streams in in functional coatings for titania. [The partnership] has also opened up opportunities for broader discussions across other specialty chemicals that we have a need for. Also, because of their historical reliance on petrochemicals they are looking to diversify into renewable technologies as oil reserves are slowly depleted.

Tasnee has the option to invest up to A$20 million. What does this mean for Dyesol?

Tasnee have an exclusivity period of 6 months to invest up to A$20 million in Dyesol. This is sufficient to get us through to commercialization without any problems and to take advantage of a lot of opportunities that we could take a look at. It’s a significant amount of money and is consistent with our business plan, in particular, to developing DSC on steel.

We have, of course, alternative, non-dilutionary avenues being made available to us as well over the next few months. In Australia, in particular, some very large renewables programs are coming on stream. There’s a very large one – it’s quite innovative on an international scale – of an A$10 billion bank, known as the CEFC, being made available to renewables companies like Dyesol. We believe we are near the top of the queue to be considered for a significant non- dilutionary investment by the Australian Government. We have already engaged in quite lengthy discussions with it and we’ve enjoyed visits from the Prime Minister, so we’re considered at the forefront of Australian clean energy companies.

Which products specifically would be commercialized?

We’re talking about the three lead products: (i) a major glass project for BIPV using glass substrates; (ii) a major steel project for BIPV using glass or titanium substrates; and (iii) a BAPV product for indoors using a possible combination of both.

Translucency is an important feature of the products we’re integrating into buildings, which will let light in, but also to use the façade of buildings to harvest energy. Half the electricity in the world is consumed in buildings and there are significant new building codes around the world that aim at building energy neutrality. Essentially, this means buildings have to become largely self-sufficient and very few technologies allow for that. The roofs and the walls, depending on the nature of the architecture of the building, will be used for energy harvesting and energy conservation. We think we’ve got the entire building envelope covered, as it’s described, and world class partners that can exploit the routes to market. The challenge, however, when you work in the building environment is that the product has to be long life or very durable.

What is the A$20 million dependent upon?

It’s not just specific milestones, but Tasnee need an opportunity to do full due diligence and some time to see how our individual projects are proceeding. But, the initial due diligence was very positive. The next six months will give it the opportunity to have an exclusive investment in Dyesol at a price of our shares, which is a premium to the current market price, so we’re not giving away the shares – they’ve agreed that the premium will be justified if some or all of these opportunities come off.

Middle Eastern demonstration projects have been mentioned. Are there any specifics?

I am not at liberty to discuss specifics, however, there are some pretty impressive energy efficient buildings being constructed in the Middle East in general. I think the lead project we’ve all observed is one called the Burj Khalifa in Dubai – that was the first of what could be a number of smart buildings in the Middle East, and I think everyone’s very impressed by that. We’d like an opportunity to be able to apply our technology to something similar, if it was proposed in other parts of the Middle East. Saudi Arabia is particularly becoming a more modern economy, and is increasingly diversifying away from reliance on petrochemicals and oil.

Why do you believe Dyesol’s products are well-positioned in the solar industry?

Silicon has become somewhat exposed to its limitations – not only due to the fundamentals of oversupply and uncommercial activity in places like Germany, but because silicon doesn’t address all potential solar markets. It performs very poorly in certain environments, even in the Middle East, because the shadowed side of buildings – which typically occupy as much space as the exposed sides – are basically rendered useless if they’re covered in silicon PV. We’re a technology that works well in all light conditions. We’re actually optimal operating in what’s known as a 1/3 of the sun. The 1/3 of the sun is typically that type of irradiance that occurs during the cloudy days or in heavily shaded areas. So we’re a bit like an indoor plant: we don’t need direct sunlight to be performing well. It is a clear competitive advantage.

What conversion efficiencies are you touting now?

The actual efficiencies now at the laboratory level are about 13%, but obviously there is a performance loss when you go from relatively small laboratory type testing to mass production, on buildings in particular, because you’re trying to reduce cost. [So] we’re at about 8% industrial efficiency now. The objective is to push it to 10%. At 10%, we have a robust and grid competitive product, although it depends on what part of the world you’re in, because everyone’s competing in different energy markets.

Grid competitive?

These days, we aim to have a product which is grid competitive in the absence of FITs. That’s been a more recent development. Three or four years ago, when investors and consumers thought solar tariffs could be relied upon, we had a lower specified product and we were expecting to come to the market around late 2011, early 2012, but because of the shaky nature of the tariff market and the fact that it can’t be relied upon, especially in Europe (because governments have failed to maintain fiscal surpluses), we are now aiming for a grid competitive product.

That’s taken us back to the drawing board for an extra 18 months to two years to help close the technology gap. This basically means we’re not going to come to market with a 7 to 8% product, but with a 9 to 10% product, which means we’ve had to supplement the lost economics of no subsidies by improving the efficiency of the DSC photovoltaic product. We’re definitely getting there. The last 6 months, in particular, have seen significant improvements in performance and both our major projects are continuing and we’re still fully committed and fully resourced.

Which markets would your products be grid competitive in, when you reach 10% efficiency?

Particularly in the markets that are net importers of energy, like Japan and Korea. Overall, a lot of Asia, in particular North East Asia, [are net importers] as are certain parts of Europe and the U.K. Electricity costs are going up all the time, especially as producers have to meet higher production requirements. It would maybe be less competitive in the U.S., because the U.S. has a lot of shale gas happening there now. This doesn’t mean the quest for renewable energy is gone there, but it’s made it a little more undemanding.

What are Dyesol’s manufacturing costs like?

LCOE [levelized costs of electricity] is becoming the common standard for this measurement (we’re getting away from all that watt-peak nonsense the silicon guys pedal, which is just based on a theoretical performance in ideal conditions, which means that in most conditions they fall well short of claims). The LCOE is forecast at mass production for DSC – using the NREL model – to be somewhere between 10 and 12 U.S. cents per kWh. We’re getting down to somewhere between 10 and 12 cents per kWh, which makes us pretty competitive, especially at retail. In Australia, retail electricity is somewhere around 14 to 15 Australian cents. At that level, we would be competitive in Australia and the U.K.

Last March, Dyesol announced moves to reduce costs by approximately 30%. Has this been achieved and, if yes, how?

I think we’re pretty close to it. We tend to have somewhat uneven cash flow, so to say that we’ve got there with absolute confidence – it’s probably a little too early, but we have significantly reduced spending, especially around business development. There’s still opportunity for further cost reduction, which we believe we will do now we’ve introduced this strategic investment. Some further rationalization will occur and also with new funding coming available in the U.K., the U.S. and Australia at the project level – we’re really standing at the top of the queue for a lot of government funding – we’ll go back onto having a significantly subsidized workforce. I’m confident that by the end of the Australian financial year (June) we will have achieved that 30% cost reduction and it will be sustainable.

Last year, it was announced that via Dyesol’s Tata Steel collaboration, the steel giant will be integrating steel featuring DSC technology into projects it is developing. Has this happened?

Tata Steel has been going through some issues of its own, because it’s got a huge commitment to the U.K. steel industry, which in Europe appears uncompetitive. That said, the functional coatings business for which it is quite famous and respected has always been profitable, so we have been caught up inadvertently in that maelstrom.

However, we still remain very optimistic based on regular conversations with Tata that a commercialization phase for the project will be achieved. That decision is due over the next few months. We share a common shed in North Wales where we both have dedicated staff to working on the BIPV-enabled products. There’s no deadline as such, but it is imminent and I expect it we will know in relation to that in the next three months. The future of the project is assured, but the details remain a little sketchy. As a small company that’s nimble, we’ve been very much focused on risk management and providing for any possible disappointments.

What about your work with Pilkington?

We’re working with them in North America. There have been delays to the North American grant programs because of some restructuring at the state level. The money is still available, but there’s been 6 to 12 months of delays, which are particular to everyone who’s been waiting on state and federal programs to be implemented. They’re meant to be back in earnest in April or May this year. We received an initial grant of around US$1 million from the Ohio Third Frontier Fund and we believe we’re a prime candidate for the next round of funding, which could be considerably more. New funding will also allow for the introduction of venture capital to further sharing of development risk.

What are Dyesol’s main markets?

Our low hanging fruit for these products is typically the northern hemisphere markets where the climate conditions are particularly suited to our technology and, where in particular, places like Scandinavia – they have very few sunny days per year. That extends all the way south to the Alps, so markets like Germany, the U.K. and Canada and the U.S. and a lot of China and North Asia. The market for internal energy harvesting with BAPV is almost universal.

Any final thoughts?

Things are definitely picking up as we come to the tail-end of restructuring and rationalization. The solar industry is not dead. It’s just gone through horrible heartburn and indigestion. It’s a bit like the Telco industry 10 to 15 years ago, when it had enormous problems and there was rationalization, and billions of dollars of investment were written off. But, those companies that survived went on to make a fortune.

No-one’s walked away from the fact that solar’s the preferred form of renewable energy. It’s just that the Chinese destroyed the traditional business plans by being better and cheaper, in polycrystalline silicon, in particular, which meant that the German industry is on its knees and obviously a lot of capital is invested there and now it’s not getting a return. 3rd generation solar addresses the issues of cost and performance that will bring about a strong resurgence of interest and investment confidence that should translate into long-term benefits for shareholders.

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