Managing Thin Film PV Expectations

The following was drawn from NanoMarkets' new report, Thin Film Photovoltaics Markets: 2008 and Beyond

The excitement that is currently being generated by all things cleantech has attracted a lot of entrepreneurial interest to PV and to TFPV in particular. Old-timers to the PV field are somewhat skeptical about the "newbies" and in particular are dubious about whether the newcomers really understand the complexities of working with (say) complex quaternary alloys like CIGS. Do engineers who have spent their careers in the integrated circuit industry really understand the extreme cost constraints imposed by the need to compete with coal-fired electrical generation? Similarly, most suppliers of c-Si solar cells remain skeptical about the potential of TFPV, believing that their superior efficiency will continue to carry the day.

There is clearly some truth to all this. Booms like the cleantech boom have always been traps for the foolish. But as far as we are aware, most of the newcomers into this space are experienced entrepreneurs and technologists. Perhaps a more serious risk is that investors drawn by the boom will abandon the sector when it fails to meet expectations that were unrealistically high to begin with. The most successful companies may be the ones who manage the expectations game as well as they manage other parts of their businesses.

A more interesting question is how well firms that have had a longer history in the TFPV space will be able to step up to the new opportunities that becoming available. TFPV is exactly the kind of business where economies of scale play an important part and some firms have announced ambitious plans to scale up their production to meet the needs of the marketplace. Such firms include First Solar, Fuji Electric, Showa Shell, Sanyo, Uni-Solar; perhaps a few others. These firms are certainly the firms to watch, since they will be shaping the TFPV market of the future.

When and if TFPV becomes a mainstream source of electrical power, even these suppliers will need orders of magnitude more capacity. While the total solar market, including c-Si, is just a few gigawatts, the U.S. alone consumes trillions of kilowatt hours every year. The market opportunity is enormous, but capitalizing on it will require extraordinary investments.

In the amorphous silicon sector, we are seeing a major ramp up of capacity from a few firms in this space. Most notable among these is Sanyo, which should have a total production capacity for a-Si TFPV in place of 260 MW by the end of this year. As discussed in our report, much of this capacity is for the hybrid HIT technology, with both c-Si and a-Si characteristics. According to some industry sources, Sanyo may ramp up to 1 GW in capacity by the 2010 to 2012 period. Last year Fuji Electric had only 15 MW in a-Si capacity, but plans to grow this to 100 MW, with 30 MW in place by 2009. Uni-Solar also plans a great leap forward; to 300 MW of a-Si capacity by 2010.

First Solar is especially important to watch, since it dominates the CdTe segment. The company claims to have achieved the lowest cost per watt of any commercial technology. It is expanding aggressively and plans to have a gigawatt of capacity in place by the end of 2009.

In the CIGS arena, Showa Shell recently confirmed that it is considering construction of a gigawatt-scale plant. While nothing is definite yet, such an expansion would make it the largest CIGS supplier. A more moderate expansion to 60 MW of capacity is already in progress. CIGS suppliers such as Nanosolar and Heliovolt are among the most enthusiastic proponents of non-vacuum deposition technologies. Non-vacuum deposition may be the key to sub-$1/watt photovoltaics, so these companies may have an impact well beyond their size. Nanosolar is building a plant that it claims will have a capacity of around 430 MW CIGS plant. Its evolution is seen as something of a test for printed TFPV and its facility, once up and running will swamp all existing CIGS manufacturing in terms of capacity.

The money for this expansion is coming from several kinds of investor. Large electronics and energy firms like Sanyo and Showa Shell are clearly large enough to finance expansion internally and routinely do similar expansions in other parts of their business. Uni-Solar is funding its extra capacity with a stock offering by its parent company. First Solar had a very successful public offering in 2006. Nanosolar is a fairly classic start-up that initially garnered some angel and VC financing, including angel money from the founders of Google. The firm has also gotten money from various government R&D grants.

But there are now several dozen firms offering various kinds of TFPV cells. Some of these are at an early stage of development and are not likely to be building manufacturing facilities any time soon. Firms that are in the a-Si and CIS/CIGS space will probably be unable to compete in the future with small facilities. Such firms will either have to move up the value chain and produce higher value added products (e.g., solar battery chargers or building systems) or grow their facilities like everyone else.

Such rapid expansion also raises the risk of creating at least a short-term capacity glut. To consume large numbers of cells, the industry needs large projects. These have relatively long lead times, requiring substantial investments and possibly a variety of agency approvals. There are already some indications that sales are lagging behind the growth in manufacturing capacity. If the future of the industry remains bright, such temporary gluts should smooth themselves out in time. If the risks discussed above manifest themselves, however, investors who assumed that the market would never slow are likely in for a painful lesson.