Outlook for Thin Film Photovoltaics in 09

By far the biggest issue is how the market will fare in 2009. The success of PV-and of all alternative energy sources-is based not so much on the cost of these alternative energy sources, but on the narrowing of the price gap between alternative energy and conventional energy. With the price of oil at the extraordinarily high levels it reached in mid-2008, PV of all kinds apparently had an unprecedented opportunity, especially since PV brings very low pricing risks as an advantage. The cost of sunlight will remain the same; namely zero. No one really knows what the future holds for the cost of oil!

Much of the impact of high oil prices on the PV market was due in part to perception. Coal and natural gas account for the majority of fossil fuel-fired electricity generation. Though costs of these fuels are also rising, their growth is less dramatic and less visible than the rising cost of oil. Nonetheless, high oil prices contributed to a favorable climate for alternative energy, and serve as a proxy for worries about energy costs.

Based on the attractive business climate earlier this year we had upgraded our forecasts for PV as a whole. At the time, we noted that there was (and still is) a large addressable market available for PV. In a recent report, the European Photovoltaics Industry Association (EPIA,) has shown that if all of the roofs in the OECD countries were fully equipped with rooftop solar, 16 percent or so of the need for electricity could be supplied. This does not seem an extravagant scenario in the long run, but it would take many times the current planned capacity for PV production to achieve it.

While such bullish analysis would still seem to apply in the long run, we have taken a different view of the short-term prospects for PV. There was always going to be some overcapacity in the PV market in 2009 which could have been dismissed as the result of building for the future. However, with construction down and both housing and energy prices falling around the world, the immediate prospects for PV are not good since sales are still strongly concentrated in the U.S. (especially California), Japan and Germany all of which are dealing with rather nasty recessions now and likely throughout next year.

Faced with downturns in the industrialized nations, many firms are looking to growth in both China and India to save them. However, while these countries may well be huge markets for PV in the future, don't expect much from them in 2009. First, although they are huge countries geographically and in terms of population, combined their economies are still 1/3rd that of the US. Both countries are also facing challenges given the decline of the US and EU based economies. Another item to consider is that rapidly industrializing countries are not known for their sensitivity to environmental matters so PV installations are limited in their appeal in this regard.

TFPV has some specific marketplace advantages and disadvantages as we enter 2009. It may in certain cases be less expensive than crystalline silicon PV, although that case is arguable. In addition, its ability to be fabricated on flexible substrates makes it especially suitable for novel BIPV products, such as solar tiles and cladding. Installation of such products may be used to give additional selling features to new homes. On the other hand, some of the TFPV technologies may be considered a more risky prospect than the longer established crystalline silicon PV technologies. This can result in reduced willingness to fund investment in TFPV materials, both at the level of the solar panel manufacturer and the ultimate customer. However, the degree to which that is important will vary with the type of TFPV.

For many TFPV firms, the best that may be hoped for in 2009 is a holding pattern. The firms best able to weather the storm will be those that have cash in the bank, a proven low-cost manufacturing solution and good management. With regard to the management issue, we note that management issues have arisen at a number of TFPV firms in the not too distant past.

We are predicting a $2.7 billion (US) thin-film pv market in 2009.