Global Solar Photovoltaic Industry Analysis with Focus on the Chinese Market

Global Solar Photovoltaic Industry Analysis with Focus on the Chinese Market
Västerås, 14 May 2008
Global Solar Photovoltaic Industry
Analysis with Focus on the Chinese
Market
Javier Campillo ([email protected])
Stephen Foster ([email protected])
The Department of Public Technology
Mälardålen University, Västerås. Sweden
Mälardålen University
Västerås, Sweden
Supervision: Jinyue Yan
Table of Contents
1 Introduction and Background.................................................................................6
1.1 Background................................................................................................................................6
1.2 Objective of the study ...............................................................................................................7
1.3 Methodology .............................................................................................................................7
2 Introduction to Photovoltaics and Energy Economics .........................................8
2.1 A History of Solar Energy.........................................................................................................8
2.2 PV Operation Principles..........................................................................................................12
2.3 Attempts at Commercialization ..............................................................................................14
2.4 Applications of PV Technologies............................................................................................16
2.5 Current Situation of Photovoltaic Industry..............................................................................17
2.6 Causes for Photovoltaic Expansion.........................................................................................19
3 Technologies............................................................................................................24
3.1 Crystalline................................................................................................................................24
3.2 Thin Films................................................................................................................................25
3.3 Concentration PV Systems......................................................................................................28
3.4 Under Development.................................................................................................................29
4 Policies.....................................................................................................................32
4.1 Subsidies and PV Policy..........................................................................................................32
4.2 Chinese Energy Policy.............................................................................................................40
5 Silicon and the Supply Chain................................................................................43
5.1 Silicon Bottleneck....................................................................................................................43
5.2 Geographic Distribution of Silicon Suppliers..........................................................................44
5.3 Silicon Processing....................................................................................................................45
5.4 Polysilicon Capacity................................................................................................................48
5.5 New Entrants to the Silicon Industry.......................................................................................50
5.6 Projections for the Future........................................................................................................52
6 Market Analysis .....................................................................................................55
6.1 Costs of Different Technologies..............................................................................................55
6.2 Major Players...........................................................................................................................58
7 Chinese Market Penetration..................................................................................67
7.1 Commercialization...................................................................................................................67
7.2 Current Barriers.......................................................................................................................71
7.3 Suggestions and Recommendations.........................................................................................75
7.4 Solar Energy Forecast for China..............................................................................................77
8 Conclusions..............................................................................................................79
9 References................................................................................................................81
Tables
Table 1. China solar cell capacity, year-end 2006 Source: THT Research[54]...............................11
Table 2. Best conversion efficiency of various solar cells developed in laboratories in China and in
the world [24].....................................................................................................................11
Table 3. Commercial solar PV and module efficiency in China and in the world [24]...................12
Table 4. Calculated EPT and EYR (over both a 20 and 30 year period) for 3 selected scenarios[44]
...........................................................................................................................................22
Table 5. Programme 1: Performance Based Incentives...................................................................38
Table 6. Programme 2: Expected Performance-Based Buydowns..................................................38
Table 7. Geographic distribution of polysilicon production as a percent of total production [14]. 43
Table 8. Silicon Producer Capacity in 2005, projected and potential in 2010 and technology
employed [14]....................................................................................................................47
Table 9. New Silicon producer capacity in 2005, projected and potential in 2010, and technology
employed [14]....................................................................................................................49
Table 10. Pipper Jaffray solar industry production estimates [14]....................................................52
Table 11. China Polysilicon Capacity (2006)....................................................................................52
Table 12. China Polysilicon Production and Demand 2004-2006 (tons).
Notes: Solar cell
polysilicon demand is calculated as: 2004: 12 tons/MW; 2005: 11 tons/MW; 2006: 10
tons/MW. 2006 crystal-silicon solar cell production is about 400MW [28].....................53
Table 13. China: Electricity generation capacity by type of fuel in GW and as a percentage of total
generation[24]....................................................................................................................69
Illustration Index
Figure 1. Schematic of a solar cell[23].............................................................................................14
Figure 2. Growth in annual installation of grid-connected and off-grid photovoltaic cells, 1990 to
2004. (Source: Solarbuzz, 2005).......................................................................................17
Figure 3. World energy consumption by region from 1970 to 2001 with forecast through 2025
(quadrillion Btu). Source: EIA (2004)[5]..........................................................................19
Figure 4. DSSC Operation Principle Diagram..................................................................................30
Figure 5. German PV market expansion thanks to the feed-in-tarrif[10].........................................34
Figure 6. World Map of Polysilicon Production [14]........................................................................44
Figure 7. Retail price per Watt peak in Europe[50]..........................................................................55
Figure 8. PV manufacturing share by country, 2005[47]..................................................................58
Figure 9. Suntech's stock price during the last 2 years[41]...............................................................59
Figure 10.Q-Cell's Stock Chart [42]..................................................................................................61
Figure 11. Total Chinese PV production capacity[24]........................................................................66
Figure 12.PV annual production and cumulative installation capacity in MWp in China by year[61]
...........................................................................................................................................67
Figure 13.Extrapolation of the consolidated PV production capacity trend in China over the last
decade[24]..........................................................................................................................68
Figure 14.China: capacity along the crystalline silicon production chain (2005)[24].......................69
ABSTRACT
As climate change is emerging as a manageable and predictable global problem, several industries
are shifting the focus of their business to include the reduction of greenhouse gasses. This is seen in
most power generation technologies, but none have shown the sustained level of growth as that of
solar power. Year over year the photovoltaic industry continues to return growth rates around 30%.
What is it about solar power that has attracted such a large amount of investment? An analysis on
the growth rates, technological advancements and largest businesses in China will demonstrate how
China is positioned to become the next world leader in photovoltaic manufacturing. The research
was done mainly through literature review and data collection,
focusing mainly on Chinese
companies performance in the last decade. There has being a also a strong study in the European
strategies to increase the use of PV technologies, from European manufacturing methods and
technologies used, to local policies and government incentives.
1
1
1.1
Introduction and Background
Background
With global CO2 emissions rising at an exponential rate, and the fact that 19 of the 20 hottest years
on record have occurred since 1980, there is a global need for a shift in energy supply from fossil
fuels to renewable energy.[1] Furthermore, as instability in the world's oil producing countries
increases, it is becoming ever more important for developed nations to reduce reliance on fossil
fuels. Of the sustainable energy technologies that currently exist, solar power has the most potential
for growth in the long term, and if it is adopted at considerable levels, solar power could have a
significant impact on the reduction of CO2 emissions and increased energy security.[2]
For the past decade photovoltaics have enjoyed an average of 30% growth across the global
spectrum with certain hot spots in Europe, the United States and Japan. There are many
explanations as to why this is happening, such as government policy, the increase in fossil fuel
prices and decrease in availability, and also enhancements in the technology due to research and
development.
But will this trend continue and in which region will we see the biggest
development?
It is likely that China will soon become a world player in the PV sector since for the past 7 years,
they have sustained a 70% annual growth in production capacity.[3] As with many other products,
China has become the production hub of the world and photovoltaics is not an exception. However,
there are many obstacles to overcome. China's ability to grow is somewhat hindered by the global
silicon shortage as well as a lack of government support for the growth of the domestic market.
Currently China does not possess the same level of manufacturing technology as the world leaders
such as Germany, Japan and the United States. This results in higher costs and a less efficient
products.
Yet there is a disconnect – even though there is considerable expansion capacity in China there is
still uncertainty about whether China will be able to develop their own domestic market thereby
increasing capacity and foreign investment. So in this case, will China remain a purely exporting
country? Europe holds a tradition of dedicated research and development while China is a global
leader in manufacturing and through a coordinated effort, a relationship between these two regions
will form an almost limitless solar industry. There is certainly a need for investigation in the solar
2
energy market to get a better understanding of how the major players will shape the future of solar
industry.
1.2
Objective of the study
The main goal of this study was to determine the market dynamics of solar energy worldwide with
focus on China's potential for domestic and international expansion. The market development of
solar energy is strongly dependent on the policy, technology development and transfer, and
economics of solar energy products. Thus, state of the art of technologies were surveyed by
analyzing public and academic documents. Policy incentives used stimulate the solar energy market
were also reviewed. The needs for the cooperation between Europe and China was discussed to
address the feasibility of the technology expansion.
1.3
Methodology
A combined methodology was employed, using both quantitative and qualitative instruments. Data
was collected from a variety of European companies to gain a clear perspective on their approach to
expansion into the Chinese market, as well as their business objectives within Europe. Next a
literature review was performed to examine both the political climate in both regions of the study as
well as social aspects affecting both Europe and China.
3
2
2.1
Introduction to Photovoltaics and Energy Economics
A History of Solar Energy
World Historical Overview
In 1839 a French physicist first discovered the photovoltaic effect while experimenting with an
electrolytic cell made up of two metal electrodes.[4] After, the first intentional PV device was
developed by the American inventor Charles Fritts in 1883. He melted selenium into a thin sheet of
on a metal substrate and pressed gold-leaf film as the top contact. Later on, in 1954 researchers at
Bell Labs accidentally discovered that p-n junction diodes generated a voltage when the room lights
were on. Within a year they had produced a 6% efficient silicon p-n junction solar cell. The same
efficiency was achieved the same year by the group at Wright Patterson air force base in the USA,
only this time, they used a thin-film hetero-junction solar cell based on Cu2S/CdS. By the year
1960, several documents were written showing different solar cells built using different materials
for the p-n junction, some key documents written by Prince, Loferski, Rappaport and Wysoski,
Shockley and Queisser developed the fundamentals of p-n junction cell operation including the
theoretical relationship between band gap, incident spectrum, temperature, thermodynamics and
efficiency [5]. In the years to come the US and the USSR space programs played an important role
in the R&D of solar cells, since they were the main energy source to power their satellites.
The year 1973 was very important for PV technological advancement. First the “violet cell” was
developed, having an improved short wavelength response leading 30% relative increase in
efficiency over the most advanced silicon cells at that time. Also, the same year an important event
occurred called the Cherry hill conference. During this event a group of PV researchers and heads
of US government scientific organizations met to evaluate the scientific merit and potential of
photovoltaics. The outcome was the decision that photovoltaics was worthy of government support,
resulting in the formation of the US Energy Research and Development Agency, the world's first
government group setup whose mission included fostering research on renewable energy, which
ultimately became the US dept of Energy. Finally in October, the first oil crisis pressed all the
governments worldwide to encourage the use of renewable sources of energy, especially solar. [5]
From this point, solar research had the momentum and funding it needed from fuel providers,
electric utilities and other interested parties to make a real impact on the energy industry. However,
4
this didn't last long because in 1982 the public funding was cut by the national governments
worldwide. It is due to this withdrawal of support that has left the impression that solar power
cannot succeed without substantial subsidies. Yet progress did not stop, it just switched direction
and rapid changes in the technology and PV industry and parties interested took place to begin a
transformation of the energy industry. All around the world energy sustainability was getting more
attention because of energy security issues and climate change.
But the reasons for these
sustainable changes should not only be attributed to social environmental consciousness. The main
driving factor, as with almost all emerging industries, is economic sensibility.
At the same time the fossil fuel industry was experiencing problems with supply and cost, China's
economy was developing at incredible rates. As of 2005, for example, China accounted for almost
30% of global growth where the European community accounted for just 5%. And as China
develops, the amount of oil needed for economic expansion is comparatively more per unit of
growth [6]. All of this indicates that even with the most optimistic view of conservation programs,
sustainable energy generation will have to increase if development is expected to continue at current
rates. Fortunately a healthy mix of sustainable energy generation technologies along with the
gradual phasing out of widespread fossil fuel use is one likely scenario for the future.
However, the most recent expansion of solar power is occurring mainly in Germany and Japan. At
first glance this might seem surprising since neither Germany or Japan have a large amount of
sunlight, but their lack of fossil fuel sources combined with a national government committed to
sustainable energy programs have enabled solar power to thrive. Together these two countries, with
Japan's sunshine program and Germany's 100.000 solar roofs program along with several
government subsidies account for a full 69% of the world market for PV as of 2005. Also, the rate
at which this market is expanding is encouraging - from 85 MW in 1995 to 1.1 GW globally in
2005. So the question here is: how can the PV industry take advantage of China's booming
economy? It is clear that the proliferation of PV technology in China will not be routed in
environmental policy so what will be the driving force?
Chinese Historical Overview
The first PV manufacturing companies were established in China during the late 1970´s mainly to
help supply the demand of the first pilot space and terrestrial applications that where launched
during these years [3].
5
Initially, these first companies were using waste raw material from the integrated circuit (IC)
industry, but during the years 1985 to 1990, China used solar cell manufacturing equipment mainly
from the USA. The first two large scale cell manufacturers in China were Ningbo and Kaifeng,
with government support, they introduced key equipment into their cell manufacturing process.
After, Qinghuangdao Huamei began production by purchasing new solar cell manufacturing
equipment. Next, Yunnan Semiconductor started manufacturing with second-hand production
equipment. Finally, Shenzhen Yukang and Haerbin Keluona set up a non-crystalline silicon solar
cell manufacturing production, being the last ones of this period. By 1990 solar Chinese companies
had established a total manufacturing production capacity of 4.5MWp [7].
During the next few years, the main companies began to innovate in solar technology, the
production of solar cells increased and the manufacturing process improved. However, the first
generation of manufacturers were very dependent upon the central government’s policies and by
that time the government did not provide enough incentives to innovate and experiment with new
technologies. Therefore, even though China had a total manufacturing capacity of around 5MWp, a
lot less was actually produced due to serious equipment bottlenecks in different parts of these
production lines. By 1998 3MWp of solar cells were actually produced [8].
After the year 2000 China experienced an era of very rapid growth within the solar market, in
particular for solar thermal applications. New companies starting to appear, but in this case, with
private/public partnerships, therefore all the producers were driven by a global market demand and
were not dependent on the central government’s policies. Some of their manufacturing equipment
still had to be imported, but in this case from Europe and not from the USA, wihle the rest of the
equipment was produced domestically.
In 2001, Baoding Tianwei Yingli Solar became the first company to manufacture using single
crystal instead of crystal silicon solar cell manufacturing technology and built a 3MWp polysilicon
solar cell manufacturing production line. Another company, Wuxi Sun Tech built a 10MWp solar
cell manufacturing production line [7].
Due to the rapid market demand in Europe (especially Germany) between 2003 and 2006 market
Wuxi Sun Tech and Baoding Tianwei Yingli Solar expanded their capacity to meet demand, and
more companies began to build solar cell manufacturing production lines.
6
In the R&D area, during the 2001-2005 period, between 5.2-6.2 M € were provided for PV
research, development and demonstration projects. The public budget provided for the next five
year plan (2006-2011) is 12.4 M €. As a comparison Germany's devoted a budget for R&D of
24.4M € while Japan invested 147 M € [3].
Solar cell
Crystal-silicon solar cell
1673 MWp
1629 MWp
Non crystal-silicon
solar cell
44 MWp
Table 1. China solar cell capacity, year-end 2006 Source: THT Research[7]
Of all the material technologies that can be used to manufacture solar cells, only two are being
produced in an industrial scale, mono crystalline silicon (mono-Si) and polycrystalline silicon
(poly-Si). Amorphous silicon is also being produced but at a much lower scale (less than 10% of the
total production). In this aspect, China follows the world's trend in PV manufacturing technology,
where technologies based on crystalline silicon account for 93% of the world market share [7].
China has invested a very limited amount of money in R&D compared to some other countries,
their main interest has been focused in decreasing the production cost per unit and increase the
quantity of modules produced using the technologies available in the market rather than improving
them or developing new ones that could achieve higher efficiencies or produce a noticeable
decrease in the use of silicon [3].
Table 2.Best conversion efficiency of various solar cells developed in laboratories in
China and in the world [3]
7
Table 3. Commercial solar PV and module efficiency in China and in the world [3]
Finally, the increase in Chinese production compared with the global trend is of great interest.
While global PV production has been growing at an average rate of 36%, the annual growth
capacity in china is nearly double that of the rest of the world with an average annual rate
production of 70%. It remains to be seen if China will be able to continue with this incredible
growth rate, however, there is much innovation and manufactures across the PV supply chain have
come up with some interesting strategies which are explored later in this paper.[3]
2.2
PV Operation Principles
As its name implies, photovoltaics is a technology that converts light (photo) directly into electricity
(voltaic). The name of the individual photovoltaic element is known as solar cell, which is made out
of materials called semiconductors.
The most used semiconductor material is silicon, which in its naturally occurring state has the
unique property of 4 electrons in its outer orbit, allowing them to form perfect covalent bonds with
four neighbouring atoms, thus creating a lattice. The obtained crystalline form is a silvery, metalliclooking substance.
In its pure state, crystalline silicon is a poor conductor, due to the fact that all of the electrons in the
outer orbit are bonded and cannot freely move. To change this behaviour, pure silicon has to go
through a process called doping. In this process some “impurities” (eg. C, N, As, B) are added to
the material [9].
8
According to the type of material added, the semiconductor receives the P or N classification.
●
N-Type: Arsenic or phosphorous is added and since each element has 5 electrons in their
outer orbit, there is one electron that has nothing to bond to, therefore is free to move within
the material. By adding several atoms of arsenic or phosphorous, enough electrons will be
able to move, allowing an electrical current to flow through the material. The name “n-type”
comes from the electron's negative charge.
●
P-type: Boron or gallium is added. In this case each one has only 3 outer orbit electrons, and
when added to pure silicon, there is a hole in the structure where one silicon electron has
nothing to bond to and is free to move. The absence of electrons creates the effect of
positive charge, hence the “p-type” name [10].
These electrons are occupying a band of energy called the valence band. When some energy is
applied and exceeds a certain threshold, called the band gap, these electrons are free to move in a
new energy band called the conduction band, where they can conduct electricity through the
material.
The energy required for the electrons to migrate to the conduction band can be provided by photons
which are particles of light. Figure 1 shows the idealized relationship between energy (vertical axis)
and the spatial boundaries (horizontal axis). When the solar cell is exposed to sunlight, photons hit
the electrons in the valence band and give them enough energy to migrate into the conduction band.
There, a n-doped semiconductor contact collects the conduction-band electrons and drives them to
the external circuit where they can be used to create electricity. Then they are restored to the
valence band at a lower (free) energy through the return circuit by a p-doped semiconductor contact.
9
Figure 1: Schematic of a solar cell[5]
This is all possible because sunlight is a spectrum of photons distributed over a wide range of
energy. Photons with greater energy than the band gap can drive electrons from the valence band to
the conduction band and can travel through the external circuit to produce work. Photons with less
energy than the band gap cannot excite the free electrons, and instead, that energy travels through
the solar cell and is absorbed as heat.
The voltage at which electrons are delivered to the external circuit are slightly less than the band
gap. This voltage is measured in units of electron volts (eV), thus in a material with 1eV band gap
the voltage delivered by a single cell is around 0.7V. Therefore multiple cells are connected
together (usually 36) and encapsulated into units called PV modules which is the product usually
sold to the customer.
2.3
Attempts at Commercialization
Solar power has certainly had chances in the past to commercialize but did not succeed on a large
scale. In the first instance of interest, solar collectors at the beginning of the 20th century were
widely being used for agricultural irrigation. Also, the American Southwest was a perfect testing
ground for solar collectors, which by 1915, 30% of the homes in Pasadena California used solar
energy to generate hot water. Aubrey Eneas, a solar entrepreneur in this Californian area, made a
large effort to commercialize this technology and created a large truncated cone collector to heat
water that powered a steam engine for running irrigation pumps. Unfortunately his designs were not
10
able to stand up to the unpredictable weather of this region such as dust devils, wind storms and
hail. Eventually he gave up believing that this type of solar power would never become
economically viable [2].
The next instance, through some very fortunate laboratory accidents at Bell Labs, came in 1954
with the first working photovoltaic cell. Naturally, the prospect of limitless energy from the sun
was of great interest to the international scientific community and governments alike. Progress was
swift and consistent as the emerging PV industry enjoyed dedicated support from governments and
private funding. This continued through the 1970's and as a result of the oil shock, the US President
Carter's administration approved a $3 billion program for the development of solar energy. The
White House even showed its support by installing solar panels on the roof. However, this was the
extent of the progress that started in in 1954 and as Ronald Reagan entered office in 1981, research
and funding slowed dramatically. By 1986 the solar panel showcase on the roof of the White House
was removed, funding for alternative fuels was cut and oil prices began to drop. The message was
clear that solar power was not priority of the moment and would have to wait. And at this point, as
the United States accounted for 80% of the world's solar power, their actions affected the rest of the
world and overseas governments in Europe and Asia followed in step [2].
The reasons for the past failures to commercialize this technology are access to a cheaper and more
available alternative to solar energy (fossil fuels) and a drastic change in political motivation. These
2 elements are no longer present which is why solar power will finally have a real chance to
commercialize on a massive scale. First, the price of oil has risen dramatically from it's recent low
in 1998 at $15.24 to it's current high which is consistently in the $50-$60 range [11]. The next
motivator is the serious environmental situation facing the world. Environmentally responsible
nations see sustainable energy as the main tool for reducing green house gas emissions, which is
one aspect that did not exist in the past. Finally, as PV technology is being proven cost effective in
some areas of the globe, most notably Germany and Japan, many other national governments wish
to remain competitive in this high-tech field and have begun to develop their own solar
infrastructure. Simply put, the hindrances that existed in the past no longer exist and there are
several new motivations that almost guarantee solar power will continue to grow and become
competitive with other forms of more conventional energy
11
2.4
Applications of PV Technologies
Another dramatic change that occurred to help the industry expand was the increased use of PV for
grid-connected applications. Typically, in the past, PV was dominated by off-grid applications
where PV provided a more economic means of delivering electricity than connection to the grid or
the use of batteries. Off-grid applications can take many forms, such as the familiar PV power
calculator or also irrigation pumps and freshwater distillers for example. However these systems are
limited to delivering power only when the sun is shinning. Other larger systems for home power use
can store electricity in batteries for use at night or seasonal storage. Another market segment which
is perfect for PV is that of remote industrial photovoltaics. Remote lighting, highway construction
signs and parking ticket dispensers are examples of this. A third market segment exists in rural
electrification. Often it is too expensive to power a house located far away from existing power
lines so instead of extending connection, a PV system including a battery and charge controller can
be installed at a much lower cost. In developing countries, for example, an installation of 50 Wp
PV for 500 $US can replace the monthly cost of kerosene, batteries and candles through a lowinterest loan from institutions such as the World Bank [12].
These PV applications are still expanding today, but in the mid to late 90's a dramatic shift of PV
usage shifted towards grid-connected power. This is mainly due to the Japanese sunshine program
and the German 100,000 solar roofs program. These initiatives were the result of increasing
electricity prices, a will to escape dependence on foreign fossil fuels and environmental concern.
While total solar applications have grown at a rate of 29% per annum, grid-connected applications
have grown at a rate of over 50% per annum.
Another large PV application is centralized systems. In 2006, centralized PV systems only
accounted for 2% of total installed power, but this is rapidly changing. In Sarnia, Canada, for
example, the Ontario government has begun the process of installing 40MW of centralized PV
power [13]. Furthermore, centralized PV systems have the potential to expand exponentially as
about 1/3rd of the earth is covered by sun-rich deserts and if just 4% of this land area was used for
PV, all of the world's energy needs would be covered (even with current efficiency levels) [2]. To
achieve this, some some issues still have to be solved, such as electricity transmission, however the
use of hight voltage direct current (HVDC) transmission is likely to solve this problem since it can
be cheaper than conventional AC transmission lines under certain conditions, and the losses in the
system could also be significantly lower.
12
Figure 2. Growth in annual installation of grid-connected and off-grid photovoltaic cells,
1990 to 2004. (Source: Solarbuzz, 2005)
Also, a recent entrant and interesting business sector of PV is micro-scale PV systems. In the last
few years, there has been a significant effort in the commercialization of these applications such as
lightning systems for gardens, solar LED street lighting and some other stand-alone small
applications. The price drop in PV systems and a more environmental global consciousness are
helping these technologies spread fast and are becoming very common solutions for these very
specific applications. Companies like China Technology Development Group currently offers have
a wide range of this applications in their portfolio and are creating cooperation partnerships with
companies in Europe to increase their position in the market [14].
2.5
Current Situation of Photovoltaic Industry
The current situation is positive, yet somewhat uncertain. As the silicon shortage is ending, there is
some speculation about whether the companies who have committed to increase supply will follow
through on their promises. The growth rate of the industry as a whole, although it has slowed a
little in 2006 due to the shortage, is expected to increase again. Also, in lieu of the shortage, other
technologies have stepped in to fill the gap.
Thin-film technology is becoming much more
competitive. A good example of this is the American company Nanosolar which is based in
California. They have secured 100M US$ and are building a plant that will produce 430 MW of
cells.[15] This number is extraordinarily large considering that in the year of 2006 only 1.520 MW
were installed worldwide.[16]
13
The current worldwide capacity as of the end of 2006 was 5.737 MW where 588 MW was used for
off-grid applications. The European Union accounts for more than half of the installed PV with
3.220 MW of which 112 MW is off-grid. If these figures are put over population, the EU also
becomes the region with the highest per capita usage with 6,533 Wp/capita, mainly thanks to
Germany which produces 34,8 Wp/capita. Japan produces 13,4 Wp/capita, but both Germany and
Japan are behind the world leader: Luxembourg 50,54 Wp/capita. Yet, with a population of less
than 500.000, Luxembourg does not have to face the same challenges of scale as Germany and
Japan.[16]
The main driving force for the increased production of PV in recent years is the reduction in price
thanks to both economies of scale and incentive programs. New incentive programs are appearing
in many emerging markets as well, most of which are following the hugely successful German feedin tariff program. For example, Canada has begun using a feed-in tariff under the Renewable
Energy Standard Offer Program of 0.42 CAD/kWh for grid-connected PV and is expected to
become a renewable energy hot spot for North America. France has an even higher tariff which can
reach up to 0.55 EUR/kWh when used in the form of building integrated photovoltaics (BIPV).
Italy also instituted their own version of the German system and offered 0,445 and 0,490
EUR/kWh, however they were not as successful in 2006, their launch year.[17]
The main players in the PV industry are divided across the supply chain, some focusing on the
production and refining of feedstock materials, some involved in the fabrication of PV wafers, cells
and modules and some have even stretched themselves across the chain and are involved everything
from silicon extraction to the fabrication and installation of PV arrays. The leading companies
involved in silicon production are Hemlock, Wacker and REC. All 3 of these companies have
begun the process of expansion due to the increased need from the PV industry, but the extra output
will not be ready to match the 2007 demand. The current leading cell manufacturers are Sharp,
Q-Cells and Suntech. Each company has stated they plan to increase capacities even in the midst of
the supply shortage. And it is this fact that has created some uncertainty in the market which is
evident with falling stock prices from some of the major solar companies such as Sunergy,
SunPower and Solarfun Power Holdings.[18]
Although the future of solar power looks bright, there are still many obstacles for solar companies
world wide.
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2.6
Causes for Photovoltaic Expansion
Political and Financial
Predicting any future scenario regarding future energy usage is a difficult task, and industry
specialists from all forms of power generation have quite different opinions. However, one of the
most cited models for predicting long term energy production originates from the U.S. Department
of Energy's Energy Information Agency (EIA). This group is responsible for producing an annual
forecast report for world energy use, titled the International Energy Outlook (IEO) as well as the
Annual Energy Outlook (AEO) which includes predicted prices for fossil fuels and electricity. [19],
[20].
Figure 3. World energy consumption by region from 1970 to
2001 with forecast through 2025 (quadrillion Btu). Source:
EIA (2004)[2]
There are several problems with the assumptions made in these reports. Firstly, a critical mistake
that has been made was the assumption that through productivity improvements, additional
production and new pipelines, the inflation-adjusted price of energy will remain the same in 2025 as
it is today even as the predicted need for fossil fuels will like be 50% larger. Since peak production
of oil has been reached and in 2004, the world required a full 99% of global global capacity, there
will likely be a sharp increase in price due to limited supply and increased demand. And to solidify
15
this point, in 2004 and 2005 when oil prices where 70% higher than 2002 levels, the increased price
was higher than any point in the EIA forecast up to 2025. Naturally, a counter argument to this is
that prices are cyclical and as the price of oil goes up, more is invested in infrastructure to increase
supply and moderate the demand thereby lowering the price. However, at this stage, the scale and
time line do now allow for a significant price reversal. The reason for this is that investors are fully
aware of the declining production and if growth rates are expected to be maintained, it is estimated
that capital investment will have to increase to 500 billion $US annually between 2001 and 2030, a
rate twice that of the 1990's. And to add to this, large new projects to increase production take
years or even a decade to bring on-line, and in the meantime, as the early 2000's have shown,
energy prices can fluctuate wildly during a project lifetime possibly making the net investment a
loss.[2]
The second problem, which is a problem with all models about future energy scenarios, is the
unforeseen political climate in the years to come. It has been proven recently how severely oil
prices can be affected with conflicts in the Middle East. If instability continues, as it may well with
the growing pressure between the United States and some middle eastern OPEC countries, oil prices
could go up even higher if production levels are affected. This relates directly to a reliance on
foreign energy, which is a major benefit of renewable energy, but since this threat is not quantifiable
in financial term, this aspect is often overlooked in energy reports and only mentioned in a cursory
manner. And with every international conflict involving oil supply, the case for solar power gains
attention.
Energy Payback Time
One argument that has plagued PV power is that the energy payback time is too large, which is to
say that the energy required to fabricate solar panel from silicon extraction and refining right up to
installation and eventual decommissioning is too large to warrant the use of PV at all. The
environmental question surrounding solar power indeed needs investigation, since currently the
majority of energy generated is from unsustainable sources. After all, if solar panels required more
energy in fabrication than they produced over their lifetime, there would be a net energy loss which
would only contribute to environmental problems. Thankfully, although this was once the case, the
gains in efficiency for solar panels have increased to a point where the energy pay back period is
just a fraction of a PV system's lifespan. Richards and Watt from the Centre for Photovoltaic
Engineering at the University of New South Wales have rearranged the standard model and come up
16
with some modifications that put solar power on a more level playing field with conventional
energy generation technologies.
The widely accepted but out of date formula for energy payback time is as follows:
This model misses one key factor, which is the lifetime of the module. The EPT in this form will
yield a value that does not demonstrate the potential power generation after the full energy payback
has been reached. Furthermore, using this type of indicator only serves to perpetuate the myth that
PV is does not able to generate as much power as was needed to create it. Also, over the course of
the lifetime of a PV system, there are several components that might need replacing such as an
inverter, a battery bank or other structural components. This affects the EPT significantly and these
factors are not as easily inserted into the original equations.[21]
The solution to this is relatively simple, but it completely shifts the objective of the calculation.
Instead of looking at the amount of energy created versus the amount it required to build, the energy
yield ratio, or EYR, can be used to show how many times the energy invested is paid back over the
useful lifetime of the system. The equation for this is as follows:
and a multi-component system is expressed as:
17
It can be seen here that if a product has a useful lifetime of 20 or 30 years (as is the case with many
PV products today), the EYR reflects a much more useful figure to consumers.
Table 4: Calculated EPT and EYR (over both a 20 and 30 year period) for 3 selected scenarios[21]
In this table, taking scenario 1 as an example, where it would take 2,2 years to repay the energy
input using the EPT calculation, there is a much higher ratio EYR of 9,3 and 13,9 for output to input
energy for 20 and 30 year systems respectively. This is a much clearer demonstration of how the
energy produced by PV can be repaid and does not mislead consumers to false conclusions about
solar power.
Environment
As previously mentioned, for PV to have a positive net effect on the environment, it is important for
PV systems not to require more energy in fabrication and maintenance than they produce. Since
efficiencies have risen so much in the past decade, this is clearly possible. However, for this fact to
remain true, it is important to consider how much sunshine is available for each system. Certain
areas of the world have higher insolation levels and can rightly claim to have a larger net energy
production such as China, Southern Europe, Australia and most equatorial regions. Unfortunately,
some of these regions do not have the economic and political mechanisms needed to stimulate
growth for the adoption of PV.
18
Yet this is the area where environmentalists and policy makers should be focusing their attention
since the greatest gains can be accomplished in these regions. India and China are two of the most
rapidly developing countries in the world and as their energy requirements grow, so too does their
pollution of greenhouse gases. Thankfully, there is an array of incentives for more sustainable
options that will likely curb the increase in GHG emissions, and although solar power currently
accounts for less than 0.5% of global installed capacity, this will change drastically in the future
because of solar power's impressive growth rates over the past decades.
For example, China has put in place several incentives which include favourable import customs
duties for renewable energy products, various subsidy programs for all kinds of renewable energy
technologies including wind, biogas and solar, which is investigated in greater detail in chapter 4 of
this paper.
19
3
3.1
Technologies
Crystalline
Crystalline Silicon technology (c-Si) accounts for more than 90% of the actual PV systems in the
market, the reason why its presence is so high its because it has use all the technology and R&D of
the semiconductors for the electronics industry since the 1960's. Furthermore, silicon is one of the
most abundant minerals in the earth's crust, giving refineries a virtually unlimited supply resources.
However, silicon is a very brittle material, requiring relatively thick cells (~300um, although 100um
thick cells can be obtained using the latest sawing technology), therefore some of the electrons
excited by the photons have to travel large distances inside the materials, losing energy in a process
called recombination, where electrons return to their valence band. Consequently a material with
high purity and structural perfection is required. To avoid this loss, the electrons must be highly
mobile, as they are in pure silicon. Imperfections and impurities can absorb the electron's energy
and convert it into heat, impeding the electron's ability pass through an electric circuit.
Once silicon of the desired purity is obtained, it is then put together into ingots and then cut into
wafers using a saw. Wafers stand for about 65% of the module cost, equally divided between
purification, crystallization and sawing. For many years the PV industry have used scrap silicon
from the IC industry, but the increase of PV demand has nearly exhausted this market. The Siemens
method for obtaining silicon is the most used worldwide but it has been considered ultimately too
expensive for its use in PV. The purity it provides, however, is well above what is necessary for the
fabrication of solar cells.
During the 80's, an attempt to fabricate low-cost solar silicon (Sol-Si) did not succeed due mainly to
the low demand at that time. Today, some new attempts are being made, from just simplifying the
Siemens method, or by using totally different techniques to purify and process the silicon. A very
important advance in solar cell fabrication has been the demonstration of cells with high efficiency
made from wafers containing hundreds of large-grain multicrystals (1-10mm), called
multicrystalline (multi-Si), or polycrystalline (poly-Si). The multi-Si growth procedure is much
faster and the wafer is cheaper. Because of the random orientation of the crystals, there's an
efficiency drop of a few percent (absolute) compared to a mono-Si wafer, but taking into account
that the cells are cheaper, the price per watt peak remains the same on a per-module basis. The
simplicity of the multi-Si wafer-growing equipment and process offers a clear trend towards the use
20
of this option for mass scale production.
Although the solar cell manufacturing process represents a relatively small fraction of the total cell
cost it strongly affects the overall cost in $/Wp, because it determines the cell and module
efficiency. The efficiency depends of the wafer and ribbon utilized, but it also greatly depends on
the manufacturing process itself.
Efficiencies over 25% have been achieved for laboratory cells in a long complex manufacturing
process, where every possible efficiency-improving factor has been taken into account to obtain a
nearly-ideal device structure. When transfered to commercial mass producing scenarios, the
efficiencies obtained are around 15% for single-crystal cells and 13% for multi-crystal cells. In
modules these efficiencies are reduced to 14% or 12% due to the redefinition of the area that now
includes the module frame.
The existence of this big efficiency gap between laboratory and commercial cells together with an
increased market demand suggest that new higher efficiency cells will appear in the years to come,
some companies have achieved 17-18% efficiency cells in production. There are some other factors
that can also be improved, the manufacturing yield, for instance, is around 95% giving some gap for
improvement, and finally, at the end of the process, the interconnecting and encapsulating process
can be done using better automation and using cheaper materials helping reduce the overall cost of
crystalline cell modules. [5]
3.2
Thin Films
Around 10 times more crystalline silicon is needed to absorb a given fraction of sunlight compared
to other semiconductors like GaAs, CdTe, Cu(InGa)Se2 since silicon is the weakest absorbing
semiconductor used for solar power. Therefore, thicker wafers have to be made when working with
crystalline technologies and, because of the size, higher quality material has to be used because of
the longer paths the high-energy electrons have to travel before reaching the external circuit.
During the same years c-Si PV cells were developed, it was shown that other semiconductors could
be used for electricity production. When this material is used to make solar cells, so little of this
material is required that a foreign material is needed to physically support the cells. During the first
years of thin-films development, 4 technologies achieved higher efficiencies than 10%, Cu2S/CdS,
21
a-Si, CuInSe2/CdS and CdTe/CdS. Cu2S/CdS disappeared soon due to stability problems related to
electrochemical decomposition.
The main advantage of the thin films is the lower price they could achieve once set into a mass
production scheme.
The lower price of thin films derive from the following characteristics:
●
They are typically 100 times thiner than Si wafers (between 1 to 3 um) deposited on lowcost substrates such as glass, metal foils, and plastics.
●
The temperatures used to place the material on the substrates is much lower (200 to 500 C
vs 1400 for c-Si).
●
They can tolerate higher impurities, therefore needing cheaper purification of raw material.
●
They are integrated into a monolithic interconnected module reducing the module
connection costs.
Even though price is a very good reason for thin films to take a big portion of the market share,
crystalline-based PV still dominates around 94% of the market because thin films still have lower
efficiencies and there's much less developed technology for their manufacture. Consequently, high
amounts of capital are required to build manufacturing plants due to the fact that the techniques
used have to be developed some times from scratch. Thin films industry couldn't adopt a mature
technology like the Si PV community did from the Si electronics industry.
Analyzing the most used technologies, the first one, with Amorphous Silicon (a-Si) films are
typically deposited between 150 to 300 centigrades allowing the use of low cost substrates, such as
glass, steel foil, or plastic. All practical a-Si solar modules contain multiple junction devices where
two or three junctions are grown on top of each other, allowing more efficient use of sunlight. Even
though a-Si has showed efficiencies up to 15% for triple junctions under laboratory conditions, it
usually presents a lower efficiency when compared to other PV technologies but has the advantage
of being temperature-independent, when other technologies can lower their efficiencies up to 4%
when exposed to high temperature outdoor conditions (eg. summer). a-Si technology is the most
common used in the thin-films area, but it still has to overcome certain factors such as:
●
Improve its efficiency
22
●
Minimize the self-limited degradation (reduced a-Si panels efficiency by 2 to 3%)
●
Increase the faster, low-cost manufacturing process by increasing the deposition rate of the
layers and the utilization of gases.
Another Thin Films technology is the Cu(InGa)Se2 alloys, that have achieved the highest
efficiencies (between 12 and 15%) but were limited by the low band gap. By using different
empirical methods, the maximum achieved efficiency has been 19%, by adding different alloys that
increase the band gap and increase the efficiency of delivering the electrons to the circuit. The three
major challenges for this technology are:
●
Control the composition of the alloy through the film in a manufacturing environment on a
moving substrate.
●
Find alternative junction partners to replace CdS
●
Find new alloys or new deposition methods to increase the efficiency by achieving higher
band gaps.
Finally there are the thin films of CdTe, they have been studied since the 1970's, one main
difference this last type of thin films has compared to the mentioned ones, is that there are over 10
methods to deposit the CdTe films that have produced CdTe solar cells exceding 10% efficiency.
There are 4 available commercialy are: Spray Pyrolisys (SP), Electrodeposition (ED), Vapor
Deposition (VD) and close space sublimation (CSS). The highest reported efficiency for cells based
on this technology has been 16%. Even though some CdTe modules have been in outdoor fieldtesting for over 10 years withouth major degradation, some other CdTe modules have degraded
considerably. Of all the mentioned Thin Film technologies, CdTe is the one that presents the more
ammount of challenges as follows:
●
Cu seems to produce a high efficiency device, but affect the long-term stability.
●
Various optimization methods should be better understood so they can be simplified and
transfered into a mass scale production scheme.
●
CdTe modules are more sensitive to outdoor interaction (O2, H2O) requiring better
encapsulation methods.
●
Safe and cost-effective strategies of Cd usage in the workplace and recycling should be
addressed. [5]
23
3.3
Concentration PV Systems
Due to the cost of solar cells, focusing concentrated light onto a small area have been always
considered a way of reducing costs. In order to make it profitable the concentrators required should
be cheaper than the area of solar cells they are replacing, another condition that has to be taken into
account is that the solar cells efficiency should not decrease under concentrated sunlight. The first
condition is usually easily fulfilled because the concentrators can be made using low-cost optical
devices, the second one is a little bit trickier due to the fact that in order to keep the cells
permanently in focus, active tracking systems are required, significantly adding costs to the
modules. Also, even though the cells efficiency should increase with increase luminous flux, in
practice due to the high currents in very small areas, the ohmic losses make this efficiency drop,
therefore additional care have to be put into solar cells used in concentration systems to minimize
this effect.
Another effect present when using concentration PV systems, is that only direct sunbeam is
collected since diffuse light is not focused, this reduces the electrical output by 15% approximately.
This can be fixed when using 2-axis tracking systems to keep the solar concentrators facing the sun
directly all the time.
Analyzing all the gains and losses, and taking into account that the cells efficiency keeps getting
higher, the tendency is that concentration PV systems are more efficient than conventional c-Si
technologies and it is also believed that concentration systems should ultimately be cheaper than
module silicon solar cells, however, due to the lack of real market, this statement cannot be
confirmed in practice.
Currently, concentration systems are suitable for large installation rather than for domestic use
because there is not a large amount of companies manufacturing concentration PV systems,
therefore they have large general cost for small production volumes. However, the situation may
change, and with the help of cheap optics, and efficient and low-cost tracking systems, this
concentration PV systems can make a very good use of high-efficient solar cells.
Even though of the three reviewed technologies, a-Si has the lowest efficiency, it was
commercialized much earlier, and therefore now has a much greater manufacturing capacity
compared to its thin films competitors. One of the reasons for this to happen is that CdTe and
Cu(InGa)Se2 have no real application outside photovoltaics, so, just independent research groups
24
and laboratories have been working in developing these technologies during the last few years, but
it has to be taken into account that translating research-grade cell performance into commercial
production line modules is a very challenging task, delays from 6 to 8 yeas are typical to achieve
the same lab-obtained efficiency in production lines. [5]
3.4
Under Development
As previously mentioned in section 2, the energy that comes from the sun as a light form is very
hight but spread over a wide spectrum, therefore presenting a low energy density.
The energy that can actually be converted by solar panels is the one provided by those photons with
higher amount of energy than the band gap, all the remaining energy from the photons that hit the
panel with low-energy levels are transformed into heat in the back of the panel.
For this reason, there is strong development being done to increase the utilization of the different
energy levels provided by sunlight's photons. A way to achieve this is by stacking cells of
semiconductors with different band gaps. The cells with higher gap semiconductors are placed on
top, therefore absorbing the higher energy photons and letting pass through the lower energy ones
so they can be absorbed by inner cells of lower band gap semiconductors.
The theoretical limit for an infinite number of cells stacked together with different band gaps is 86%
while with a single junction cell only 40% maximum efficiency can be obtained. [5]
Since multijunction cells are considerably more expensive than single junction cells, their
application niche is mainly for spacial applications where price is less relevant than performance in
most cases. However, they can be used for terrestrial applications using concentrators to reduce the
amount of cells required. There is a trend to develop cells operating at 1000 suns [5].
The prospects for this technolgy are very promising, since they predict in the long-term, to produce
electricity competitive with conventional sources.
Multijunction cells are also crucial for the thin-films, the highest cell and module efficiencies
reported for a-Si thin-film PV technology are for triple junctions. The band gap of various
polycrystalline alloys can be varied with alloying.
25
Another technology that is getting a lot of attention its called Dye-sensitized Solar Cells (DSSC).
Instead of working based on the photovoltaic effect, they work on charge between molecular
orbitals, as in photosynthesis. They consist of a photo-sensitized anode and an electrolyte forming a
photoelectrochemical systems.
Even though, this technology has been previously studied, cells had poor stability, until 1991, when
Michael Grätzel and Brian O'Regan at the École Polytechnique Fédérale de Lausanne[22]
developed drastic improvements in the performance of DSSC. Therefore this solar cells are also
known as Grätzel Cells.
The Grätzel cell follows the same photosynthesis principles plants employ. A layer of dye
molecules, where light absorption is performed, is added to a mesh of nano-particles of a
semiconductor, TiO2 (titanium oxide) placed on the bottom of a glass substrate acting as a
transparent conducting coating. When a photon hits the dye's surface, an electron is transferred to
the semiconductor (TiO2) in a process called injection. This excited electron moves to the anode on
top of the cell where it can be extracted and transferred to the load. A positive charge is then
transfered now from the dye's surface to an electrolyte between the two layers of glass substrate that
encapsulate the cell and then to the counter electrode connected after the load. With this last
electron transfer, the charge in the electrolyte returns to its reduced state thus closing the circuit.
The operation principle is represented in the figure shown below:
Figure 4: DSSC Operation Principle Diagram
26
DSSC is a promising technology mainly because of the low cost of the materials used and its
assembly process is simple and easy. Some “do it yourself” kits are even available for educational
purposes [23].
There are, however, some barriers to overcome before DSSC can compete with conventional ways
of producing electricity:
●
Efficiencies are usually around 10% or below, where low-cost PV commercial applications
are around 12-15%.
●
Dealing with a liquid electrolyte, instead of solid-states devices, such as in traditional c-Si
panels, inserts a set of new limitations. Under low temperatures the electrolyte can freeze,
stopping therefore the power production, and during hot conditions, it can expand, break the
sealing system and start to leak.
Once these limitations have been solved, mass production of DSSC can become a reality, specially
because with the high silicon prices we've experienced in the last few years, this technology can
offer already a better power/price production ratio. Also, because of its operation principle, DSSC
panels can work under cloudy or low sunlight conditions in such a great way, that even some indoor
applications are being considered.
27
4
4.1
Policies
Subsidies and PV Policy
Incentives and Subsidies
The feed-in-tariff (FiT) which has fueled the German market over the recent years is an explicit
monetary reward for producing PV electricity, at a rate per kWh somewhat higher than retail
electricity rates being paid by consumers. The incentive does not help directly with the high initial
cost of a PV system, unless the producer can use this tariff in a proposal to more easily secure
financing. There are several ways the FiT can be applied: the first is where the FiT is applied to all
power produced by the PV system and the second is where the FiT is only applied to any additional
power above the needed of the customer. The FiT itself is usually funded sustainably, whereby it is
paid for by a tax levied to all electricity users instead of from the government budget (which can
change as the direction of government changes). Some countries, such as Italy, have opted for the
latter method, but the incentive program put into place is too recent to draw conclusions about its
effectiveness.
The core benefit of the FiT is that it can be used as a temporary mechanism to stimulate growth that
is not a burden for taxpayers since the entire funding for the program is taken from a tax levied on
the electricity bill of all consumers. In this way, investors can be assured that PV systems are of
high quality and perform well since funding for the system is guaranteed. This incentive also forces
the industry to improve performance since the annual reduction of the benefit will only encourage
investors to acquire the best technology that will give them the greatest return. The FiT is also
regarded as the main driver for further cost reductions and a transition to economies of scale.[24]
The reward of such a tariff varies - calculations can be made to determine the cash flow required for
a certain PV installation to become competitive and provide a certain return on investment. Also,
externalities can be estimated from the costs of pollution associated with traditional energy supply.
Or the tariff can be based on the benefits that PV will add to the grid, peak demand of electricity or
line support. And even in some cases a government might decide a standard reward will be a certain
multiple of the retail electricity price.
In any case, the main targets for this kind of subsidy are groups such as housing developers,
28
investors or commercial entities. Specifically it will attract groups that have limited capital such as
households, public organizations and small businesses if the FiT is combined with a direct capital
subsidy. Alternatively, countries such as Japan, the USA, Switzerland and Australia have decided
to use direct capital subsidies, renewable portfolio standards, green electricity schemes, tax breaks
or some combination instead of the FiT. Generally, using a type of subsidy other than the FiT,
progress in the industry is generally slower but more constant and predictable. Countries currently
using the FiT include Austria, Germany, Italy, Korea, France, Portugal, Spain, the Netherlands and
Canada. There are some drawbacks with this type of subsidy since industry growth might not
always be consistent due to overly complex administrative requirements, caps on PV capacity or
even the exclusion of large-scale plants.
Some countries, such as Germany, have avoided this situation by providing a high subsidy with a
decreasing amount over time which rewards early investment. But if prices for systems do not come
down as the technology expands, or if the program itself is not directly helping the target economy
(instead of the foreign economy supplying the systems) progress could stagnate.
Also, the issue of where exactly to set the FiT is a major problem. Setting the FiT too high will
result in overheated markets and if it is set too low the investment in PV will be negligible. Policy
makers aim to set the FiT at just the right level, which with careful scrutiny of existing markets and
foreign PV FiT schemes is possible, but with changing governments, lengthy pay-back periods and
fluctuating energy prices, FiT rates should be constantly under revision. One solution is to only
apply the FiT to a specific market segment at the beginning, and later expand to other segments.
This will alleviate the need to put a cap on the FiT in terms of installed capacity.[25]
Furthermore, as the Core Group along with the European PV Industry Association have found
through policy framework analysis, high levels of FiT rewards are not proportional to market size,
but rather are sensitive to an incentive threshold that investors must be comfortable with. More
generally speaking, the Core Group mentions that the two most important ingredients in a sound
FiT plan are longevity and stability. If there is mistrust of government support for a PV subsidy,
especially because of the high initial cost and predicted length of operation of the PV system,
investors will not become as involved. Also a good mix of incentive instruments with well defined
time frames which are contained in simple administrative packaging can be quite attractive for
investment.[26]
29
Germany
The German subsidy system for PV is considered by the European Photovoltaic Industry
Association to be the best in Europe.
It has been praised as very easy to use with little
administrative requirements. Because of this, the growth in the German PV market has been the
best in Europe as well.
Figure 5: German PV market expansion thanks to the feed-in-tarrif[27]
Since their innovative Renewable Energy Law (REL) was introduced in 2000 which provided a
buyback rate of 0,50 €. In 2004 this law was revised to and the new buyback rate ranged from 45,7
– 62,4 Euro cents which is reduced by 5% annually to avoid overheated markets.[27]
The German system itself is treated as the standard for hopeful governments worldwide to use as a
model. To name a few, countries such as France and the state of California in the US have taken
much of the German approach and made small changes to adapt the system to their own needs.
This has not been done in China as of yet, but currently China is focusing on the international
market and domestically PV is used for rural electrification – something that will be discussed in
greater detail in chapter 6 and 7. For the moment, France and California will be investigated to
provide a general sense of how the feed-in tariff works on a local scale.
30
France
The federal subsidy in France is currently the highest in the EU with a FiT of 0,55 €/kWh for
Building Integrated PV (BIPV). This is composed of an initial 0,30 €/kWh which applies to all new
PV installations, with an additional 0,25 € for BIPV which should last for 20 years. This benefit
structure is also available outside of Continental France, in Overseas departments (DOM) and
Corsica, but in this case, the initial FiT is actually 0,40 € and a BIPV addition of 0,15 €. One reason
for the especially high tariffs formed in 2006 is that in 2000 the government decided on very low
tariffs of 15.25 €/kWh which left PV as an unattractive option from an economic standpoint. This is
especially unfortunate because France is a highly motivated country when it comes to energy
reform and exploring new alternatives to their long history of nuclear power. A press release from
Invest in France and the French Solar Energy Association, Enerplan, a full 98% of French people
are interested in the promotion of energy alternatives and over 40% of the population believe that
PV has a key role.
The future of PV in France is looking good, although they have started a bit late. Government
predictions have planned for installed PV of 200MW by 2010 but after that it becomes less clear.
The government is predicting growth rates less than the industry which would reach a goal of
500MW by 2015 with an annual growth rate of 10%, whereas the PV industry itself is predicting a
full 1 GW with a growth rate of 25%. Investors believe the latter is more likely for 2 reason: the
first is that the development of the French infrastructure will take the lessons learned from the
successful German industry, and second, never before has the French public been so supportive of
renewable energies, specifically solar energy.
However, there are obstacles that are not easily overcome. The amount of administration work
slows down the system and as an example, 1 out of every 10 installed systems in 2006 were never
connected to the grid because of administrative problems. There is a lack of expertise in this
developing market and the French will have to watch out for competition coming from abroad.
Currently, the French market is dominated by 3 companies: Tenesol (co-owned by the previous
state-run power company, EdF and the power company Total), Apex BP Solar (whose parent
company is of course British Petroleum) and Photowatt (subsidiary of the Canadian Automation
Tooling Systems Inc.). However, with the onset of neighbouring Germany's solar power experience,
these French companies will have to fight hard to keep their market share. Tenesol, for example,
having only sold 1.5MWp in 2006 expects to boost their sales to a full 7 MWp for 2007 thanks to
31
the greatly improved government aid. Many in the industry feel that companies that existed in the
French market prior to the government incentives will have a better shot at capturing a greater
market share. Currently there is a lack of qualified engineers and complicated bureaucracy is still a
prevalent issue. To magnify these problems the installation of many small systems inherently
requires more personnel.
Thankfully, the latter problem will correct itself thanks to the influx of new players in the French
market. Conergy AG and Schüco International KG are examples of 2 German companies that have
already established training centres in the Paris area to train new installation engineers. Specifically,
training will include the new quality system "Quali-PV" program under the supervision of Enerplan
that has been active since July 2007. By the end of 2007, this certification could potentially be
possessed by 1000 trade companies. Also, another certification that has more to do with solar
bureaucracy called "Centre Scientifique et Technique du Bâtiment" (CSTBat) has already proven
it's need. A survey conducted by European Press Service shows that the major hindrance to the
advancement of the PV industry is bureaucracy, which specifically refers to delays in processing
feed-in contracts with new installations and lengthy approval processes.
Other companies entering the market have specialized their involvement. Biohaus, a German PV
wholesaler has decided to limit their customers to continental France where the FiT is more heavily
weighted towards building integrated systems (BIPV). Soleos Solar France is taking the opposite
strategy and is focusing their effort in off-shore regions (DOM/TOM) where few companies
operate. And even further from the mark is Donauer Solar, another German wholesaler who has
decided to focus their attention on large-scale projects that will not benefit from the full availability
of the FiT. [28]
It seems that there are a variety of ways to make use of this type of subsidy. In the future, the
Chinese should look not only to the German market, but also the French market to learn from their
somewhat different approach to the expansion of their domestic market. Next a more capitalist
approach will be investigated to see what kind of incentives and programs are being used.
California
In recent history California has been a net importer of electricity. In the year 2000, at times the state
had to import 50% of its power. Today that figure has fallen to 25% but the need still remains. Local
32
power generation cannot seem to keep up with demand even though California has proven to be
energy efficient: the per capita electricity usage is only 6500 kW/h, which is even lower than
Germany which consumes 6800 kW/h per capita.
In the 1990's California underwent a shift whereby the federal government liberalized the electricity
market which wiped out the state-wide electricity price in favour of market based pricing. Initially
this was reported as a great step forward in conservation and it was thought that with market forces
controlling the grid, pricing will become more competitive and fair. This did not happen for several
reasons, but mainly the power supply companies simply put off planned investments into new
power stations and grid capacities which resulted in massive black-outs around the state. As these
companies were whispering notions of bankruptcy, electricity suppliers out of state were reluctant
and sometimes completely unwilling to sell electricity to California.
This problem has still not been rectified, but the trends have changed at least. Investment in power
generation and grid improvements are on track again, but more importantly, the public has woken
up to the fragility of the electric grid and realized their dependence on it.
Contrary to the official line of the US federal government, much of the US, with California leading
the way, are becoming more ecologically educated. This can be seen with the sales of hybrid
vehicles even with the limited selection that currently exists compared to the internal combustion
engine. Even the republican governor of California, Arnold Schwarzenegger, is using his political
strength to steer the state in a new direction: soon California will pass a bill which bans electricity
generated from coal-fired power plants. California also has the strictest exhaust emission standards
in the country and very soon a zero-emission vehicle will be announced. Schwarzenegger also filed
claims against 6 major vehicle manufactures for environmental pollution and destruction to the
climate which could quickly turn into a billion dollar law-suit. Finally, the governor has said that to
reach the Californian goal of reducing GHG emissions by 25% by 2020 the industry will undergo a
positive change that will create billions in new investment and tens of thousands of jobs, something
which the federal government has ferociously denied is possible.
Certainly the incentives are there for an upcoming solar boom in California: there is a need for
energy expansion, over 340 days of sunshine per year and the political support needed to encourage
PV usage. [29]
33
However, one immediate drawback of installing a PV system in the US is the upfront cost of the
system. In 2006 the average cost of a system was $9.24 US/Wp for a system around 5 kW. At the
same time, comparable German systems were in the range of $5 - $6 US/Wp. Therefore, there was
certainly a need for a new incentive program. Under the old subsidy system which expired at the
end of 2006, customers were paid upfront to help with the high cost of installing a system, but
received no money on a per kWh basis. Under the previous system, the Emerging Renewables
Programme, installations under 30 kW were paid $2.80 US/Wp. Installations over 30 kW were
under a different program called the Self Generation Incentive Programme had similar subsidies
from $2.50 to 2.80 US/Wp.
The subsidy system that California has put in place which began in January 2007 is aggressive, but
somewhat complicated compared to European systems. There are two options available to
consumers and some even have a choice as to which subsidy option they would prefer. The first
option, dubbed the Performance Based Incentive (PBI), is straightforward and applies to all systems
larger than 100 kW. This incentive program will provide continuous returns for the consumers
unlike the second option. For this reason customers can opt out of this system and apply under other
option which will provide a lump sum based on the size of the system as well as some other factors.
The second option that is available, the Expected Performance-Based Buydown (EPBB), applies to
systems less than 100 kW. This system is based on factors such as equipment ratings and
geographical factors such as location, tilt, orientation and even shading. Because of this, it is very
difficult for installers to make accurate predictions for subsidy financing, especially for systems
closer to 100 kW.
Below are 2 tables which outlines the incentives:
Customer Group
Monthly Payment
Duration
Commercial
0.26 US$/kWh
Five Years
Residential
0.39 US$/kWh
Five Years
Goverment/Non Profit*
0.37 US$/kWh
Five Years
Table 5. Programme 1: Performance Based Incentives
34
Customer Group
Up-Front Incentive
Commercial/Residential
up to 2.50 US$/Wp
Goverment/Non Profit*
up to 2.35 US$/Wp
Table 6. Programme 2: Expected Performance-Based Buydowns
Yet this new legislation has been met with some skepticism. However to compare the Californian
incentive program to the German version is not worthwhile. The question of how the German
market will develop has been answered and now the question is how will the Germain PV market
be financed. In California, since the subsidy levels are not nearly as high, nor will they likely
become, the state will have to rely on its traditional strength that lies in the high-tech industry as
well as its excellent climactic conditions which can deliver more than 2000 hours of sunshine each
year. Another attractive area that is specific to California is the expanding catalog housing
construction industry. And if this can be combined with photovoltaics into an attractive option for
buyers interested in zero energy housing, solar installations would become quite commonplace.[29]
Canada
The growth in the Canadian sector has been constant over the past 14 years at about 20%, reaching
20,50 MW of installed power, significantly less per capita than other IEA countries of similar
insolation levels. Still the market is continuing to grow despite the low price for conventional
energy - mainly in the off-grid sector (93% is used in applications such as transport route signaling,
navigational aides, remote homes, telecommunications and remote sensing and monitoring).
The interesting point here is that much like China, Canada has historically focused on rural
electrification much more than grid connected PV. And Canada, much like China, has no focused
their efforts on the development of a domestic market. Recently, the Canadian RESOP program
which employs a feed in tariff of 0,42 $CDN will likely increase PV installations at a predictable
rate. This is certainly an area China could monitor to gain knowledge for the future.
35
Japan
The Japanese market is another good example of the effectiveness of subsidies. But now that Japan
has a PV industry which is subsidy free, will the government have to step in once again to stimulate
growth? Japan initiated the PV subsidy system under the direction of the Ministry of Economy,
Trade and Industry (METI) back in 1994. Initially the program covered 50% of the installation cost
and then in 1997 the system changed to pay a price depending on the size of the system installed. In
1997 the subsidy offered compensation of ¥340,000/kW (US$3223/kW at current rates) and steadily
decreased to the end of the program's life in 2003 with a subsidy of ¥90,000/kW ($865/kW). What
is left is a healthy PV industry which is continuing to grow at sustainable rates.
Because of this subsidy program, Japan was able to secure its position at the top of the worldwide
PV industry for both installed systems and export of solar power equipment. The interesting aspect
to Japan's situation is how their PV market is now sustained with no more subsidies and PV is
competing with conventional energy. Granted they have very high electricity prices which is
necessary for PV to become competitive, therefore Japan can serve as another model for policies
much further in the future.
4.2
Chinese Energy Policy
China plans to increase their renewable energy consumption to a full 10% by 2010. This is the
main goal of China's Renewable Energy Law that was implemented in the beginning of 2006. This
new law requires grid operators to electricity from registered renewable energy producers. Also, a
fund has been set up to offer financial incentives to encourage the development of renewable energy
projects. And finally, the law includes some very clear penalties for non-compliance. Considering
that in 2003 China used only 3% renewable energy, this is a major step and has been recognized as
such by many environmental critics around the world, most notably, Greenpeace.[30]
Yet a Chinese feed-in tariff still does not exist. Experts in the field do not believe the Chinese
government will seek to institute this kind of incentive in the near term. For the moment they are
relying on sever different kinds of financial support from the government. For example, during the
Tenth Five Year Plan (2001-2005), the central government invested between 5,2 – 6,2 M € in PV
R&D and the Eleventh Five Year Plan is projected to double that figure to 12,4 M €. However, a
comparison to Germany and Japan is a bit discouraging since respectively they invested 24,4 M and
36
147 M € in 2004 alone.[3]
In any case, the programs that do exist are certainly pushing the market forward. The Brightness
Programme that began in 1996 and is scheduled to run until 2010 aims to provide 100 watts of PV
electricity to about 23 million people. Another venture connected with the Brightness Programme
called the Township electrification programme completed in 2004 and installed about 24 MWp. In
2006 several other projects such as the Township Electrification Programme and the rooftop
programmes in Shanghai and Wuxi have substantial government investment.
Thanks to the
government support through subsidies and direct funding of some projects, China's 2004 capacity
was 40 MWp.[3]
But the question remains if China has directed their research funding to the right areas. Currently
the majority of funding is aimed at improving material quality of PV cells and the accompanying
manufacturing process. While they have focused their efforts, they have neglected some important
areas such as system components like inverters, batteries and control electronics which typically
make up about 25% of a systems costs. Another area that has not attracted attention from PV
developers is the integration of R&D into energy policy and domestic market deployment. This
might seem in line with the national approach to grow quickly and take advantage of the current
cheap labour availability but in the medium to long term, to capitalize on domestic markets, China
will need to innovate in more areas of the supply chain in much the same way that Germany has.[3]
The major contributor to the development of the PV market is the Renewable Energy Law that took
effect at the beginning of 2006. The law is divided into several sections covering how programs
will be funded, how they will be monitored and what concrete goals are expected to be achieved.
The interesting aspect to this law is the section where legal requirements are outlined: any criminal
activity is pursued in a direct manner and the failure of utilities to purchase all electricity from a
renewable producer is also punishable. This type of law, with the appropriate monitoring, could
certainly make it easier for renewable energy startup companies as well.[31]
Furthermore, if the present government actions on renewable energy as a whole are any indication,
PV will likely receive much more attention in the future since the production of certain components
in the PV supply chain parallels China's history of large scale manufacturing and OEM production.
There is no doubt that China's main strength lies in their ability to increase manufacturing levels
quickly, and with the proper government policy and support, this is likely to occur for the PV
37
industry just as it has for so many other product lines.
38
5
5.1
Silicon and the Supply Chain
Silicon Bottleneck
Over the past 5 years, there has been a seven-fold price increase for PV-grade silicone. The cause of
this is simple: the rapidly expanding PV market is overwhelming the available supply of silicon
which is shooting up the price. Previously, PV the industry was satisfied with the excess or rejected
silicon from the semiconductor industry, but currently the demand of the industry has increased to a
point where over one third of silicon is being sold to the PV industry. 11 000 tonnes of silicon were
sold to the PV industry out of a total 30 000 tonnes produced in 2005. In actuality, about 15000
tones were used for solar cell production which is enough to make 1.15 GW of solar cells, with the
excess coming from remaining inventories and rejects from the semiconductor industry.
Yet, with such a steep price increase, subsidies and technological improvements alone will not be
able to sustain such high market growth although silicon producers are doing their best to keep up
with demand. Currently, an additional 20 000 tonnes of silicon are projected to come on the market
in 2008-2009 from the world's leading PV-grade silicon producers: Hemlock, USA, REC Silicon,
USA, and Wacker, Germany. A variety of strategies are being used.[32]
The current strategy that is being used by most facilities is the long established Siemens process
which produces highly pure PV-grade silicon but at high prices. It is due to this fact that a global
discussion about the upper impurity levels of solar silicon has begun as a means to help reduce the
constantly increasing price of silicon. However, to achieve efficiencies upwards of 18%, a very high
purity is needed (in ppm, O:1, C:1, B:0,5, B:0,025, As:0,025, Fe,Al,Cr,Ni,Ti,Mo,V,Cu,Zn sum to
less than 0,1) and using the current Siemens process, cost reductions are very difficult.
Besides the expansion of the current production from the Siemens process promised by silicon
producers, three companies are working on developing new processes that promise to reduce PVgrade silicon production costs. Wacker Chimie, a German company is developing a process called
fluidized bed decomposition of trichlorosilane. Tokuyama Corporation is working on hot wall
decomposition of trichlorosilane and melting of the formed silicon. Also, Joint Solar Silicon has a
two-step process where the decomposition of monosilane to silicon powder in a free space reactor is
subsequently compacted into denser silicon pieces. All methods produce the necessary purity for
PV production and research is ongoing to reduce costs and increase efficiency within the
39
process.[33]
In 2005, a full 95% of solar cells produced used silicon-based technologies. Recent breakthroughs
in thin-film technologies are encouraging, but as The Prometheus Institute for Sustainable
Development, of Cambridge, Massachusetts remarks: "Thin films, while promising, will not
increase their market share fast enough to keep the PV industry from relying almost entirely on the
polysilicon supply through 2010. Understanding the supply of silicon, therefore, is essential to
understanding the prospects for the PV industry as a whole."[34] So in the interim, with government
incentives at a point where solar electricity can be competitive with conventional power, silicon
companies are scrambling to sell as much as they can. Yet, what will happen when thin-films begin
to capture their share of the market and the silicon bottle neck that exists disappears?
To being with, competition will increase. The current state is one of partnerships and acquisitions
Schott and Wacker have joined in wafer production until 2012 investing 370 € over the next couple
years. Also, Solaria of California have signed a deal for 1,35 GW of solar cells from Germany's
Q-Cells. Finally, SunPower has entered into a contract with NorSun, a German startup for 2 GW of
silicon ingots and also they have acquired Powerlight, a large solar integrator in November 2006.
5.2
Geographic Distribution of Silicon Suppliers
In 2005, more than 50% of the world's silicon suitable for PV use was produced in the United
States. Japan and Europe shared the rest with Germany making up the largest portion in Europe.
This uneven ratio is slowly changing however, and in the years to come a more market share will be
taken up by China. The European increase is mainly due to Germany again, but Norway is also
expected to contribute a significant portion.
Country/Region
US
Japan
Europe
China
Russia/FSU
RoW
2005
2010 (projected) 2010 (potential)
54,2%
40,7%
27,6%
24,3%
14,8%
9,6%
21,1%
32,6%
30,2%
0,4%
7,5%
18,8%
N/A
1,2%
10,4%
N/A
3,1%
3,3%
Table 7: Geographic distribution of polysilicon production as a percent of
total production [34]
40
Figure 6: World Map of Polysilicon Production [34]
Also, given the low cost of shipping silicon, it is interesting to see where companies will choose to
place their factories. There is very large potential in both China and the former Soviet Union but at
present, China has shown the most dedication in this area. Above is a table demonstrating the
potential and projected outcomes for 2010. In 3 years time, according to projections, China could
see the biggest relative increase since formerly their polysilicon production was almost nonexistent.
In China, the largest monosilicon producer is the Jinglong Group, with a production capacity of
3000 tons. Its is located in north China's Hebei Province. Its monosilicon output made up 50% of
China's total in 2006. Jinglong has joined in the expansion plan of the world's largest polysilicon
producer Hemlock Semiconductor Corporation (HSC) and signed a long-term supply contract, with
may ensure a certain part of its raw material supply, according to Jinglong's Chairman. [35]
5.3
Silicon Processing
Silicon Refining
The refining process for silicon is not very complicated, but since the level of purity required by the
PV industry is 99,9999 %, there are several steps along the way to achieve this result. The first step
in the production of polysilicon is mining. Here the quartz rock is extracted from the mine and
41
added into a furnace with coal and woodchips or charcoal and headed to produce a liquid. Once the
liquid is cooled, the silicon can reach a level between 96 - 99.0% purity. At this stage, the aluminum
industry used about half of the global production. This is a very large amount respectively - in 2005,
global matallurgical silicon (MG-Si) production was above 1000000 MT while the PV industry
accounted for just 15 000 MT.
To increase the purity of the silicon, there are several methods that can be used. In 2005, 91% of PV
grade silicon was made using the traditional Siemens process with the remaining 9% created from
the fluidized bed reactor process. The Siemens process reacts HCl with MG-Si which forms a liquid
which is subsequently vaporized. This gas is then deposited onto silicon rods that are heated to 1100
C. The use of the trichlorosilane (TCS) has the advantage of high deposition rates and high
volatility which helps remove the problematic impurities, specifically boron and phosphorous.
However the reason why much research is going into other methods of purification is due to the
high electricity consumption for maintaining the process temperature. Another process to further
refine the silicon deposits monosilane gas onto heated silicon rods. The higher purity of the
monosilane in comparison to the TCS increases the purity, but of course, this also increases the
overall cost.
The fluidized bed reactor (FBR) has the advantage over the Siemens process for capital cost and
electricity consumption, but since the technology is still relatively new the associated economics are
not well understood. The process itself was developed by Ethyl Corporation and they used silicon
fluoride instead of MG-Si. In the process, the silicon seed is put into the reactor and silane and
hydrogen gases pass through to allow deposition. Another experimental process called Vapor-toLiquid Deposition (VLD) which is gaining attention is that of Tokuyama. They have developed a
process which uses the same feedstock as the Siemens process, but the deposition occurs in a heated
tube where the vapor condenses to liquid allowing for faster final product formation.
With current trends in the industry, producers are moving away from the Siemens process and
towards the FBR process. Also, many producers who have traditionally focused on providing highpurity silicon for both the Integrated Circuits (IC) and PV industry have decided to focus on the
latter since IC requires purity levels which are thousands of times greater and incur higher costs for
production. It is predicted that in 2010, the Siemens process will only account for 75% of
production with the FBR process increasing to 13% and specialized PV-MG production AT 11%.
Experimental processes will account for the remaining 1%. [7]
42
However, with all the different types of silicon refining, there remains the problem of high
electricity costs and the need for a highly trained labour force. With a general analysis of the
Siemens process, the Prometheus Institute estimates that a average figure of about $100/kg for the
construction of a polysilicon factory. With today's average efficiency rates, a large factory that can
process 10 000 MT of polysilicon can produce enough silicon for about 900 MW of annual PV cell
production. And assuming capital cost recovery and operating costs, the cost of silicon is at least
$0,60 to $0,75 per watt which is about 15 to 18 percent of the total cost of a solar modules today
($3,50 per watt). For solar power to reach competitive levels the price must reach the $2,00
threshold.
Ingots
There are several forms which silicon can take after the refining process: ingot, block, sheet or
ribbon. Furthermore, certain processes are only for creating monocrystaline ingots such as the
Czochralski and float zone methods. Polysilicon is made using directional/solidification casting or
ribbon/sheet methods.
The Czochralski method begins with a silicon seed attached to a rod which is dipped into a large
crucible which contains molten silicon. As the seed is drawn up, a monocrystaline ingot is grown.
In 2005 this method accounted for a full 35% of all global production, and although it takes
comparatively longer and is more costly than other methods, the resulting cells have very high
efficiencies. The Float Zone method is similar to the Czochralski method in that a silicon seed is
still used at the beginning of the process, but instead, a heating coil is passed along the forming
ingot to separate the input silicon from the newly crystallized ingot. This type of crystalization is
even more costly than the Czochralski method, but it can be worth it if very high efficiencies are
necessary since this method is produces silicon very low in oxygen.
Wafers
Transforming the purified and shaped silicon into wafers is very wasteful process. When using
standard techniques to saw the ingots, somewhere between 200 - 230 µm worth of silicon are lost to
make wafers that are between 200 - 300 µm. New techniques are under research to reduce waste
and also laser cutting is sometimes used but in this case there is material degradation because of
heat produced from the laser. Yet, because some losses with wire cutting are inevitable, a reduction
43
in silicon usage is the main focus of research. In 2005 it took about 12 grams of silicon to create 1
watt of electricity, including losses from wire cutting. For this to be reduced which would in turn
lower overall costs of solar modules, three main goals must be achieved: wafers should be sliced
thinner, ribbon and sheet methods need to be more widely used and cell efficiencies need to
improve.
5.4
Polysilicon Capacity
The current shortage that exists in the polysilicon industry can be attributed to two main factors:
first, after the semiconductor industry crash of 2001, there was excess semiconductor grade silicon
that was suitable for the PV industry and secondly, after the PV industry had used up the excess
silicon new capacity had not been planned due to the uncertainty that is inherent in the rapidly
growing PV industry. In fact, the PV industry grew so quickly and relied so heavily on the excess
silicon capacity from the semiconductor industry, that very few PV companies decided to pursue
plans to secure polysilicon specifically for solar use. Also, when looking at the growth of the PV
industry as a whole over the past ten years, the industry had an annual growth rate of about 30%,
whereas new capacity added only grew by less than 4%. This will change though, several of the
larger companies are dedicating many resources to polysilicon production now. In 2005, the 7
largest polysilicon producers were Hemlock (7700MT), Wacker (5500MT), REC (5300MT),
Tokuyama (5200MT), MEMC (3800MT), Mitsubishi (2850MT) and Sumitomo (800MT). Two
other companies in China were able to provide an additional 130MT as well.[34]
The future of the aforementioned companies looks bright. All of them are planning expansion of
polysilicon production - the largest being the current industry leader, Hemlock, which plans to
increase production to 19 000 from their 2005 level of 7 000. Here is a table which outlines the
projected growth of these companies (These estimates also take into account potential productivity
improvement, construction delays and reductions in plant size.)
44
Company 2005 Production
Capacity (MT)
Hemlock
Wacker
REC
Tokuyama
MEMC
Mitsubishi
Sumitomo
Tot. China
7700
5500
5300
5200
3800
2850
800
130
2010 Production
Capacity (MT)
(projected/potential)
19,000/-14,500/-15,500/-5,400/-8,000/-3,150/-1,300/-7,300/--
Technology
(Siemens, FBR,
VLD, MG to SoG)
Siemens
Siemens/FBR (trial)
Siemens/FBR
Siemens/VLD (trial)
FBR/Siemens
Siemens
Siemens
Siemens
Table 8: Silicon Producer Capacity in 2005, projected and potential in 2010 and
technology employed [34]
In this summary of the top polysilicon producers, Hemlock and Wacker share a similar outlook for
the future. Both companies expect to expand to 2 and a half times their current production capacity
and in 2005 they sold 40% of their product to the PV industry. Renewable Energy Corporation
(REC) differs from the previous 2 companies in that they are one of the few PV companies that are
fully-integrated. From silicon production to distribution and installation, REC has full or part
ownership of subsidiaries throughout the PV supply chain. Tokuyama has chosen a different
approach as well - although they only plan to increase their capacity by 200 MT, this full amount is
expected to come from the promising new technology called vapor-to-liquid deposition which
allows for much faster production and produces a product more appropriate for PV applications due
to its reduced purity. If their new 200 MT VLD plant can achieve expectations, the company
believes they could become the world's 2nd largest polysilicon producer.[34]
MEMC, with 2 factories, one in Texas and the other in Italy, are currently the only company
producing granular polysilicon at an industrial scale. This has given them a competitive advantage
as some companies prefer polysilicon in this form. Wacker and Hemlock have pilot projects to
produce granular silicon as well so this advantage could be short-lived, but with planned expansion
in 2008 which would almost double their current production rates, MEMC is keeping pace with the
larger companies. The remaining 2 companies on this list are expanding but have not shown the
same level of commitment. Mitsubishi has planned only minor expansion in relation to their current
capacity, while Sumitomo is expanding only in relation to the increased demand from the
semiconductor industry.[34]
45
5.5
New Entrants to the Silicon Industry
New and emerging companies entering the PV industry definitely have competition. Although the
past decade saw polysiclicon capacity increases lower than 4% versus an average of almost a 30%
increase for PV production, the shortage of silicon will soon be over. However, there is a stark
difference in the projected amount of polysilicon that will come online and the potential production
amounts. Also of interest is the level of commitment new companies have shown to the newer and
less established technologies involving metallurgical silicon processing to solar grade silicon (MGSoG).
Company
DC Chemical
Hoku Scientific
Isofoton et al.
French Consortium
Crystal
Russia/FSU
M.Setek
Elkem
JSSI
ARISE
JFE Steel
Solar Value
Global PV Specialists
Total China
2005 Production
Capacity (MT)
-------------130
2010 Production
Capacity (MT)
(projected/potential)
3,000/-1,500/-2,500/-2,000/3,000
1,200/---/14,500
6,000/-5,000/10,000
850/---/2,000
100/-5,300/10,000
--/2,000
7,300/22,100
Technology
(Siemens, FBR,
VLD, MG to SoG)
Siemens
Siemens
Siemens
Siemens
Siemens
Siemens
Siemens
MG to SoG
Silane to SoG
MG to SoG
MG to SoG
MG to SoG
MG to SoG
Siemens
Table 9: New Silicon producer capacity in 2005, projected and potential in 2010, and
technology employed [34]
Of these companies listed, DC chemical, Hoku Scientific, Isophoton, a French consortium and
M.Setek have chosen to use the conventional Siemens process in their expansions. DC Chemical
has received a $250 million investment from SunPower to make a 3,000 MT polysilicon facility.
Hoku Scientific, a fuel cell company based in Hawaii, has chosen to diversify and has secured
investments of $250 million, some of which is from other solar companies in the form of contracts
for feedstock material. This will fund a 1,500 MT polysilicon facility as well as a 30 MW module
plant. Isophoton, which is a public company from the Andalusian government has joined with
Endesa, a Spanish utility to form the first Spanish polysilicon plant. The plant will be 2,500 MT
and it is positioned perfectly as this region is expected to be a solar installation hot spot. Finally,
the collaboration of the French companies Econcern, NorSun and Photon Power Technologies, have
planned to build a solar polysilicon plant dedicated to the solar industry. The consortium is still
46
unsure of the size of the plant, which will be somewhere between 2,000 and 3,000 MT, but they
expect it to be operational in 2008. Finally, M.Setek, a Japanese silicon-wafer company has
planned to enter the market and by 2010 they will produce 6,000 MT of polysilicon.
These previously mentioned companies have all posted reliable information concerning their
expansions or they have proven reliability in the past in similar industrial practices. Furthermore,
since they are all employing the Siemens process to produce polysilicon, their capacities and future
potential can be easily tabulated. Other companies entering the market, although having some
experience in silicon production, are either less reliable because they have not secured all necessary
funding, have not provided a timeline, or have chosen alternative technologies to the Siemens
process so for this reason, their production levels are not as concrete. The major companies of
interest here are Elkem Solar, ARISE, SolarValue, Global PV Specialists, GiraSolar and Dow
Corning.
Elkem Solar of Norway is probably the most influential in this grouping. They currently provide
about 50% of the world's metallurgical silicon and with their experience in this area, they plan to
employ metallurgical silicon refining methods to produce solar grade silicon. Their contribution to
the polysilicon market is important for 2 reasons. First, the size of their expansion from 5,000 MT
to a full 10,000 MT by 2010 would make them the fourth largest polysilicon producer in the world
and would have about 9.8% of the market share. Second, because the silicon will be solar grade,
this will greatly reduce costs compared to traditional processing methods. For some time traditional
polysilicon made with the Siemens method may need to be blended to attain the required purity for
solar applications, but as the technology will undoubtedly improve, costs will continue to decrease.
ARISE Technologies of Canada has recently entered the silicon market - in the past they focused on
the downstream end of the supply chain. Cash and donations from a consortium including the
Canadian government have made their entry into the market possible with almost $20 million in
funding. ARISE plans to conduct joint research to form a proprietary solar grade polysilicon
production process with help from the Univerisity of Toronto and the University of Waterloo. By
2010 they hope to have a 2,000 MT plant in operation.[34]
SolarValue has added to their business by purchasing a metallurgical silicon company from
Slovenia. They will use this company as feedstock for their MG to SoG operation that they hope
will reach 10,000 MT by the year 2010. For this to happen, several improvements from research
will need to be implemented, but this expansion is only in the planning stages at the moment. The
47
California based Global PV Specialists have chosen to enter the market to produce silicon solely for
their own customers. Their business is mainly consulting and setting up turnkey factories for cell
manufacturing and adding a polysilicon supply to these factories will certainly make their core
business more attractive to prospective clients. GiraSolar is another company showing promise.
They are an umbrella company operating out of the Netherlands and control several different types
of solar energy companies at several levels in the supply chain. Although they have no estimates on
when they will be able to produce their pilot factory, they have applied for patents for a proprietary
process they believe could cut up to $12/kg off the current cost of producing solar grade silicon.
Finally, Dow Corning has come up with their own unique type of polysilicon which they have
called PV 1101. DC makes this silicon by purifying metallurgical silicon and then sells this its
customers who then mix it in to their own feedstock at 10% or more. Resulting blend ratios and
efficiencies have not been given due to non-disclosure agreements, but a rise in demand would be a
clear indicator to the quality of the product and as of yet, no reports have surfaced of reduced cell
quality or efficiency.[34]
5.6
Projections for the Future
Future of Polysilicon in the Western World
For the next few years up to 2010, the top three companies, Hemlock, Wacker and REC will
maintain their positions in the market as they did in 2005. They have all added significant
capacities with 2008 being the first year where all 3 companies will have their expansion plants
fully operational. In 2009 Hemlock and REC will increase production yet again while in Wacker
will come online with another facility in 2010 totaling 47 000 MT of capacity. The fourth largest
producer, Tokuyama, will be overtaken in the years to come. Speculation on why this will occur has
2 arguments, the first being that the Japanese company is not as committed to future PV sales as the
industry leaders are, or its possible that expansion plans are under consideration but have not been
made public. This also brings up the interesting point that the many in the industry are now talking
of oversupply. This would be detrimental to companies employing processes that purify silicon to
levels only suitable for PV use as any excess solar grade silicon could not be used by the
semiconductor industry without further processing.[34]
The most dramatic change here is coming from both China and companies comprised in the Other
section. These companies, either new entrants to the industry or an expansion of current PV
48
activities to include silicon processing will make up over 25% of production in 2010. Also, if
China can fully realize their potential, they could seize upwards of 18% by 2010.
Here is a table showing the predicted usage of silicon by year and by sector. It is believe that 2008
will be the year where the PV industry overtakes the semiconductor industry in terms of silicon
needs.
Year
2003
2004
2005
2006*
2007*
2008*
2009*
2010*
Poly
Poly Prod. Demand IC
(MT)
/ Semi
26700
17000
28800
19350
31080
20627
35800
22277
40210
24282
57220
26710
71370
27245
77370
28062
Residual Poly Surplus Total Poly
Poly for
from Past
Available Wafter c-Si Other Solar Solar Prod.
Solar
Prod.
for Solar Prod (MW) Prod. (MW)
(MW)
9700
11000
20700
671
80
751
9450
11700
21150
1142
114
1256
10453
7118
17571
1523
170
1693
13523
13523
1610
258
1868
15928
15928
1828
449
2277
30510
30510
3162
720
3882
44125
44125
4641
918
5559
49308
49308
6035
1098
7133
Table 10: Pipper Jaffray solar industry production estimates [34]
Chinese Polysilicon Production
Currently, polysilicon manufacturing is dominated by seven global leaders. In the year 2006, 36.000
tons of silicon were produced. Over 50% of the silicon was supplied to the solar industry, with the
rest supplying the semiconductor industry. Of the total amount, only 500 tons were produced in
China while 5260 were required in this country.
This clearly shows how 95% of the used silicon in China has to be imported, increasing their solar
cells manufacturing costs and limiting their production capacity. Even though new silicon
manufacturing plants are being built, the 7 global leaders hold the patents for the process
technology, leaving China with inefficient processes that consume from 2 to 3 times the amount of
energy required to manufacture the same amount of silicon.
On the other hand, the biggest silicon manufacture plants in China produce up to 300 tons of silicon
per year, 800 tons below the required 1000 tons per year to reach minimum economy of scale
making it harder for China to keep up with international silicon prices. In the following tables,
China's polysilicon industry actual status can be appreciated:
49
Company
Luoyang Zhonggui
Sichuan Emei Semiconductor
Capacity (tons)
300
200
Table 11: China Polysilicon Capacity (2006)
Semiconductor demand
Solar industry demand
Total Demand
Polysilicon production
Polysilicon shortage
2004
910
585
1495
57,5
1437,5
2005
1060
1596
2656
80
2576
2006
1260
4000
5260
230
5030
Table 12: China Polysilicon Production and Demand 2004-2006 (tons). Notes: Solar
cell polysilicon demand is calculated as: 2004: 12 tons/MW; 2005: 11 tons/MW;
2006: 10 tons/MW. 2006 crystal-silicon solar cell production is about 400MW [36]
Regardless the technical limitations previously mentioned, China's local polysilicon supply is
growing, companies like Luoyang Zhonggui and Emei semiconductor have been increasing their
manufacturing capacities, another company, Sichuan Xinguang who began manufacturing solar and
semiconductor polysilicon, has now the largest polysilicon production line in China. Actually China
is the fourth country to achieve polysilicon manufacturing capacity over 1000 tons per year.
If all the planned projects become a reality, China's estimated polysilicon manufacturing capacity in
2011 will reach 12.660 Tons per year, and China's polysilicon shortage will be solved. Even though
the situation looks promising for the polysilicon supply within China, companies like Suntech, the
biggest solar panels manufacturer in the country, has secured his position in the market through
long-term contracts with several international silicon suppliers such as REC (Norway), MEMC
(USA), Comtec (USA) and Sunlight (USA). The same scheme is being followed by other Chinese
companies such as Trina and Ja Solar who secured their silicon supply with silicon suppliers from
Germany and South Korea.[36]
50
6
6.1
Market Analysis
Costs of Different Technologies
As mentioned in section 3, there are mainly three available technologies for commercial PV: singlecrystal, polycrystalline and thin films.
Crystalline-based technologies, are the oldest, and since 1976, they have experienced a price drop
of around 5% per year. However, due to the silicon shortage, cost rose considerably between years
2004 and 2006. This price rise have encouraged the develop of new silicon-free technologies with
great potential for a further price reduction.
With the aggressive entering of China into the PV market, one of the approaches required for an
effective price reduction of solar modules has been addressed, mass production. However, some
different approaches could also help PV technology finally reach a price where it can compete with
traditional non-renewable technologies.
Crystalline-Based Technologies
A crystalline-based solar cell requires around 40% silicon for its construction, therefore this
technology is highly dependant on fluctuations of the market price for this semiconductor. A price
reduction on silicon would immediately drop the price of these solar cells. Up until a few years ago,
solar cells where using IC-grade-silicon for its construction, this grade of silicon (1E-09%
impurities allowed) is more pure than the required for solar cells (1E-06), and the efficiency
improvement it allows, does not justify its price increase. To address this price-reduction approach,
some companies are producing solar-grade-silicon at lower prices than the one required for
integrated circuits.
Once a low-price supply of silicon has been achieved, it should be used in a very efficient way.
Actual solar wafers thickness is around 240um, therefore having a production efficiency of around
45 wafers per kg of silicon (~100W at 10g/W) [37]. If thinner cells can be produced, such as the
180um thick cell Sharp's prototype, a considerably increase in production efficiency can be
achieved. Some research has been done to reduce cell's thickness down to 100um, but the cells
become to brittle, and represent a significant problem for the manufacturing process of modules.
51
Another strategy for price reduction in use is to produce more polycrystalline-based solar cells than
single-crystal solar-cells. Even though these last ones provide a better efficiency, are considerably
more expensive, and it is possible to achieve commercial panels based on polycrystalline cells with
efficiencies of 18.5% (Kyocera).
Finally, once the usage of raw materials has been highly optimized, the remaining cost to reduce the
production of c-Si-based modules is to optimize the manufacturing process of modules itself. In this
area, 2 different approaches are in use today: most European companies, such as Q-cells, are
working extensively in automate the PV manufacturing process as much as possible, therefore
reducing broken cells, increase energy consumption and reduce production time. China, on the other
hand, possess certain characteristics that makes the country more competitive from an economic
point of view. First, labor costs can be less than $200/month per worker, and its companies also
benefit from lower SG&A (Sales, General, and Administration) R&D and tax rate costs. Therefore
Chinese PV manufacturing lines tend to be more labor-intensive instead of using automated
assembly equipment.
In 1975 the price of PV technology was about $30/Watt, and has gone down to around $3/W in
more than 30 years by using all the approaches mentioned before. The lowest price the PV industry
has experienced was $2.60/W in 2003 using Sharp's solar modules. After that, due to the shortage of
silicon it rose again during the years 2004-2006 but started to show a reduction during middle of
2006, due to the introduction of several new silicon manufacturing facilities. In figure 7 this effect
could be appreciated when analyzing the price per watt peak for commercial modules of 125W or
more.
4.9
4.85
€, Euro/Watt peak
4.8
4.75
4.7
4.65
4.6
4.55
4.5
01/14/04
08/01/04
02 /17/05
09/05/05
03/24/06
10/10/06
04/2 8/07
11/14/07
06/01/08
Date
Figure 7: Retail price per Watt peak in Europe[38]
52
Thin-Films
Even though it lags behind c-Si technologies when it comes to efficiency analysis, thin-films have
got greatly stimulated during the silicon shortage of the last years. A-Si, thin-films technology
leader, have the advantage of requiring only around 1% of the silicon required for building a c-Si
module, therefore not depending of the silicon supply.
Also as explained before in section 3, thin-films offer several advantages that make the technology
more flexible than c-Si based PV technologies, specially in the manufacturing process, therefore
they can achieve a very low price when set into mass production scheme. First, since the
temperatures required to place the material on the substrates is considerably lower than the ones
required for the same process when using c-Si, the substrates required are cheaper and even some
flexible materials can be used, allowing thin-films to be used for several specific applications where
c-Si can not. Second, the purity of the materials required is lower, therefore the raw material
obtaining process becomes cheaper than obtaining highly pure silicon. And finally, since they are
integrated into a monolithic interconnected module the connection costs reduces the overall module
price.
Also, there are some different approaches that can be followed, besides reductions in the
manufacturing process of thin-films. An important one is its integration in buildings (BiPV), since
it integrates the building structure in a better way than c-Si modules, the price of the materials that
are being replaced by thin-films modules can be deducted from the module price.
Thin-films still account for less than 10% of the modules installed worldwide, however, the increase
in the price of silicon, has boosted up the development and manufacturing of thin-films
technologies, and thin-films account for almost half of the installed PV systems in the US, mainly
due to the introduction of very succesful thin-films manufacturing companies such as First Solar.
This company, by using CdTe thin-films, achieved the lowest cost per manufactured watt in the PV
industry at a production scale of only 100MW in 2006, and the company announced costs of $1.25
per watt today, but it expects for costs to drop per watt below $1 by 2009. A price very hard to get
for c-Si based technologies if a there is not a drastic price drop of silicon in the months to come.
Just as First Solar, many new companies will start appearing in the next few months, and the old
ones will start manufacturing some type of thin-film-based technology. The main reason for this is
because there are typically shorter lead times for building thin-films solar manufacturing facilities.
53
Companies like First Solar take between nine and 15 months to build a new plant, while it takes
around 3 years to build polysilicon plants. This means that thin-films companies can respond faster
to quick changes in the PV market demand, such as the changes we have experienced in the last two
years. As an example, the biggest solar cells manufacturer, Sharp, announced the construction of
their 1GWp thin-films manufacturing facility.
On the other hand big players, Suntech for example, do not seem as interested in manufacturing
thin-film solar cells as the previously mentioned companies. By the end of 2007, Suntech only had
announced a production capacity of 50MWp of thin-film based solar cells. Instead, they drastically
increased their production capacity on c-Si based technologies, and signed large long-term contracts
with silicon suppliers. The reason for this is that although thin-film based technologies are already
commercially available, they are still under intense research and development. A trend not very
often followed by Chinese manufacturers, they instead, tend to optimize the production scale of the
most used technology available at the moment.
6.2
Major Players
With the world's five leader manufacturers in the PV industry controlling more than 50% of the
total production, analyzing their strategies and plans for the future, can give us a clear perspective
of what to expect in the future to come.
As explained before, companies formed in USA leaded the market during the first years of the PV
sector, mainly thanks to the great boom of the spacial industry. Later on, Japan's companies
production capacity increased at a very remarkable rate and have been leading the world's PV
production then since. However, mainly thanks to government subsidies and environmental
policies, Europe have gained more and more market each year.
In the following figure, the PV manufacturing share by country by the year 2005, is shown.
54
Figure 8: PV manufacturing share by country, 2005[39]
As it can be clearly seen, the major players were Japan (45% Share) and Europe (28%). However,
China has had the fastest growth in the past two years in the history of PV (In production capacity
increase in MWp). By year 2005, China's production was 150.7 MW and by end of the third quarter
of year 2007, just Suntech alone (China's biggest PV manufacturer) was 420 MW, and it is
projected to be 1GW in 2008 [40]. With an estimated current amount of 160 module and over 40
cell manufacturers in the People's Republic of China [41], China's future PV manufacturing share is
definitely going to be considerably higher.
Now, a brief description of some of the world's leader PV manufacturers will be performed,
showing their biggest milestones in the past years and their successful strategies.
Suntech
Founded in 2001 by Dr Shi Zhengrong, Suntech is definitely the major player of the moment, after
opening their 1 gigawatt facility in Wuxi, China, Suntech became the second largest solar modules
manufacturer in the world. Suntech started in september of 2002 their first production line with
10MW capacity, expanding constantly per year, reaching 50MW in august of 2004 and becoming in
2005 the largest PV manufacturer in China with the start of their 120MW production plant, China's
55
first mega-scale PV manufacturing facility. [42]
After an impressive growth production rate, Suntech entered New York's stock market in August of
2005, where, thanks to investor's money, the company kept its expansion, by several acquisitions
and joint ventures: 66.88% in August 11, 2006 of MSK Corporation (PV Manufacturer specialized
in BIPV). On february 7, 2007, the company established a 80% owned subsidiary, Shenzhen
Suntech Co., Ltd, with Shenzhen New Photovoltaic Technology Development Co., Ltd and
Shenzhen Yutong Investment Co., Ltd. On February 15, 2007, the Company established a 90%
owned subsidiary, Jiangsu Suntech Co., Ltd, with Wuxi New & Hi-Tech Venture Investment Co.,
Ltd. [43]
During year 2007, Suntech increased its capacity target three times, first from 390 MWp to 420
MWp, then to 480MWp [41], and finally during their third quarter report results in november 15,
the final target was 540MWp. In this report, it was also announced their target for 2008, 1GWp, 2
years ahead of schedule[40]. Due to this results, its stock price has increase drastically during the
past few months, as it can be seen in the following figure, and its trend is to keep raising.
Figure 9: Suntech's stock price during the last 2 years[44]
Now, in order to keep its actual position in the market, Suntech can't stop it's aggressive expansion
scheme, that's why one of their key strategies is to reduce the cost of silicon. This can be achieved
by creating long-term contracts with silicon manufacturers, buying silicon for prices below the
actual market price and fixing that price for several years. This strategy has been already used by
the company, and in November 14, the company announced they had entered a two silicon-wafer
supply agreements that last through 2016. [45]
56
Suntech's current leader products are monocrystalline and multicrystalline silicon PV cells with
16.8% and 15.6% efficiencies respectively. That explains the amount of effort put into reducing the
cost of silicon supply, so the company can increase its gross margin.
On the thin-films area, with the constant development of this technology and its increase in
efficiency and decrease in price, Suntech wants to be also an important player in the supply of thinfilms in the future to come. To achieve this, the construction of their R&D and manufacturing thinfilm factory in the Caohejing High Tech park in Shanghai already begun. Production will begin in
2008 and will reach a capacity of 50MWp in 2009. [41]
Q-Cells
With a production of 256.6 MWp by the third quarter of 2007 [46], Q-cells is the biggest PV
manufacturer in Europe and is currently ranking number 3 worldwide.
Established in 1999, Q-Cells AG is a Germany based company, focused on production and sale of
monocrystalline and polycrystalline silicon solar cells. During 2007 Q-Cells had a growth of 47%
compared to 2006[47]. During the company's 2007 third quarter report, in november 14, Q-Cells
meeting 2007's expectations and increased the expectations for 2008 and 2009. [48]
Q-Cell's main strategy is, rather than just follow a pure expansionary scheme, research and
development is a key element of their management policy. By having several subsidiaries, Q-Cells
make sure the company plays an important role in the development and implementation of the best
technologies available in the market. Calyxo, Brilliant 234, Solibro, CSG Solar and Flexcell in the
thin-films area. EverQ for String Ribbon Technology and finally Solaria for low concentration PV
technology.
Even though Suntech showed a bigger expansion capacity increase during the company's thirdquarter financial report, Q-Cells presented a higher gross margin (37% vs Suntech's 24%[49]). The
difference mainly was because Suntech had to pay higher prices for silicon, since Q-Cells, with
more experience in the market had already long-term low-costs contracts with silicon suppliers.
This same experience that helped Q-Cells have such a high gross margin in 2007, added to their
57
constant innovation policy and efficient use of silicon, have allowed the company to have a constant
increase in the stock market, as shown in the figure below.
Figure 10: Q-Cell's Stock Chart [50]
Q-cells is confident with their growth strategy, and even though Suntech have recently overtaken
the company for the number 2 spot in the market by using a very aggressive expansionary strategy,
Q-Cells's commitment to invest in new technologies less dependant on silicon without stopping
their continuous growth, could help them gain their position back. in 2010 Q-Cells expects a
production of more than 1GWp in their core business and between 400 and 600MWp in their
thin-films business.
Kyocera
The Japanese company Kyocera, has had a very important presence in the PV market for the last
few years. By year 2005, Kyocera was ranking 3 with an annual production of 180MW[51], now,
with the inclusion of Suntech in the top 3 worldwide, Kyocera moved to position number 4. During
year 2006, Kyocera's solar sales increased by 33%, and in april 2007, the company announced
plans to expand its solar module manufacturing capacity to 500MW. [52]
To keep a high positioned status in the actual PV market, some of Kyocera's strategies are similar to
Suntech's, such as keep a constant expansion capacity, although not as aggressive, and ensure their
silicon feedstock by creating long-term contracts with silicon suppliers. However, Kyocera has been
in the PV market for longer, therefore it has been consolidated as a global company with
established local production and supply systems for solar modules in Japan, Europe, the United
58
States and China. Therefore, its strategies are more focused in growing each plant according to its
area needs, increasing their efficiency and responding to local specific demands. Also, Kyocera's
commitment to R&D makes them hold the world's record for energy conversion efficiency in 15x15
polycrystalline silicon solar cells, at 18.5%. [53]
With companies such as Suntech, already predicting production's capacities of 1GW by 2008,
Kyocera's 500MW production capacity plan by 2011 does not seem big enough, but, its experience
and distributed production scheme has guaranteed the company a close relationship with
governments and customers in the past, so it is possible that these same relationships added to its
competitors pressure, can stimulate Kyocera's growth rate beyond their actual predictions.
Sharp Solar
Sharp Corporation is a global electronics manufacturer and one of the oldest solar cells
manufacturer, beginning researching solar cells in 1959, and its mass production in 1963. [54]
During the last 7 years, Sharp has been the number 1 PV systems manufacturer in the world.
Starting in 2000 with 50.4MW PV modules shipped, Sharp has kept a continuous growth rate, and
by the end of year 2007, its annual production reached 710MWp. [39]
Sharp has been in the solar market for over 50 years, first providing solar power for satellites and
lighthouses (1000 by year 2000), but then moving into every possible PV application available.
Sharp holds most of the patents for technologies and manufacturing methods giving the company a
clear advantage over its competitors. Also, its experience and production capacity, have given the
company a very respectable status in the market, allowing them great relationships with
governments and major private companies. Therefore the company holds most of the biggest largescale PV installations worldwide, including the largest commercial PV system in the US to date, at
Google's corporate headquarters in Mountain View, California (1.6MW) installed in June 18, 2007.
[55]
Sharp's product line include all the technologies previously mentioned, from the traditional
monocrystalline and polycrystalline silicon solar cells, up to specialized high-efficiency solar cells
for spacial applications.
59
One of the products line Sharp has put an special effort on, is their thin-films one. The company
presented their latest modules during Intersolar's exhibition held in Freiburg, Germany in 2007.
Their latest modules are triple-layered with two layers of amorphous silicon and one of
microcrystalline silicon.
The modules efficiency is just below 10% (very high for thin-film
modules) and with a peak output of 105Wp per module. Also, the company announced in november
of 2007 the construction of a 1GWp thin-films manufacturing facility in Japan.
Even though Suntech's expansion strategy makes the company Sharp's actual main commercial
competitor, Sharp's experience and technology guarantees their competitiveness in the future.
Companies Review
Since PV technology has been considered as an option to help supply the demand of electricity for
both commercial and domestic applications, the main issue that has been around this technology is
its high price per watt produced. This last one has been, until now, considerably higher, compared to
traditional technologies, or even compared with some renewable ones, such as windpower and
biomass.
Thanks to its “clean” nature, and a world trying to be less dependent on fossil fuels, supportive
policies used by several governments have been vital to help this technology develop dramatically
during the last decade.
However, this trend is changing, 2006 and 2007 showed the highest growth rate in PV technology in
history, only this time, not just due to supportive governments, but due to a growing PV market. PV
technology is today a ready-to-implement option that would help shifting electricity production
from fossil fuels. One of the most significant changes that have helped such a high growth, is the
introduction of China as a major player in this area. For many years, China's PV production was
very limited and the market was ruled by Japan, Europe and US.
Suntech, China's biggest PV manufacturer, has changed this, and just within 6 years, has become
the world's second largest PV products manufacturer, projecting a production capacity of 1GW in
2008.
Germany has still the world's largest PV market, (estimated 1260 MW installed in 2007) [56] and
60
some of the most successful PV companies in the industry. However, China's aggressive
introduction into the market is forcing prices to drop dramatically, while in Europe production costs
for PV modules are around 3.2€/Wp[57], China is entering the market at prices of 2.74€/Wp[41].
One of the reasons why the price is still higher in Europe is because they have invested a lot of
money in PV R&D during the last decade. China, on the other hand, is highly focused on
manufacturing processes expansion and price reduction. China's strategy can be clearly appreciated
in Suntech, putting a great effort in increasing the manufacturing amount of modules based on the
traditional monocrystalline and polycrystalline silicon-based solar cells. Also, to make sure events
like the silicon shortage we have experienced since year 2004 do not affect their production rate,
Suntech has made large long-term contracts with silicon suppliers. On the thin-films area, even
though the company has announced the construction of a thin-films research, development and
manufacturing plant, its 50MWp capacity falls short when compared to their 1GWp crystallinebased silicon solar cells production capacity.
The german-based company Q-Cells, on the other hand, is truly committed to innovation and work
with state-of-the-art technology. The company's projections of 400 to 600MWp by 2010 of thinfilms production capacity clearly shows a trend of using less silicon-dependant technologies.
Instead of just focusing on immediate price reduction, the company is more interested in increasing
their cells and manufacturing process efficiency. This strategy may seem slower in terms of
increased production capacity, but more stable in terms of market longevity.
However, even though there is a lot of effort in increasing the production of thin-films-based
modules, c-Si still accounts for over 90% of all the modules being sold worldwide, but the trend is
for thin-films to grow. Obtaining silicon is a very expensive and energy intensive process, and, as
proven since year 2005, there could be a shortage of it, therefore increasing the production costs of
PV modules.
This shortage of silicon, reminded the PV industry of the incident that happened during the oil crisis
in 1972. Depending on a raw product which price can fluctuate so drastically can generate a very
big impact on a whole industry. But at the same time, just like the oil crisis stimulated the growth of
renewable energy sources in the past, the shortage of silicon is now stimulating the development of
new PV technologies less silicon-dependant.
61
Of all the low silicon-dependant technologies available, thin-films is definitely the most important
at this moment, and that is why companies based on this technology, such as First Solar, have
shown an impressive growth, only compared to very innovative successful companies such as
Google. First Solar is a US-based company formed in 1999. Unlike the previously mentioned
companies, this one is only focused on manufacturing thin-films modules. The company started
production in 2002 and achieved the lowest cost per manufactured watt in the PV industry at a
production scale of only 100MW in 2006 [58].
Thanks mainly to the silicon shortage, First Solar has received a great recognition, and of course,
lots of investors interested in this new technology. The company entered the public market at $20
per share, and it has gone up in value by 11 times in less than 1 year. Google entered the market a
few years ago and is now over $600, the numbers are bigger but the multiple is not. [59]
Right now is the best time for thin-films developing, however, with an increasing number of silicon
suppliers appearing, the shortage of silicon is not to be considered a problem anymore, and in case
the opposite effect happens and there could be an over-production of silicon, c-Si based
technologies could drop their prices and put thin-films into great trouble. Therefore thin-films
researchers should concentrate their efforts on rapidly increase their conversion efficiencies up to
c-Si levels without sacrificing their price per watt, therefore guaranteeing their future role in the PV
market.
62
7
7.1
Chinese Market Penetration
Commercialization
Chinese PV companies are expanding rapidly. Since the beginning of China's significant entry into
the PV market which occurred around the beginning of the decade, China has production capacity
growth almost double that of the rest of the PV producing world with a growth rate of 70% to 36%
respectively. However the important point to notice is that although China is producing more and
more every year, most of it is exported. This graph demonstrates this fact.
Figure 11: Total Chinese PV production capacity[3]
With 80% of the PV products in 2005 being exported, it is clear that Chinese government was not
able to spark much interest into the domestic PV market up to date. This due to the lack of
environmental legislation that would require utilities to purchase renewable energies prior to the
Renewable Energy law that took effect in January of 2006.
Domestic Market
As of 2004, China had a very small domestic market considering their large potential market and
63
high solar radiation levels (much of the country averages above 2000 hours of sunlight per year).
And although the domestic market has grown consistently since its meaningful inception about a
decade ago, progress is slow due to low levels of government support and higher profits available in
foreign markets.
Figure 12: PV annual production and cumulative installation
capacity in MWp in China by year[60]
Several useful programs, such as the Township Electrification Programme and other rooftop
programs have demonstrated China's ability to provide some stimulation in domestic markets, but
this has been on a limited scale. The governments projection of 2 GWp installed capacity by 2020
also suggests that the government is not doing enough to promote favourable conditions for the
development of internal markets.
Other advocates of Chinese solar R&D have predicted an
increase to 10 GWp by 2020, but for this to happen, a complete shift in government policy, industry
focus and R&D funding will be needed.
To begin with, the implementation of a feed-in tariff that has worked so well in Japan and Germany
will be needed. A good example of how much impact the feed-in tariff has on a domestic market
can be seen in Canada, where to date upwards of 90% of PV is used in non-grid connected
installations which is similar to Chinese levels.
With Ontario's new feed-in tariff under the
Standard Offer Programme, which provides a benefit of 0,42 $CAD available to both commercial
and residential customers. Canada is still in its infancy for grid-connected PV, but much like
64
Germany and Japan, this will certainly spark interest in domestic producers.[61] Currently China is
focusing on bringing electricity to the millions of households that are without power, and although
this is a worthwhile endeavor for the development of the country, the market potential in this
segment is limited compared to grid-connected PV.
Figure 13: Extrapolation of the consolidated PV production capacity trend in China over
the last decade[3]
Furthermore, although Chinese producers are currently focused on reducing costs of wafer and cell
manufacturing, companies in China plan to increase their presence in the higher value added
segments of the production chain. Historically, foreign competitors in Europe, North America and
Japan have led controlled these segments, but as China moves forward with their plans, they will
gain the potential to reduce costs which could be economical on the domestic market. However,
producers are still not investing enough in implementation and application research therefore
growth is not likely to increase in the domestic market as much as it has internationally.
Finally, probably the most important reason why China will not grow a significant domestic market
is because Solar Power is still too expensive to compete with conventional power. China will
continue to invest in their primary energy source, coal, as seen in the table below:
65
Table 13: China: Electricity generation capacity by type of fuel in GW and as a percentage of total
generation[3]
International Market
China PV companies have generated a lot of interest as of late. Numerous Chinese companies have
made headlines with dramatic plans for future expansion, exceptional profits and large contracts
with other companies in different areas of the production chain. Now one of China's richest men,
Dr Shi Zhengrong, founded China's most successful PV company, Suntech, in 2001. As discussed
later in this paper, part of China's strength has been to take advantage of the low cost labour that is
currently available. This had made expansion in this industry much faster than other countries.
However, companies in China seem to realize that to add value to the production chain and to
increase profit margins they need to invest heavily in wafter and cell production and move away
from the traditional module assembly segment that has characteristically been their main focus.
Figure 14: China: capacity along the crystalline silicon production chain
(2005)[3]
66
Clearly China is attempting to reduce cost through economies of scale. However, the cheap labour
that had such an impact in module production is not nearly as pronounced for cell and wafter
manufacturing. To bring cost savings to this segment, high-tech improvements need to be made and
it is in this area that companies have invested the most money. China is also moving away from
imported technology and trying to develop their own solutions, which in the medium to long term
will produce significant cost savings.
Expansion plans exist with most companies and contracts for silicon are being signed very quickly
as the silicon becomes available. Most companies predict that when the silicon shortage is over in
the coming years, there will be dramatic price reductions in solar cells. The overall cost of the
modules will not decrease as dramatically since the silicon contained in the whole operation only
accounts for about 30% of the total cost.
To summarize, a recent report has been issued by Global Sources breaks down the ambitions and
concerns of 60 PV suppliers in China. The report states that the main 3 strategies being used to cut
costs are: reducing waste, increasing automation and upgrading management systems. Clearly the
silicon shortage is taking a heavy toll on Chinese producers and reducing waste was listed as a
primary goal for 28% of respondents. Increased automation and management system reforms
ranked at 27% and 25% respectively. For the next 12 months, 60 % of suppliers cited price
competition as their primary concern. Another 25% said raw material costs could hinder their
growth while 7% were concerned about overseas standards. However, a full 97% said they
expected exports to increase over the next 12 months.[62] This is overly optimistic considering the
fierce competition and the dominance of the Chinese market's giants like Suntech who are able to
offer more competitive prices, but the ambition of the industry itself is clear.
7.2
Current Barriers
Lack of Silicon Production and Refining
Since the beginning of the solar industry, the silicon needed for fabricating solar cells came
exclusively from the oversupply of the integrated circuit industry. Year over year, however, growth
in the solar industry has risen about 30% to a point where more silicon was required by the solar
industry then the IC industry. But as always, IC producers were able to pay more for the refined
silicon material and because of their longer business ties with silicon producers and higher margins
67
on their final products. But now with the PV industry proving a certain amount of staying power,
they have started to secure long term contracts with silicon producers, as well as gaining a certain
amount of silicon from producers designed specifically at a purity only usable by the PV industry.
This is good news for Chinese producers because at the moment their technological strengths do not
lie in polysilicon manufacturing.
Yet, as their capacity for solar cells expand, the deficit of
domestic silicon produced and used expends in step. This puts a lot of pressure on new entrants to
polysilicon based PV companies if they are not able to secure silicon in the next few years while the
silicon shortage continues. Furthermore, if thin film R&D has a breakthrough in China (increasing
efficiency or exceptional cost reductions for example), a slight shift away from silicon based cells
towards cheaper third and fourth generation PV technology could help mitigate the silicon shortage.
At the very least, China will undoubtedly become much more competitive in the international
market when the silicon shortage is over in a couple years. Although they have some barriers to
overcome, the silicon shortage will only slow their progress, not stagnate it.
Lack of Government Support
The Chinese government has laid out clear strategies for increasing solar power and supportive
environmental programs which were mentioned throughout the paper. However this will not be
enough to stimulate growth for a domestic market. The history of China has shown their unique
ability to maximize production and profit margins though the use of cheap labour, relaxed
environmental laws, and their ability to encourage foreign capital investment. This will certainly
translate to the PV market as well, but without proper domestic incentives, the domestic market will
not grow at the same rate. However, there are several market segments to consider. The first goal
of China is to provide power to millions that currently go without.
A web interview with Emil ter Horst, director of Horison, senior PV consultant and China PV
expert is somewhat more optimistic and mentions that '[t]he "Renewable Energy Law' was approved
in February last year and has been actively enforced since this year. The effect for the development
of the PV market is not yet clear.“ When asked by SolarPlaza the Shanghai 100.000 Solar Roofs
Program, ter Horst said “I also think that provincial incentives/policies such as the Shanghai
100,000 roof programme will be decisive for the prevalent PV market segment in the province.”
Therefore, there is reason to believe that very small scale PV installations (on the order of 10 to 40
Wp) will pick up and provide electricity. But larger segments in the high kilowatts and megawatts
68
will have to wait for more generous subsidy offers in the next round of incentives from the
government.[63]
More recently China held the bi-annual International Solar Energy Society (ISES) Conference
which was held between the 18th and 21st of September, 2007 and over 600 participants including
300 Chinese trade investors attended. Although the mood was very optimistic about the future of
the Chinese PV industry, the general consensus was that the national government was not ready to
support the domestic market in the same way that Germany has.
Specifically, the Chinese
government currently views solar power as a solution for rural electrification needs, not for large
scale alternatives to fossil fuel energy production. This is understandable since the situation in
China is quite different to Germany. In China, income levels compared to electricity prices are
quite significant and this doesn't lend itself as easily to a feed-in tariff. Instead, the government, for
the foreseeable future will continue to rely on subsidising the current state-run energy companies to
help lessen the impact of high electricity prices.[64]
Finally, because new PV projects are too expensive for the general population in China, and
considering there are still unfulfilled needs in rural electrification, the government is focused on
new roof-top projects. The Brightness Program which expired in 2005 is now replaced by a new
project for 3 million households. Until prices can come down and rural electrification is no longer
the main focus in development, there will not be any sizeable feed-in tariffs to stimulate the
domestic market.
Inaccurate Projections for PV
Up to date, expansion has been fairly predictable in the PV industry. This has been a big advantage
to interested parties since they were able to invest in confidence. Companies producing cells and
modules historically have never had problems securing silicon but now with the shortage, many
companies are expanding silicon production. Also, because the silicon supplied to the PV industry
was from a reliable source - the semiconductor industry - now the need has out grown the supply
and there is a flood of promised silicon expected to come onto the market, not all of which has been
verified.
Also, because competition is so fierce at the moment in China and producers are worried about
competitors price reductions, companies are doing their best to attract investment. Some of this will
69
undoubtedly be rooted in overly optimistic projections for the future. This is a dangerous business
tactic because planning production expansion before securing the necessary feedstock means a PV
producer would have to rely on the expansions promised by the silicon refining industry, which are
also not entirely concrete either.
Solar Cell Efficiency and Product Quality
The highest efficiency for a commercial solar PV module current available is 18.4% (Kyocera)
using polycrystalline technology, and in the thin-films area it is possible to find panels with
efficiencies of around 10%. Although, under laboratories conditions it has been possible to reach
efficiencies of up to 40%. With an expected time delay between laboratories and manufacturing
production lines of about 8 years, it is possible to predict an inevitable efficiency increase in the
electrical conversion of PV modules.
With the great advances the PV industry has experienced during the last 2 years, it is possible that
the considered time delay from laboratories to production lines could be shortened. However, with
an increased effort put into PV development, new technologies are appearing constantly, making it
harder for manufacturing companies to decide which technology to choose to bring to the
production line. In the years to come, we will have a variety of technologies that would fit many
different specific needs. However the bottom line will continue to be the $/Wp of the installed
system.
In this area, Chinese companies's PV modules efficiency has always been slightly lower compared
to those of Japanese and European companies. This is a trend that is likely going to continue
because Chinese companies do not seem as interested in developing new technologies. They would
rather enhance the manufacturing process of the existing ones - c-SI based PV cells for instance since this last approach provides a faster economic payback time (EPT). This approach does not
necessarily guarantee market longevity. Technologies like thin-film based solar cells have shown a
steeper learning curve, leading to faster and more efficient manufacturing processes that could
allow them to have the best $/Wp ratio in the future.
To achieve this point, quality is another factor besides efficiency that has to be taken into account.
At the very beginning of the PV industry, its application field was considered too specific and just a
few companies manufactured solar cells. This resulted in many companies having the power to
70
choose their own quality standards based on customer needs. Although there exist several
certification organizations worldwide trying to address this situation, there are new companies and
technologies entering the market every day, making this task a very complicated one. This could
become a real problem in the future, where customers would have to “trust” the companies quality
control process. For a product with a life time expectancy of 20 years, for consumers, is a big leap
of faith to take, considering most of this new entrants have not being in the industry for that long,
and there is no guarantee that they will be 20 years in the future.
Chinese companies have had a history of being able to enter the market of different industries very
fast, and in an aggressive way. That is why they have gained a reputation of being the
manufacturers of the world. The Chinese regulation system allows companies to grow really fast in
a very short amount of time, but while this is vital for their ability to enter the market, sometimes it
has lead to low quality control policies. Many companies have had legal conflicts for not complying
with the safety and quality regulations of western countries. This negative image can affect Chinese
manufacturers, and it is quite possible that companies in western markets could wait until the
Chinese PV industry matures. Therefore, because of the negative image that China has for the
quality of their manufactured products, it is even more important that PV manufacturers focus on
quality assurance and control.
7.3
Suggestions and Recommendations
Competition is fierce in the Chinese solar industry. Companies are aggressively securing contracts
and expanding their production because of the incredible growth rates around the world. New
markets are opening on an almost quarterly basis with governments world wide installing new tariff
schemes or other types of subsidies. Clearly there is a lot of profit to be made. But with so many
entrants into the industry, how can China position themselves as a world leader?
Beginning with the strengths of the Chinese market, the expansion of production seems inevitable,
although in the past it occurred in fits and starts. And no doubt will China continue its history of
massive exports compared to domestic sales. But the real future potential for China lies in their
untapped domestic market. Increased PV presence in China would result in more experience for the
industry itself, and efficiency and quality improvements naturally follow. Certainly China has their
obstacles to overcome, beginning with overcoming the silicon shortage and increasing cell
efficiency and quality to remain competitive with the rest of the world, but they have the unique
71
advantage of a cheap labour force. And as China develops in the decades to come, this comparative
advantage will diminish. Therefore, for China to maximize their advantage sooner rather than later,
several key factors need to be addressed.
First, the view that the Chinese government considers PV as a technology used primarily for rural
electrification needs to be changed. As mentioned earlier, this is certainly a worthwhile cause and
the results from these programs throughout China have been quite successful, but these programs
should be running along side of grid-tied PV. To make PV more mainstream, startup projects will
be needed in urban areas and some centralized PV plants should be created.
This seems to be a tough idea to sell to the Chinese government for several reasons. Mainly
because there is simply not enough pubic money available to justify large scale expansion for
domestic PV when coal represents a much cheaper alternative. Another reason is the lack of
support from more advanced countries like Germany when it comes to the transfer of knowledge
and technology. Recently at a the ISES conference in China, Frank Haugwitz from the German
Agency for Technical Cooperation mentioned that “[Chinese] PV manufacturers have a problem in
obtaining [European] technology. Foreign technology suppliers are not so willing to sell them
know-how and machinery.”[64] Instead, China has oriented themselves more towards Russian
expertise, which is certainly inferior to the well developed German and Japanese industry. And the
most fundamental reason is that there are very few incentives, politically, socially and financially, to
motivate Chinese companies to concentrate their efforts within their borders.
The first solution to transform the domestic industry would seem be a synthesis of the German
Renewable Energy Act as many other countries have already done (France, provinces with Canada,
states within the US for example). In China this would only work with some significant changes
which would address their specific obstacles. Since China has relatively high electricity prices as it
is, introducing a feed-in tariff similar to the German tariff would not transfer the cost of electricity
away from the consumers in any meaningful way. In Germany, the rebate received for green energy
produced is derived from all consumers in the form of a tax. This could be modified in China by
instead placing the tax burden on unsustainable energy producers, thus promoting solar power as a
cleaner technology, providing financial incentive for PV adopters which would essentially create a
level market on which PV can compete with conventional types of energy.
Following this stage, a certain amount of public education is needed to increase national support for
72
clean energy within China. This is not easily quantifiable, but there is certainly a correlation with
an educated public and a more sustainable and efficient energy market. Many European countries
have succeeded in this respect which is apparent in the environmental platforms that exist for
political parties up for election. France, for example, has placed a high importance on energy
security and the reduction of GHG emissions.
Finally, for China to maintain their growth rates and increase their domestic market size, they need
to increase their product quality, continue research and development to remain competitive with the
rest of the world.
As previously mentioned, Chinese companies tend more to focus more on the manufacturing
process than on the PV technology development itself. This is still true, and can be easily
appreciated when analyzing some of the biggest Chinese PV manufacturers expansion strategies.
This should not be confused as lack of R&D from Chinese companies, as there is a growing
development on PV manufacturing equipment such as module laminators, wafer eth/bath and
mono-crystalline wafer pullers. This equipment is being designed and built in China for a fraction
of the price it would cost to purchase this technology from western countries.
With this in mind, China is technologically reaching the most efficient per dollar manufacturing
process of the market, by combining a highly-skilled cheap labor force and local low-priced
manufactured automation equipment. But even though this is giving China a great competitive
advantage over western companies at present, Chinese PV companies currently lack the necessary
level of development that could change their market position in the future. Furthermore, thin-film
technology's steeper learning curve may change the market situation very fast, leaving behind those
who did not enter this technology market soon enough.
7.4
Solar Energy Forecast for China
The future of solar power in China is still in great debate. Although growth rates have averaged
about 70% since 2000, the coming years will be quite decisive for the future of PV in China. On
the conservative side, the government believes that an installed capacity in China will reach 400
MWp by 2010 and 2 GWp by 2020. On the optimistic end of the spectrum, some Chinese solar
R&D representatives believe that up to 10 GWp is possible by 2020, but for this to happen, policy
needs to be completely reworked.[3][64]
73
The likely scenario is probably somewhere above the lower projection. Chinese producers have
certainly proven their ingenuity when the proper motivations are there, and if the next 5 year plan
for China includes some more interesting incentives, a sharp increase in domestic PV will likely
occur in the beginning of the next decade. Furthermore, as economies of scale are added to the
picture, and considering the likely price decreases that will come after the silicon shortage is over,
the case for Chinese domestic PV becomes ever more realistic. Not to mention the climatic
advantage that China possesses due to the large amount of sunshine available in this region of the
world.
Internationally, it seems that China will continue keeping a steady production capacity expansion.
Product improvements with efficiency and quality will allow them to capture more market share.
Continued use of their cheap labour force will allow them to maintain market dominance in the less
skilled segments of the production chain such as module assembly.
It looks like the shortages of silicon are finally disappearing and production prices for c-Si based
technologies are starting to drop, turning the market from a market of suppliers to a market of
buyers again. With China's PV production capacity over 2GWp by 2010, this ensures their
important role in supplying the world's PV demand.
And finally, although China is unevenly distributed in the production chain, new entrants to the
market are filling the gaps and older companies are showing interest in vertical integration. This
fact will create a more secure market for the future since they will become more self reliant.
74
8
Conclusions
The Chinese energy industry consumption is estimated to reach 1629 Million Tons of oil equivalent
in year 2006. Fossil fuels, most significantly coal, accounted for 69% of the total energy
consumption in 2005 and oil at 21%, were the major sources for energy in China. With the Chinese
objective to secure energy for their future, their investment in coal is still overshaddowing all
attempts at growing a domestic renewable energy market. However, in the photovoltaics sector,
China registered rapid growth in solar cell production for export. In only 2-3 years (roughly from
2003 to 2005), solar cell production share of the country increased from 1.07% to 8% with respect
to the world, only after Japan and Europe.
The growth strategy China has followed in the PV industry has been very similar to every other
manufacturing sector, by using cheap qualified labour and low administrative costs several Chinese
companies have been able to build large PV manufacturing plants and being able to position one of
them (Suntech) as the second largest PV panels manufacturer in the world.
There are, however, several barriers China must overcome in order to keep such an impressive grow
rate in the industry. First, there has been a high price for silicon for the last 5 years, and taking into
consideration that this is the raw material for c-Si-based solar panels, that account for 90% of the
the total ammount of installed panels, this has a serious impact on the entire industry. Some
companies, such as Q-cells and Sharp, have migrated from a c-Si based production to make large
investments in Thin-films development, mainly to rely on a less silicon-dependant technology in the
short-term. Suntech - the Chinese leader solar manufacturer - on the other hand, just expanded to
1GWp c-Si based manufacturing capacity, maintaining a strong dependency on silicon. In order to
keep prices competitive, c-Si based panels manufacturers will keep long-term contracts with silicon
suppliers in order to have a silicon price per kg lower than the retail market price.
There are two main ways to make it cheaper to produce electricity from solar panels, having a high
conversion efficiency so you use less panels to produce the same amount of electricity or to make
them cheaper so it is possible to buy more, this whole balance goes down to analyzing PV modules
price in $/Wp. China's approach tends to be the second one, less efficient panels but cheaper due to
the manufacturing strategies already mentioned (cheap labour, large-scale producion, etc.).
However, with thin-films technology holding the lowest manufacturing price per watt, c-Si based
technologies should increase their efficiency in order to hold its market position. Chinese PV panels
75
conversion efficiency is usually 2-3% lower compared to the conversion efficiency found in
European and Japanese panels, showing that there is an important need for investing in R&D into
into wafer and cell production.
R&D would also benefit Chinese companies in terms of quality standards, there is still the
worldwide mentality of Chinese companies having low-quality standards, it could not be so
important when it comes to analyzing short-lifetime products, but when it comes to analyze solar
panels, -with a guaranteed lifetime of 20 years but expected to last for 25-30- quality standards
becomes an important issue. This quality standards increase would at the end increase consumer
"trust" and help Chinese companies keep holding their solar PV panels manufacturing growth.
Even after solving these barriers, some additional effort should be put into the chinese PV industry
in order to guarantee their important participation in the field. In order to prepare for rising labour
costs, Chinese companies need to invest more heavily in automation and optimization of their
manufacturing processes. Also, there is a large potential for the PV local market, but low public
awareness is actually present, therefore increased awareness campaigns should be addressed.
In the state-of-the-art technologies, Thin-films have proven so far their large potential in the PV
industry, but Chinese companies participation in this area have been minimal compared to the
efforts made to increase the production of c-Si based panels. With a manufacturing price of 1.25
USD/Wp -the lowest of all the commercial PV technologies available- Thin-films technology
becomes a very serious option Chinese companies should consider more heavily.
In the present project it was found that although China is speeding ahead to become the world
leader, they are not taking a sustainable approach. Partnerships with European companies to secure
more efficient technology is slim and the use of the inexpensive Chinese labour force continues to
allow Chinese businesses to remain competitive with foreign producers. Finally, as China is and
will remain a net exporter of solar power products in the decades to come, the domestic market will
not grow due to the lack of government support and higher profits available outside Chinese
boarders. The implications of these findings are that as China is showing signs of a young market
undergoing rapid expansion, they appear sustainable only in the short to medium term. As this
market matures and development drives up labour costs and stricter environmental standards, the
lack of investment in solar infrastructure and more efficient technologies will hinder China’s ability
to complete globally in the medium to long term.
76
9
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