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).
In a race to improve margins and expand market share, solar manufacturers are seeking to jettison all unnecessary costs from their photovoltaic (PV) modules. The most stubborn of these costs generally derive from non-active materials, such as frontsheets, encapsulants, and backsheets, which can contribute between 25% and 40% to overall module costs.
In a recent report, Lux Research surveyed the field of emerging non-active material technologies for flat plate PV modules in order to assess which have the most potential for adoption. This week’s graphic highlights the report’s take on alternative frontsheet technologies. In order to determine the break even cost of these materials – the cost at which a manufacturer maintains or increases its profitability – Lux Research calculated the relative impact on module efficiency they offer compared to rolled, patterned low‐iron glass, the incumbent material for crystalline silicon (x-Si) modules.
The graphic’s left side lists the relative efficiency impact for all the alternatives to rolled, patterned low-iron glass considered. Clearly, a number of fluoropolymer materials offer lower frontside reflectance and boost module efficiency by as much as 2.8% in the case of FEP. However, most of these materials are prohibitively expensive to warrant a switch. The graphics right side illustrates the % difference between break‐even cost and the current material cost. Again, it shows viable, field‐tested fluoropolymers, like ETFE, cost about 20% more than its break‐even value of $14/m².
Three other materials, however, offer an attractive value proposition from a price perspective. Low‐iron float glass is the most viable drop in replacement for rolled glass. Counter intuitively, it offers a modest overall price advantage at a cost of $9/m² over rolled glass despite slightly lower transmittance. Consequently, as rolled glass has increased in price, suppliers have begun offering float glasses of equal quality, and x-Si players like SolarWorld have begun incorporating the cheaper alternative into their modules.
On the fluoropolymer side, sheets based on transparent PVDF and Tedlar also provide dramatic cost/performance advantages over glass – each with well over $1/ m² of room to increase pricing and remain competitive. However, concerns regarding the long‐term field performance of such materials remain a key hurdle to adoption.
Crystalline silicon (x-Si) PV modules comprise the largest and most established portion of the photovoltaic (PV) module market, holding roughly 81% of the global PV market in 2008. These x-Si modules also have significant penetration in all sizes of grid-tied applications – from residential to large-scale utility installations.
A handful of large, top-tier manufacturers dominate the market, but smaller start-ups with differentiated technologies are still entering. As the module oversupply rolls through 2009 and 2010, some crystalline silicon module manufacturers will be at the heart of the shakeout.
Examining the performance of companies in this technology area, we find that:
Large corporations with differentiated technologies are among the strongest performers.Many of the highest ranking companies are large corporations that stand out due to top-level high-efficiency products and large corporate backing. Their backing provides support for module warranties, capacity expansions, pricing battles, and technology development.
New competition from low-cost manufacturers is driving down the value of European leaders. European module manufacturers with high-quality x-Si module technologies are beginning to struggle as module production becomes increasingly commoditized. Their quality advantage is beginning to slide as new low-cost manufacturers gain access to higher-quality materials, dropping their scores on technical value scale.
Even with promising technologies, start-ups face formidable barriers to growth. The most successful pure-play solar firms got an early start in the market, and offer either differentiated technologies, sharp business execution, or both. New entrants to the solar market need more than a novel design or slight technical advantage to succeed. Companies building capacity, especially those based on a novel technology, score lower than those with existing capacity because they must play catch-up with more traditional and established manufacturers. The outlook is increasingly bleak for start-ups with unique technologies that are yet to build production capacity.