green stocks report
Thin-Film Solar Gains in Efficiency, Market Share
Inexpensive technology grows at twice the rate as polysilicon photovoltaics.
By RONA FRIED, Ph.D.
Rona Fried, Ph.D., is
president of Sustain-ableBusiness.com, the
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When silicon prices shot up several years ago, it challenged manufacturers of photovoltaic modules to
find a cheaper alternative, and the door opened for
thin-film solar. Until then, thin-film — which doesn’t rely on
silicon — had largely been in the developmental stage.
Now, thin-film is gaining ground. Canaccord Adams (CA)
reports that annual thin-film installations have grown from
181 megawatts (MW) in 2006 to 400 MW in 2007, for a total
of about $1 billion in revenue. CA estimates there’s 800 MW
total installed. The company projects thin-film growth to more
than 7 gigawatts (GW) by 2010, equating to sales of $8 billion
in 2010, and $10 billion in 2011, compared to the overall PV
market projected at $32 billion in 2011. Although the crystalline market is much larger, thin film is growing at double the
Thin-film is cheaper to produce than crystalline solar
because it requires fewer steps in the manufacturing process
and doesn’t rely on polysilicon, an expensive material to make
because it requires a lot of energy to melt it. The simplicity
of the low-temperature thin-film process gives thin-film producers twice the margins of crystalline manufacturers. The
downside is that thin-film is less efficient in converting solar
energy into electricity, with most modules achieving efficiencies in the 5 to 8 percent range, compared to crystalline at 12
to 15 percent. Thus, thin-film requires more solar modules to
achieve the same wattage, and its arrays consume more space
on roof tops or real estate.
First Solar — The Leader: CA believes
that thin-film manufacturers may not be able
to compete with crystalline at efficiencies
under 12 to13 percent. One company, First
Solar, has jumped ahead into a leadership
position by producing thin-film modules at
10. 6 percent efficiency.
There are few publicly traded thin-film
companies. First Solar (FSLR) and Uni-Solar, a division of Energy Conversion
Devices (ENER) are the dominant players. Solar cell manufacturers Q-Cells ( QCE.DE) and Ersol ( ES6.DE) have thin-film divisions as do multinationals Honda, Sharp, Mitsubishi
and Sanyo. Equipment suppliers Applied Materials (AMAT),
Spire (SPIR) and Oerlikon ( OBH.DE) offer ways to play thin
film through the back door.
The field is getting crowded on the venture-backed private
side, which means we’ll see new companies entering the public
markets over the next 5 to 7 years. CA identifies 84 companies
in the thin-film space, including the multinationals.
First Solar (FLSR) uses its low-cost business model to
COuRTESy FIRST SOLAR
First Solar has eight plants
in Germany, one in Malaysia, and this one, in Perrysburg, Ohio. Its process
entails high-speed coating
of cadmium telluride on
bring thin-film solar into the mainstream. The largest thin-film
manufacturer by far, its modules are designed for large scale,
grid-connected commercial solar power plants. The company
uses the most efficient thin-film process, cadmium telluride
(Cd Te) technology, which layers material less than 3 microns
thick onto a glass substrate. The raw materials cadmium and
tellurium come from mining waste, providing a beneficial use
for what would otherwise be a toxic disposal problem.
FSLR formed in 1999 and went public in late 2006 as the
first company to launch volume production of thin-film PV.
Through efficiency gains on the factory floor and by using 20
percent fewer semiconductor materials, FSLR reduced the
cost of producing PV panels from $1.50 per watt in 2007 to
$1.14 per watt in the first quarter of 2008. They claim to be
on track to a mere $0.75 per watt by 2012, where its thin-film
will be competitive with conventionally produced electricity.
At the same time, FSLR expects to achieve 11 to 12 percent
efficiency between 2010 and 2012.
Rapid Growth: The company’s ramp up has been spectacular, growing from a 25-MW pilot line in Ohio in 2002, expanding to 75 MW by early 2005, followed by a 100 MW German
plant in 2006. Since early 2007, FSLR has been building out
four 100-MW Malaysia plants, for a total annual manufacturing capacity of 495 MW in 2008, and more than 1 GW by the
end of 2009.
First Solar can build new plants so quickly because of its
automated, continuous throughput production process, low
labor costs and tax incentives in Malaysia, and generous incentives in Germany. The state-of-the-art plants, with stringent
environmental management systems, can manufacture a solar
module in only 2. 5 hours.
FSLR takes pains to post lifecycle analyses of its products on
its website, and it is the first solar company to operate a pre-funded take-back program to recycle panels at end-of-life.
Revenue has grown dramatically from $3.2 million in 2003
to a projected $1 billion for 2008. FSLR became profitable in
2006 and its stock led the markets in 2007, skyrocketing to
over $300 a share.
Although competition is heating up from General Electric,
IBM, Applied Materials and others entering Cd Te thin film,
analysts see the entry of larger companies as validation of
FSLR’s business model, rather than as an immediate threat.
FSLR has been on our SB20 List (The World’s Top Sustainable Stocks) for the past two years. The company reminds us
of Whole Foods in the natural foods sector, which, because
of its strong management and business model, was able to
beat financial expectations for many years. Like Whole Foods,
FSLR trades at a well-deserved high premium. S T