Category Archives: Solar Systems

GaN and SiC-Based Power Electronics Set to Deliver Big Value in Distributed Solar Installations

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Inverters’ importance in the solar market has only been emphasized by the oversupply and price pressure that has driven down the cost of components around it. Suppliers are doing their part to reduce costs as well, with incremental improvements in efficiency and component count reduction, but the holy grail for solar inverters is the implementation of wide bandgap semiconductors – specifically, silicon carbide (SiC) and gallium nitride (GaN). They offer the promise of higher efficiencies, as well as superior thermal management – critical for temperature-sensitive applications such as solar inverters. GaN and SiC offer indirect cost savings in addition to direct performance benefits – superior thermal conductivity of SiC over Si reduces the size of the heat sink in inverters. Higher switching frequencies of SiC and GaN reduce the failure probability and count of passive components, while high power density enables footprint reduction and installation cost savings. The question is, what is the opportunity for introducing diodes and transistors using these higher cost, but higher performance materials?

Microinverters offer the best absolute $/W premium for SiC or GaN  diodes with Si transistors (SiC + Si, and GaN + Si, respectively) and represent the ideal niche entry for these devices in the residential segment. However, string inverters are the most attractive segment for price premiums relative to silicon with the introduction of SiC and GaN transistors in addition to diodes. Acceptable string inverter price premiums of all-GaN and all-SiC systems versus all silicon top $0.10/Wp in the residential market segment enabling price premium of greater than 20% relative to silicon-based inverters. Importantly, string inverters enable ready access to the growing commercial and residential segments, delivering both volume and price in the two segments set to dominate new solar installations in the developing world for the coming years.

Notably, SiC diodes are already hitting the market through microinverters. As GaN diodes and SiC and GaN transistors become more commercially available, they should take the same path – and will have a similarly beneficial impact, while enabling discrete device developers to penetrate the large-scale inverter market at a healthy 10% price premium. As devices fully featuring GaN and SiC hit the market, they’ll hold the biggest competitive advantage in small systems – microinverters and small string inverters, for residential and commercial solar installations – with a powerful proposition: lowering the levelized cost of energy (LCOE) and increasing margins on electricity sold through PPAs.

The race is on to position for technology-driven differentiation in these growing markets. Little surprise to see inverter mainstay Advanced Energy acquire REFUsol on this basis given the latter’s valuable SiC-based inverter IP and products. Though the payback will take some time, the $77 million Advanced Energy paid for that IP will look like a bargain down the road. Others would be wise to take note of this and ABB’s similarly SiC-related acquisition of PowerOne and act accordingly.

Source: Lux Research report “Reaching for the High Fruit: Finding Room for SiC and GaN in the Solar Inverter Market” — client registration required.

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Local Content, Anti-Dumping Policies Miss the Point

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Over the past few weeks, solar trade news has been made in three regions:

  • In India, the government will close a loophole that prohibits developers from importing crystalline silicon (x-Si) modules under the Jawaharlal Nehru National Solar Mission (JNNSM) by extending the provision to thin-film modules, as well. Specifically, developers in India had imported significant volumes of thin-film cadmium telluride (CdTe) from First Solar and some amorphous silicon (a-Si) from Sharp under the program. As the country tightens the screws on imports, expect developers to simply work around the solar mission. They can capture state-specific incentives in places like Gujarat, Rajasthan, and Tamil Nadu, and more continue to come online as the industry’s prevalence increases in India. Developers can also finance systems on power purchase agreements (PPAs) with private customers, and still capture green certificates without meeting JNNSM qualifications. The more stringent the Indian government makes its policies favor domestic content, the more irrelevant it becomes as developers embrace workarounds.
  • As we alluded to in our insight about tariffs on solar glass (client registration required), the European Union is poised to put import duties on Chinese solar modules. The Wall Street Journal reported that duties are expected to average 46%; in comparison, the U.S. applied duties (client registration required) effectively range from 20% to 35% on top-tier manufacturers. Though the EU seeks to protect solar manufacturing in the region, most of it is already gone, and much of what remains will be filtered out, too, as financial problems plague SolarWorld. The policy is too little too late, and would only serve to increase module prices and hurt project economics for developers while demand is currently poised to be significant in historically strong markets like Germany and Italy, and eastern European markets like Romania and Poland.
  • Ontario has lost its appeal after the World Trade Organization (WTO) upheld its ruling that the Canadian province’s domestic content program violates international trade laws. The program has long been contested by Japan and the EU. An EU spokesman said that “the use of quality, cost-effective technologies should not be hampered by protectionist measures,” which could be perceived as hypocritical in light of the EU’s own trade case, discussed above. For Ontario, the program seemed destined to crash; but the bigger problem has been the region’s flooded interconnection queue.

Though the legal processes continue today, the solar industry has largely moved past worrying about these policies. The supply industry continues to consolidate and shake out low-quality suppliers, while the landscape of survivors becomes increasingly clear – including companies in China, and elsewhere. Supply consolidation – as well as the declining costs that catalyzed the shakeout – should be interpreted as good signs by clients as the industry recovers and progresses towards equilibrium in 2015 (see the report “Market Size Update 2013: Return to Equilibrium” — client registration required).

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The Photovoltaic Market’s Return to Equilibrium in 2015 Drives Tomorrow’s Growth for Today’s Innovators

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The PV market has been a minefield in recent years, with shrinking margins, fluctuating subsidies and trade conflicts keeping executives across the globe awake at night. Beneath it all, the market has continued to grow, and will continue to do so in the next 5 years but with markedly different and healthier dynamics.

Due to the extreme price pressure experienced by manufacturers today, many will not survive the next two years. Uncompetitive tier-2 and tier-3 manufacturers, and some tier-1 manufacturers like Suntech, either will dissolve or be acquired. As a result, global module capacity will decrease from 65 GW in 2013 and 2014 to 58 GW in 2015. With demand increasing to 52 GW in 2015, overcapacity is reduced to 12%. As overcapacity shrinks, manufacturers will save up to $0.09/W by increasing utilization from 55% to 90%. Since prices remain mostly stable, manufacturers will be able to return to profitable gross margins. Projecting even further forward, with the U.S., China, Japan, and India taking over where Germany and Italy left off, companies looking for growth need to look no further than the PV global demand doubling from 31 GW in 2012 to 62 GW in 2018.

These projections depend on multiple large movements within the market, such as financing innovation for distributed projects, governments fast tracking utility-scale project development in emerging markets and discontinued government support for failing tier-3 manufacturers. Importantly, manufacturers will also need to reduce costs to maintain low prices while improving margins. These near-term incremental cost reductions will come from innovation such as double printing cell metallization to create thinner, deeper line widths and reduce silver paste use, or upgrading wafer saws to structured or diamond wire to reduce kerf loss and/or reduce wafer thickness. Business models need adjustment to not only survive the next two years, but also to adapt to the future market and come out on top in 2015.

Companies need to invest in their future now to develop products for the next generation of solar – the generation in which differentiated products such as back contact modules, passivated emitters, kerfless wafers, copper zinc tin sulfide modules, and numerous other technologies can earn large margins in a $155 billion market. Successful companies in the long-term will absorb cheap IP now and accelerate development.

Source: Lux Research report “Market Size Update 2013: Return to Equilibrium” — client registration required.

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Steven Chu steps down at U.S. Department of Energy, leaving a mixed legacy

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Last week brought the widely expected news that Steven Chu will be stepping down as Secretary of the U.S. Department of Energy (DOE). Chu has been a hero to scientists and clean energy advocates, but on his watch the DOE has made some questionable decisions, particularly from a commercialization and business standpoint. That said, Chu has also laid the groundwork for a strong legacy of energy innovation – if those initiatives produce results, he may justly be regarded as one of the most important DOE Secretaries since the department was created in 1977.

Unfortunately for Chu and DOE, the name “Solyndra” will appear in the first paragraph of most appraisals of his term – the DOE’s ill-fated $535 million loan guarantee (client registration required) to the Silicon Valley solar panel maker became a rallying cry for opposition to the Obama administration’s clean energy investments. Other recipients of DOE loan guarantees and other largesse, including A123 Systems (client registration required), Beacon Power (client registration required), EnerDel, and Abound Solar (client registration required), have also filed for bankruptcy. While there was a case for deploying government funds when private investors largely stopped lending during the financial crisis, the DOE loan guarantee program mixed investments in reliable projects, like solar power plants using established technologies, with funds for firms like Solyndra that faced steep technical and market risks. It was highly likely that several would fail, but DOE either underestimated the risks or wasn’t well prepared for the political fallout (or some combination of both), and arguably hurt the cause of government support for new energy technologies – previously a point of bipartisan consensus.

Chu’s DOE also showed commercial naïveté in its claim that it could help bring 1 million electric vehicles to U.S. roads by 2015 – and President Obama personally cited Chu’s assurances in defending the administration’s focus on electric vehicles. While the DOE target included plug-in hybrids (PHEVs) like the Chevy Volt, as well as all-electric vehicles (EVs), only around 250,000 such vehicles will realistically be in operation in the U.S by the end of 2015 (see the report “Small Batteries, Big Sales: The Unlikely Winners in the Electric Vehicle Market” — client registration required). Anemic sales to date of PH/EVs also belie such optimism, and just before Chu stepped aside, DOE began publicly backing away from the goal – suggesting that DOE’s EV enthusiasm may not have been the best use of its resources.

What’s more, DOE has largely been on the sidelines of the most important energy story of Obama’s first term – the phenomenal boom in domestic gas and oil production, driven by technologies like hydraulic fracturing. To some extent that’s only right – by the time the technology (which had benefitted from DOE support in decades past) was ready for prime time, the industry hardly needed further help from DOE. However, given the impact this production will have on the energy and climate picture in the U.S., and the remaining technology and policy needs to help access these resources safely and make the best use of them, it’s surprising how little focus they’ve received (barely meriting a mention in Chu’s review of his term in his resignation letter).

Despite these stumbles, history may well look kindly on Chu’s tenure, because programs he’s championed have the potential to create a generation of impactful new technologies and keep the U.S. a center of innovation in energy. Through the network of 46 Energy Frontier Research Centers, and especially the new Advanced Research Projects Agency – Energy (ARPA-E), the DOE is funding research on really novel technologies with a breadth, depth, and purpose beyond its previous basic science efforts. ARPA-E, in particular, is well-positioned to help fill a void left by venture capitalists that are (wisely, by their financial standards) increasingly reluctant to invest in early-stage energy technologies. If these programs help shepherd along impactful energy technologies that that come to the market over the next decade, they’ll have a greater impact than even a successful Solyndra would have, and will validate Chu’s initiatives.

Given the ups and downs of Chu’s tenure, who should Obama tap to replace him? Some favor another academic, like Shirley Jackson of Rensselaer Polytechnic Institute, or Ernest Moniz of the MIT Energy Initiative, to continue to build DOE’s innovation efforts. Others argue that DOE’s commercial blind spot argues for a businessperson like Duke Energy CEO Jim Rogers. While a course correction is needed, and energy business acumen at DOE would be welcome, a utility executive may not be the best steward of Chu’s innovation legacy (and may sit uneasily atop what’s still largely a scientific agency). A business leader with more innovation experience could serve admirably – GE CEO Jeff Immelt has been floated, though seems unlikely to serve. Otherwise, given the controversies DOE has weathered and the need to defend its budget in an era of sequestration and discretionary spending cuts, a more seasoned politician might also be a wise choice to follow Chu. Someone like former (moderate) Republican governor and EPA administrator Christie Todd Whitman or past North Dakota Senator Byron Dorgan could serve to consolidate Chu’s gains in long-term innovation, but would still be inclined to pivot the agency more toward the pressing issues of the day.

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Policy Outlook: Changes in Germany, Hope in the U.S.

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While Germany is set to announce an incentive for energy storage (client registration required) in the coming weeks, the country is also trying to solve the problem of rising costs that resulted from the country’s solar installation boom in recent years. Germany’s renewable energy act (EEG) is funded by a premium on electricity prices for ratepayers (the EEG “levy”), and that premium has quickly risen to €0.05/kWh. German Environment Minister Peter Altmaier has proposed both a freeze in feed-in tariff levels through 2014, and a cap on any increase in the levy – at 2.5% per year, beginning in 2015 – as part of what is likely to become a broader reform of the EEG. This announcement comes after a record 7.6 GW of new installations in 2012; after a then-record 7.5 GW installed in 2011, the country’s politicians called for similar reforms to stop the levy from increasing (client registration required). While it’s not likely that Germany imposes a hard cap on new installations, the country is inching progressively closer to policies that will more actively limit them. The German market is targeting a stable market at 3.5 GW of new installations annually.

In the U.S., President Barack Obama addressed climate change during his inauguration for his second term – leaving many hopeful that the country will pass legislation supporting solar, wind, and other renewables (the only meaningful federal policies supporting those technologies now are tax credits). There has been some optimism for a carbon tax, but even this appears unlikely with the set of other issues the President is slated to address first. According to a Politico report, the President is more likely to address the environment through stricter Environment Protection Agency (EPA) standards – on things like power plant emissions and fuel economy – and executive orders, which he can use to, for example, make federal lands available for solar installations. These might actually be the preferred modes of change for the solar industry; players we’ve surveyed would rather operate with less policy restrictions than have added support and political uncertainty, especially with the hindsight of European markets’ boom and bust.

For more on changing policies around the world – and how to strategically plan with them – see the report “Past is Prologue: Market Selection Strategy in a New Solar Policy Environment” (client registration required).

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Concentrated Solar Power for Enhanced Oil Recovery Needs to Face Realities

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Glasspoint Solar, a technology provider that has developed a solar thermal system used for enhanced oil recovery (EOR), recently closed a $26 million series B financing round. Royal Dutch Shell was the newest investor, along with RockPort Capital, Nth Power, and Chrysalix Energy Venture Capital. Glasspoint uses a parabolic trough concentrating solar power (CSP) system enclosed in a greenhouse to generate steam that can be used in steam-assisted gravity drainage (SAGD) to recover heavy oil. SAGD pumps pressurized steam into heavy oil reserves that are too viscous to pump using traditional techniques; typically natural gas is used to produce the steam.

Glasspoint claims it can save the cost of natural gas used to produce steam for SAGD in areas where natural gas is expensive or non-existent. However, heavy oil reserves are primarily in Canada and Venezuela; both of these areas have large reserves of natural gas as well. Oil reserves in these areas will generally have natural gas pockets that companies often flare to save costs from collecting and transporting gas. Needless to say, there is an abundance of natural gas near most heavy oil reserves, making Glasspoint’s technology uncompetitive in the EOR market. Companies like Glasspoint may find niche markets away from most heavy oil reserves in Canada and Venezuela, where there is in fact little natural gas to burn, but do not expect CSP to take significant market share in the broader EOR market.

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GreenVolts crumbles and questions about the future of HCPV emerge from the rubble

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The high concentrating PV (HCPV) company, GreenVolts, is officially selling its assets after its primary investor, ABB, pulled support from the startup. GreenVolts outsourced its manufacturing to contractors such as Foxconn, so assets up for sale will largely be intellectual property.

GreenVolts obtained exactly what many small solar manufacturers are looking for: a large, well-positioned, strategic investor to add bankability and take responsibility for driving growth. Semprius found that in Seimens, and Miasolé had been looking for a buyer and recently closed with Hanergy. While the advantages of this gaining significant support from a strategic investor are numerous, there is also an inherent risk, as became apparent with GreenVolts and ABB. If the investor proves fickle and decides to cut losses, the solar company will not be able to survive. Strategic investors that invest in solar need to be willing to take a short-term loss for long-term gain.

For the broader HCPV industry, GreenVolts’ failure adds to concern surrounding the industry that has been growing since Amonix shut down its Las Vegas manufacturing facility (client registration required). We expect the situation to get worse before it gets better, but our favorites – Soitec, SolFocus, and Suncore as outlined in the Lux Research report, “Putting High-Concentrating Photovoltaics into Focus” (client registration required) – are still moving forward on capacity and installation targets, and can easily satisfy our 700 MW HCPV demand forecast in 2017.

As hype for HCPV dwindles, companies are starting to look into low concentrating PV (LCPV) as an intermediate technology between expensive, highly efficiency HCPV and cheap, less efficient flat panel PV. SunPower’s C7 product aims to do just that with reflectors that concentrate sunlight 7X onto SunPower’s interdigitated back contact (IBC) solar cells with 22.8% cell efficiency under 7X concentration. The company has an agreement with Tucson Electric Power to install 6 MW of the LCPV product. Low concentration allows for a broader range of reflector options as long as they are cheap and limit optical losses. SunPower’s C7 system uses parabolic trough glass mirrors, but startups like TenKsolar and Absolicon use 3M reflector films, Solaria uses patterned glass, and Cool Earth Solar uses a proprietary refractive film co-developed with Avery Dennison.

Monocrystalline silicon (c-Si) solar cells used in LCPV modules are many times cheaper on a per area basis than multijunction cells used in HCPV modules; however, c-Si cells are more susceptible to heat and UV degradation, and benefits from increased encapsulant transparency will multiply under concentration, which can translate to interesting opportunities for innovative material suppliers. Material and chemical companies may want to look to LCPV as a potential new market for innovative optical or encapsulation materials.

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The Road to Accelerating On-Site Generation Technology Adoption Runs Through Internal Capex Reduction

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Diesel generators’ vice-like grip on the building on-site generation market is loosening as emerging technologies increase in scale and maturity, and Fortune 500 companies commit to more sustainable operations. High-capacity factor options, such as fuel cells, will generate much higher volumes of electricity and heat than other options like solar and wind. However, solar and wind have lower upfront costs, and generate energy more economically. Broadly, each technology has its shortcomings – and struggles in a “base” scenario without incentives.

Multiple looming factors make the prospect of on-site generation increasingly attractive to adopters whether for commercial, industrial or residential purposes. Chief among them? Taxes on carbon dioxide emissions, capital expenditure reductions for generation equipment, and rising energy prices. Broadly – though not always the case – the strongest determinant of improved economics is lowered equipment capital expenditure. Given the lack of scale for fuel cells and biomass boilers, in addition to the price free-fall in solar, added potential for cost reduction should provide optimism for potential adopters that selective decisions today will lead to business-positive economics. Even small wind,  which ranges from 2 kW to 40 kW in size, has potential from an economic perspective, although in the on-site aspect makes ‘not-in-my-backyard’ a quite literal adoption barrier. In fact, most emerging technology options can become viable within a short time frame, and for industry stakeholders, technology innovations remain critical. Those without a focus on cost reduction (or performance improvement at constant costs) will find themselves without a foothold in a market.

Plenty of bad decisions will still be made given that deployment of a viable technology in the right application and in the right geography are each required to drive adoption. Above all, executing on cost reduction is pivotal but, assuming this is delivered, developers and potential adopters should have confidence that selective decisions today will lead to business-positive economics tomorrow.

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Cutting Through the Noise on Abound’s Bankruptcy

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Late last month, once-promising cadmium telluride (CdTe) start-up Abound Solar filed for bankruptcy. We pegged the company as one of five solar suppliers that would struggle in 2012 (Client registration required). Abound’s $400 million U.S. Department of Energy loan guarantee (of which it only used $70 million) to expand and build a 640 MW facility in Indiana has the wheels of political media turning – in most cases, likening the failed company to Solyndra. Such comparisons, in large part, are erroneous.

Solyndra was likely plagued by poor manufacturing yields (Client registration required), but more so by high costs that were exaggerated when polysilicon costs crashed, making it wildly uncompetitive on price. In mid-2011, the company’s manufacturing costs were between $3/W and $4/W while the x-Si market was barreling towards $1/W.

Abound’s problem was not manufacturing costs. The company claimed 97% to 99% electrical/mechanical process yields, and had begun expansion for 640 MW of capacity – surely enough scale to bring costs down significantly. Fellow CdTe supplier First Solar, though struggling today, is the cost leader in the solar industry. We’ve heard that Abound’s biggest problem was module performance. As of our last profile, the company was barely breaking the 10% efficiency barrier, whereas competitor First Solar documented average module efficiencies more than 12.5% in its Q1 2012 earnings call. Further, performance issues in CdTe are likely a function of copper present in back contact pastes, which diffuses across the CdTe/CdS junction and negatively affects performance (for more on this issue, see the Lux Research report “Key Issues and Innovations in Photovoltaic Metallization. Client registration required.).

Solyndra failed on cost and Abound on performance – and attributing either to Chinese manufacturing alone is incorrect. What they have in common is that both received loan guarantees from the U.S. government, and so both will remain political punching bags well into the 2012 presidential election – Solyndra more so, as it received more funding and has questions surrounding its political connections; whereas Abound’s expansion was also supported by the Republican governor of Indiana at the time. What should be more of a concern for the solar industry is that the shakeout isn’t over.

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Solar’s Emerging Markets More Than Quadruple from 2011 to 2017

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After recent explosive growth capped by a 66% surge to 26.5 GW in 2011, new solar installations will stall at 26.9 GW this year, while industry revenues will drop from $110 billion in 2011 to $92 billion in 2012 due to crashing prices. Fortunately, the pace of new installations will rebound to 38.3 GW in 2017, fueled in part by growth in the emerging markets illustrated in this week’s graphic.

The graphic comes from a recent Lux Research report (Client registration required), wherein analysts size the market by applying the model and methodology used in the Lux Research Solar Demand Forecaster. The report’s conclusions derive from a levelized cost of energy (LCOE) analysis of 156 separate geographies, accounting for 82% of the world’s population, calculating internal rates of return, to determine the viability and competitiveness of solar in each market.

Among other things, it forecasts that emerging markets will be both a battleground for suppliers and a source of great demand growth. Overall, these markets more than quadruple in size, rising from 1 GW in 2011 to 4.5 GW in 2017. However, they will not all bloom at the same time or at the same rate. South Asia – and India independently – accounts for the overwhelmingly majority of growth through 2015. Once that market plateaus – as the National Solar Mission re-assesses its feed-in tariff rates and overall progress – Southeast Asia (ASEAN), Africa, and South America will take the lead as they progress toward “gigawatt” status: a one-GW annual market. These regions are expected to drive emerging market growth from 2017 to 2022, specifically Malaysia, Thailand, Kenya, South Africa, Brazil, Argentina, and Chile. Further, these markets provide significant opportunity for both thin-film module technologies, many of which are pursuing emerging markets, and for utility-scale-suited technologies in general – as most new markets begin ramping volumes with large-scale systems.

Source: Lux Research report “Market Size Update 2012: The Push to a Post-Subsidy Solar Industry.”

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