It has been a devastating few months for thin-film PV, and the news keeps getting uglier. In terms of political theatre, the low point was the bankruptcy of Solyndra last autumn.
But from an investment standpoint, even more damaging was last month’s announcement by First Solar — the only thin-film manufacturer truly competing with the crystalline-silicon (c-Si) industry on its own terms — that it will permanently shut its production lines in Germany.
Thin-film’s problems are not limited to a few one-off bankruptcies or restructuring programmes, nor are they new. But First Solar’s struggles have hammered home the message that thin-film PV is fighting for its very survival.
Although First Solar hung on to its position last year as the world’s second-largest maker of PV modules (behind c-Si rival Suntech), thin-film’s overall share of the global PV market fell to 11%, down from a peak of nearly 20% two years earlier. There is every reason to expect it will fall even further in 2012.
The chief reason is that c-Si modules have become cheaper at a much faster rate than thin-film panels in recent years. But that fact obscures the challenges and opportunities for thin-film.
For thin-film manufacturers, there is no getting away from the unpleasant reality that their products are much less cost-competitive than they were a few years ago. The culprit is polysilicon.
Four years ago, when polysilicon was selling on the spot market for $450 per kg, thin-film was the darling of the solar industry.
Because thin-film modules have lower conversion efficiencies than c-Si panels, project developers have to use more of them to reach the same installed capacity. But their vastly lower price tag (as much as $1 per watt cheaper) made it well worth it.
By early 2011, however, average spot market prices for polysilicon had fallen to $80/kg, and they now stand south of $30/kg.
And with new Asian suppliers coming up, such as South Korea’s OCI and China’s GCL-Poly, there is no way thin-film can hope to lower its costs at the same rate as c-Si for the foreseeable future.
Many thin-film companies are coming to grips with the fact that their business models no longer add up in the face of cheap polysilicon, says Matthias von Armansperg, managing director of German consultancy Accelios Solar.
“The thin-film industry basically has a frozen price model compared to c-Si,” he says. “It just doesn’t have the same elasticity in its supply chain.”
Unfortunately for thin-film, polysilicon is only one of its problems on the cost front.
The second is manufacturing scale. Only three thin-film companies — First Solar, Solar Frontier and Sharp — are producing modules at anything approaching the same league as the big c-Si players. Beyond that trio are perhaps half a dozen companies with annual production of more than 100MW, all of them based on amorphous silicon (a-Si) technology, such as Taiwan’s NexPower, China’s Trony and Japan’s Kaneka.
After that comes what one industry source describes as a “zoo” of smaller players, ranging from the promising to the hopeless. Some, such as copper indium gallium (di)selenide (CIGS) specialist MiaSolé, have raked in large sums of venture capital; others, like PrimeStar and Avancis, have patient backers with deep pockets.
But even the most promising thin-film outfits will struggle to compete with the growing list of gigawatt-plus c-Si producers.
“In order to achieve further cost reductions, you need to scale up production. But you need money to do that, and that is not in great supply at the moment in the solar industry,” comments Götz Fischbeck, president of Germany’s Smart Solar Consulting.
Exacerbating the problem, most thin-film manufacturers rely on custom-built production equipment, as opposed to c-Si manufacturers, whose factories are essentially filled with standardised, mass-produced machines.
And the roster of companies making such production equipment has dwindled as thin-film’s lustre has dimmed: Applied Materials has discontinued its SunFab line; Oerlikon has sold its solar division to Tokyo Electron; and Centrotherm is shrinking its exposure to the sector.
A final challenge for thin-film, and the one that has worsened the most over the past year, is the issue of bankability. As the corpses stack up — the most recent victims being US-based Uni-Solar and Germany’s Soltecture — it becomes harder for thin-film manufacturers to convince investors they will still be around in ten or 20 years to stand behind their warranties. That leads to higher financing costs and further dents thin-film’s waning cost advantage.
Yet even though the short-run prognosis is grim, many analysts remain cautiously optimistic about the technology’s long-term prospects.
Thin-film panels work better than c-Si in hot climates, they are better suited for fast-growing niches such as building-integrated PV, and they require much less energy to produce.
And not all thin-film technologies are created equal. Much of the current optimism centres on CIGS, which offers higher conversion efficiencies than a-Si, cadmium telluride or flexible thin-film modules such as those made by Uni-Solar.
The CIGS sector is dominated by Saudi Aramco-backed Solar Frontier, which is ramping up a 900MW factory in Japan. Other credible contenders include Avancis, which is backed by French glass giant Saint-Gobain and Hyundai Heavy Industries; and Q-Cells-owned Solibro.
“If they manage the production and cost challenges, CIGS players are the ones with the most potential to attack the dominance of c-Si and tip the balance in favour of thin-film on the way to 2020,” says von Armansperg.
In contrast, experts believe the road ahead will be much more difficult for a-Si, a space littered with dozens of small, undifferentiated Chinese manufacturers, whose modules have some of the lowest conversion efficiencies in the business.
“We see a-Si kind of losing its spot in the market on the way to 2020,” says Matthew Feinstein, an analyst with Lux Research. He adds, however, that the future looks brighter for higher-end players moving towards hybrid a-Si/c-Si products, such as Sharp.
One of the most confidence-inspiring moves the thin-film sector has seen in recent years was the creation in 2010 of 3Sun, a joint venture between Sharp, Italy’s Enel Green Power (EGP) and semiconductor giant STMicroelectronics. 3Sun is now producing high-quality a-Si modules in Sicily.
President Andrea Cuomo acknowledges that 3Sun’s first few years have been much more difficult than its investors had ever imagined, even though it is able to shield itself from some of the market pressures by offloading much of its output to ESSE, a project developer owned by EGP and Sharp.
But Cuomo says thin-film offers far more scope for continued technological evolution than c-Si, which he thinks is reaching some of its limits. “We still believe thin-film is the most promising technology in the solar game.”