Global Information Inc. presents "Opportunities in the Solar Market for Crystalline and Thin Film Solar Cells" by The Information Network.
According to Robert Castellano, president of The Information Network, "Weakening demand claimed its first victim with the bankruptcy of Evergreen Solar." Solar Power Industries in PA closed its doors in May. Spectrawatt Inc., the solar cell manufacturer that was originally spun off from Intel Corp. in 2008, filed for bankruptcy protection in August, followed by Solyndra the next week, according to a report, Opportunities in the Solar Market for Crystalline and Thin Film Solar Cells, recently published by The Information Network, a New Tripoli, PA market research company
For many solar firms such as Suntech, SunPower (SPWR), First Solar (FSLR), Trina Solar, JA Solar, and Hanwha SolarOne (HSOL), the second quarter of 2011 was riddled with high inventories, a lack of transparency in German and Italian policy, impacted share price, ASPs, profit, and revenue. The return of demand in the third quarter has not been as strong as expected.
Revenues and margins for solar module manufacturers have dropped due to falling European demand and pricing weakness due to overcapacity. An online article at www.Europe-solar.de provides vivid evidence that (1) solar module prices are dropping fast and (2) prices of modules sold by top tier companies (bankable) command selling price between 15% and 35% higher than modules from non-bankable solar manufacturers.
The term "Bankable" solar products is open for debate, but is a reality. According to Suntechs analyst day presentation a few months ago:
- Only 9.5GW of an estimated worlds 27GW capacity is bankable. Suntech includes itself in the bankable category along with JA Solar, Trina Solar, and Yingli Green Energy (YGE).
- Another 10.2GW are classified as "low-cost bankable" which may include many low cost second tier producers in Asia.
- The remaining 7.3GW are pegged as simply "unbankable."
According to this thesis, there really isnt an overcapacity of solar cells in the solar industry, just an overcapacity of "unbankable" and "low-cost bankable" vendors.
Suntechs thesis is branding and thus bankability will be the key differential among industry players. These top-tier solar manufacturers are able to secure financing in the multi-million dollar range because bankability should insulate higher tier capacity from pricing declines more than lower tier suppliers.
High inventory of solar products has been pushing prices down since second quarter 2011. Total annual capacity plans by Chinese manufacturers in mid-June were to expand by 40GW in 2011. However, global demand for solar cells in 2011 might only be around 15GW, hence a further oversupply is very likely if the announced expansion becomes a reality.
Even though the top tier Chinese companies have led the Chinese to win the solar war, they continue to work on methods to reduce overall non-silicon costs.
According to Mark Kingsley, Chief Commercial Officer of Trina Solar, "In the big picture cost reductions, we are driven by a balance of technology-driven efficiency gains, more efficient materials used, and solutions designed to reduce installed systems cost. Specifically, as we further develop innovative offerings to lower the cost of solar, both within and outside the module, we will continue our rigorous evaluation of new and second supplier technologies," Kingsley added.
Shooting at a moving target (Chinese innovations) is difficult but shooting while the ducks fly (survival mode) is critical. Although the secondary equipment market may soon be flooded with used equipment as other solar companies go out of business, "The next wave of cost-per-watt reduction in the solar PV industry will be achieved through major changes in cell technology and manufacturing sophistication to simultaneously improve efficiency and factory output," said Mark Pinto, executive vice president and general manager of Applied Materials (AMAT) Energy and Environmental Solutions Group.
Another way to reduce costs and remain competitive is to develop technologies to increase efficiency. If we look at the chart below from NREL (National Renewable Energy Laboratory), except for concentrator cells and emerging technologies, the increase in efficiency can take 10 years to improve just 1%.
