Power Up Your Products
with G24i's Solar Technology

30 June 2008

Just as the future started to look bright for solar power, prospects for some solar manufacturers have dimmed. The reason? Overcapacity in the manufacture of components is likely to cause a sudden shake-up for an industry that has been used to demand for its products consistently outstripping supply.

Shortages of silicon, the core component of photovoltaic technology – the conversion of sunlight to electric current – have plagued the solar industry for several years, keeping component prices high and frustrating demand. This fuelled a rise – some analysts say a bubble – in solar stocks.

But the situation is soon to be reversed, according to several analysts. Dean Cooper, at Ambrian in London, forecasts that worldwide production capacity for components will increase from about 3 gigawatts last year to 15GW to 20GW of production in 2010, largely thanks to a massive expansion of capacity in China.

Lux Research predicts that a watershed will be reached next year, when supply will outstrip demand. New Energy Finance, another analyst, agrees.

This spells both good and bad news for the solar market. It will result in a large hike in revenues: Lux Research estimates these will reach $71bn in 2012, or about triple today’s sales, as stifled demand in the market can be satisfied. Prices for solar components are likely to plunge from about $3.80 per watt today to about $1.40 per watt by 2010, according to Mr Cooper.

But profit margins will also drop correspondingly, and if subsidised markets for solar energy start to stutter – as they reach saturation or as governments turn their attention to other renewables more deserving of subsidy – then this could mean problems for the market.

Most analysts predict consolidation, with bigger operators snapping up the smaller. In particular, manufacturers from the US and Europe are expected to hunt for acquisitions among the growing number of small companies in China, but there may also be some traffic in the opposite direction.

Oversupply will certainly be good for consumers, however. For years, solar companies have talked of “grid parity” – the point at which generating energy from sunlight falls to the same price as generating it from fossil fuels – as being many years off. But now, thanks to a combination of high conventional energy prices and the increase in component supply, some are predicting grid parity by 2012, or sooner.

Solar companies are also looking to invest in newer technologies to increase their capacity, widen the applications of solar power from roof-fixed systems, and cut their manufacturing costs.

Photovoltaic technology has progressed markedly in recent years, with advances making the cells more efficient, cheaper, lighter and easier to manufacture.

Newer techniques have focused on wringing more power from each module while using less raw material. The most important advance has been to “thin-film” solar cells – so-called because they are made by applying a thin film of a material such as amorphous silicon, cadmium telluride or copper indium gallium selenide to a substrate, such as glass or ceramics.

These technical advances have meant that manufacturers can now make their products more efficient by between 0.5 per cent and 1 per cent a year, says Randall MacEwen, chief executive of Solar Integrated Technologies, a US-based solar specialist listed in the UK. “A lot of production capacity will come on with low-cost thin-film materials in 2009 and 2010,” he says.

Further advances in solar materials are likely to include using polymer-based substances and more flexible substrates, and by honing techniques to allow them to be printed on to a flexible base. These will allow solar power to be applied to a much wider range of materials.

Some companies have already found ways to make their small solar panels at least partly flexible. Robert Hertzberg, former speaker of the California state assembly, founded the company G24i to make small flexible solar panels for use in equipment such as mobile-phone chargers that can be attached to bags.

He says the industry should wean itself away from subsidies as costs come down: “I believe new green technologies need to get off subsidies as soon as possible. The government is always way behind the curve.”

Solar power has usually been thought of as a way of supplying electricity or hot water to a single building. But in several countries, solar power plants capable of powering thousands of homes are under construction.

These include plants in Spain, Portugal, Australia and the US capable of generating between 20MW and 100MW – enough to power thousands of homes, but still much smaller than a conventional mid-sized coal-fired power plant of about 500MW. Once built, however, the fuel is free.