The PV industry is moving through a dynamic and challenging period of change. A combination of increased global manufacturing capacity and slowing growth in feed-in-tariff markets is creating margin pressure for the entire industry and throughout the value chain. However, for those companies that can survive this trying period and emerge with viable low-cost technologies and business strategies, there is a bright light at the end of the tunnel. The rapid drop in PV module prices to $1 a watt or below will accelerate adoption in the years ahead, including emerging markets which will comprise a greater share of PV market growth in the decades ahead.
By the end of 2011, worldwide PV manufacturing capacity was approximately double the projected 2011 global PV demand of 20 GW. This excess capacity in manufacturing is a key factor in driving down PV module prices over the past year. There has also been a slowdown in the growth and outlook for the leading feed-in tariff markets, Germany and Italy. In the medium- to long-term, there will be a shift in markets toward the United States, China and Japan, and in the direction of some emerging economies comprising the “sunbelt” region of the globe. However, emerging markets are not growing fast enough in the near-term to off-set the European market slowdown. The net result is that the market is anticipated to grow just slightly from 2010 to 2011, from roughly 17 GW to about 20 GW.
PV module prices decreased rapidly throughout 2011, from an average of approximately $1.70 per watt in the first quarter of the year to a level approaching $1 per watt late in the year, and are likely to decrease further in 2012. Price reductions in 2011 out-paced cost reductions, resulting in compressed margins for companies manufacturing PV modules, to the point where the majority of PV manufacturers reported operating losses in Q3 2011. The current PV industry landscape is likely to change significantly because of this drop in prices. Leading industry players are recalibrating to compete at this much lower price point, struggling to squeeze costs further even as processing cost reductions for traditional crystalline PV technologies approach a limit. For others, adapting too slowly to change will result in lost market share, or worse.
One technology that has a promising future in this low-price environment is thin film silicon PV. Thanks to ongoing R&D investment, the cost of producing thin film silicon modules has been reduced by more than 50 percent in the past three years, to the point where new fabs have an expected cost of production of just $0.50 per watt, enabling manufacturers to compete comfortably in a sub-$1 per watt PV module market (even allowing for a “balance of systems cost penalty,” which is also decreasing as system costs drop and thin film efficiency levels increase).
We can expect a significant change in the landscape as some of the companies revisit their technology strategies to remain profitable at prices of a dollar per watt. It is likely that some of those companies will shift and begin investing in thin film silicon manufacturing capacity as a more reliable way to get their costs down. Furthermore, companies exploring an expanded technology portfolio, including thin film, can benefit from turnkey manufacturing solutions that provide benefits including accelerated ramp up and license to leading technology.
Thin film silicon manufacturing innovation is progressing along multiple paths:
- Manufacturing lines are becoming increasingly automated and controlled – a clean sheet of glass is placed in one end and it goes untouched until it emerges at the very end of the manufacturing process in a fully functional state. Such an automated and controlled process enables manufacturers to achieve overall line yields of 97 percent or higher, significantly higher than is typical for other PV technologies.
- Reduced silicon absorber layer thickness is a key factor in increasing fab throughput, at the same time maintaining stabilized module power and reducing capex per watt.
- Redesigned silicon deposition equipment now includes a narrow gap reactor that leads to improved quality and uniformity.
In addition to its competitively low manufacturing cost, thin film silicon has the ability to deliver another advantage: higher energy yield at high temperatures. Thin film silicon has a lower temperature coefficient (0.29 percent) than conventional crystalline modules (0.45 or 0.47 percent) giving it a significant advantage in places where the normal operating temperature is high. This means there is significantly higher energy output for thin film silicon compared with crystalline silicon PV in hot environments. The combined impact of low manufacturing cost and high energy yield result in an estimated levelized cost of electricity (LCOE) for thin film silicon that is highly competitive, particularly in sunbelt regions where the majority of non-subsidized PV market growth is forecast for the next decade.
Equipment suppliers play a key role in the thin film silicon segment in leading the innovation to reduce module production costs and increase module field performance, and in providing an efficient, reliable and upgradeable manufacturing technology platform for their turnkey customers. Recently one leading turnkey equipment supplier shared significant process and material innovations with several of its first generation turnkey customers, including a significantly improved silicon deposition recipe and the substitution of an improved white lamination foil for improved light capture. Both of these process upgrades resulted in significant cost and performance improvements for customers, in some cases leading them to achieve average efficiency levels significantly higher than contractually guaranteed.
Thin film silicon technology suppliers are also taking steps to help to reduce balance of system (BOS) costs, which in today’s market can comprise 50 percent or more of the total cost of a PV system. Innovations such as changing the design of the module to reduce the voltage by approximately 50 percent enable longer strings and lower installation and wiring costs. Another example is one equipment supplier’s addition of specially designed mounting clips into the module manufacturing process, a design change that greatly reduces installation cost and time.
The competitiveness of thin film silicon technology has also been improved by experience gained by manufacturers over recent years ramping up a large number of production lines in locations around the world. Expected ramp-up time for a new turnkey line has been reduced by more than 50 percent in recent years as a direct result of experience and process innovation, translating into considerable improvement in projects’ return on investment.
Companies that are considering new PV manufacturing equipment investments to remain competitive or to meet demand growth face challenging decisions in today’s turbulent market. Current and forecast module market prices make wafer-based PV technologies much less profitable than in the past, notwithstanding further improvements that are underway to improve efficiency and reduce costs. Thin film silicon technology provides a clearer pathway to a low-cost, competitive manufacturing position even in the uncertain market conditions that will prevail as demand shifts from subsidized OECD markets to non-subsidized emerging markets.
Chris O’Brien is the Head of Market Development Oerlikon Solar.