Solar PV future depends on production cost improvements says IHS

In response to interest in photovoltaics for industrial and utility scale power, SRI Consulting, part of IHS, examines the economics for producing solar cells from three dominant commercial process technologies: monocrystalline wafers (Sunpower), CdTe thin-film (First Solar) and concentrating PV (Concentrix).

January 26, 2011 – BUSINESS WIRE — During 2010, new solar photovoltaic (PV) demand worldwide approached 10,000MW, and is expected to grow by double digit percentages annually for the foreseeable future, if production costs can be driven to market-competitive levels. In response to interest in photovoltaics for industrial and utility scale power, SRI Consulting, now part of IHS Inc. (NYSE: IHS), examines the economics for producing solar cells from three dominant commercial process technologies: monocrystalline wafers (Sunpower), CdTe thin-film (First Solar) and concentrating PV (Concentrix).

Although the integrated solar photovoltaic product chain can be considered as starting with mined silicon metal, and terminating with a combination of PV modules sold to end-use customers and turnkey power plants sold to utility customers, the heart of the business is in producing PV cells, mounting them in modules or panels rated at 70–400W, and installing arrays of modules to satisfy customer requirements. A globally competitive producer requires a capacity base of 500MW/year, and that a utility-scale PV plant will have a capacity of 10–50MW.

Two forms of cell architecture, silicon-based wafer and thin-film technologies, dominate the business, with 80 and 20% market share respectively. The IHS report “Solar Photovoltaic Technology” estimates production economics for the two manufacturing approaches and, using producer-specific information (patents, trade literature, technical publications and business presentations), provides reasonable design basis assumptions. These results are then used to estimate the economics of a PV utility power plant with a 50MW capacity.

Added to the analysis are speculative economics based upon the limited capacity operating experience of concentrated PV producers Cogentrix in Spain and Innovative Solutions in the U.S. These economics, although not cost-competitive with most conventional base load power generation ($0.04-$0.08 per kwh), are close enough to compete with peaking electric power in most business environments, and with base load electric power in high cost power regions, including Denmark, Italy and California.

“As PV technology improvements reduce cost faster than conventional technologies reduce cost, the world is likely to soon see an environment where PV subsidies are no longer necessary,” stated Anthony Pavone, author of the report “Solar Photovoltaic Technology” and IHS principal consultant. “Advances in technology have significantly improved cost competitiveness, but the commercial world still relies heavily on government subsidies,” said Pavone. “Like other renewable energy technologies, societal concerns over greenhouse gas-caused climate change provide the justification for these subsidies.”

In the U.S. and other regions, utility commission renewable power portfolio requirements dictate that specific amounts of grid power be sourced using technologies that do not produce greenhouse gases. As a result, several utilities are now considering supplementing conventional power (nuclear, coal and natural gas) with a combination of wind power, biomass power, solar thermal, and solar photovoltaic power.

Demand growth for PV power in the early 2000s averaged 40% per year, driven by a combination of technology advancements and generous government subsidies — especially in Spain and Germany — in the form of feed-in-tariffs (FIT). The global economic recession of 2008-2009 all but eliminated growth, but early 2010 saw demand begin to turn around.

Photovoltaic power suits distributed demand applications where its devices can be mounted on residential homeowner rooftops (<5 kw capacity), and on small commercial buildings (<50 kw). Advancements in both manufacturing technology and engineering and design practices are also reducing the cost of balance of system (BOS) components required for the consideration of PV power at utility scale (>5 MW) at economics approaching conventional peaking power cost (grid parity).

For additional information on “Solar Photovoltaic Technology,” visit www.sriconsulting.com/PEP. SRI Consulting is now part of IHS Inc., and is a business research service for the global chemical industry. IHS (NYSE: IHS) is a source of information and insight in energy, economics, geopolitical risk, sustainability and supply chain management.

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