Observations from Investing in Solar Conference

I attended the FRA Investing in Solar Conference earlier this week. While not one of the larger Cleantech conferences, it provided some interesting industry information. Some of the notable speakers and attendees included BP Solar, Kyocera Solar, Schott, Nth Power, Ngen, Daystar, Innovalight, Marathon Capital, and Bessemer Ventures, as well as numerous others. I came away from the conference with some observations on themes running through the general discussion of the speakers and attendees.
A few of them are detailed below:
Serious lament on lack of integration sophistication in the industry.

One common trend running through the conference was a discussion of the split between large companies which control module manufacture, and the system integrators/distributors at the customer end actually are doing installations, and which tend to be small and undercapitalized.(Note: Kyocera Solar is the only major producer who is completely vertically integrated).

Points & Sub-trends in this discussion:

  • Ongoing debate on when or whether we would see consolidation in the integrator space as a solution to the lack of sophistication and size in the integrator sector.
  • Serious concerns that real world data on solar installations at the system level was not readily available in large amounts (one venture backed company, Fat Spaniel, was presenting on the latest version of energy management/remote monitoring products which they are using to address this), and as a result, manufacturers focus on metrics like module level (not systems) efficiency, and price /Wp, NOT price/kwh – which is the metric of choice for electric power in every other industry.
  • Similarly a general feeling that upfront rebate programs push the industry to focus on price/Wp though there was interest in the California program to shift part of its subsidies to $/kwh in 2007.
  • In addition, there was a lot of discussion about the difficulty in maintaining margins in the integration business, which has become extremely cut throat, and has also suffered from lack of easily available module supply putting a dent in cashflows, as well as increases in copper and steel prices driving up costs.

We at Jane Capital have been saying for some time that the future for integrators is either vertical or horizontal integration, or product development. And that integrators who do not innovate or aggregate will rapidly see their margins squeezed.

Feeling that the US is rapidly losing its early leadership in solar

This was a general theme running through the discussion. A few interesting assessments made by various participants:

  • Only 1 of the top 10 PV companies are US firms.
  • Key to changing this is increasing the government support to the same levels as Germany & Japan. The recent federal government 30% tax credits (through 2007) California’s solar rebate initiative, and New Jersey’s solar rebate initiative are the main drivers in the US. As a result, the US is really just a two market solar industry – California and New Jersey.
  • We are at risk of China surpassing the US as well.
  • Thin film technologies are a wild card with the potential to change this dynamic, but are still quite far off from having enough market traction to make a difference.
  • Bottom line: if the US cleantech industry wants to be a player in the solar industry long term, it is going to have to pony up the cash.

Thin Film vs. Crystalline Debate

As usual, the thin film vs. crystalline silicon debate was ever present. A few common themes of this discussion:

  • Module cost makes up less than 1/3rd of typical system prices. So a target of reducing module prices from the current c. $3.5/Wp to less than $1/Wp (still a ways off in any case) therefore only has the potential to bring down system prices perhaps 20%-25%. Scale in manufacturing size can additionally help, but scale in installation size, and more end-product standardization are needed to reduce the overhead and installation cost, which make up a significant part of cost. Already average installed system costs for large scale typically run $1-$1.5/Wp less than the $8-$12/Wp of a residential system.
  • Current $/kwh are running from $0.50- $0.90/kwh today. Crystalline silicon technology does not have the potential to reduce installed costs really below the perhaps $1/Wp. Thin film does.
  • In addition, the industry has become extremely reluctant to continue to remain at the mercy of prices /supply in the silicon industry (as prices have more than trebled), and every major player continues to look for new ways to either reduce their silicon content, reduce silicon processing costs (a key area to watch), or move develop a thin film bet.
  • Most attendees/presenters felt the current silicon shortages would last less than 2-4 years. Interesting enough, as discussed above, the companies hurt most by this are the integrators, not the module producers, who are having trouble sourcing product, and have also been squeezed by higher copper and steel costs.
  • However, given the level of crystalline silicon capacity adds and technology advances, no one seemed to expect thin film to represent more then 10% of total production within the next 5 years.
  • One other critical area of interest to me was module longevity – roughly adding five years to module life by itself can reduce $/kwh by perhaps 10-20%. I find it very likely that we could see 40 year plus modules playing a key part in bringing down $/kwh. Crystalline silicon’s traditional longevity advantages here over thin film could become a key factor in the next few years keeping crystalline in the game a lot longer than thin film advocates might expect.

A few other tidbits:

To my disappointment there was no discussion of the Applied Material’s tandem cell technology (a story Cleantech Blog helped break into the news in the San Francisco Chronicle several weeks ago).

There was also less discussion of solar PV concentrators than I have seen at previous conferences. Though some discussion was percolating, this has become a VERY hot funding area for cleantech VCs for some reason, and I expected more talk about it. I still have trouble with the basic premise of solar PV concentrators, and don’t think those deals will see the kind of success as the module producers have had, but that’s another story.

“Tunable silicon nano powder”

There was an interesting presentation by Innovalight http://www.innovalight.com, on its silicon nanopowder based ink /printing process, touting a potential for <$0.40/Wp, and Backers have included Arch Ventures, Sevin Rosen, and APAX.

They use an ink made up of 2-10 nm silicon particles to “tune” the bandgap – ie, according to Innovalight, at that level of particle size, different particle size equates to a different part of the light spectrum. However, they did not quote numbers, and when pressed by numerous audience questions, came across as though they were still early in the lab on manufacturing techniques, and still far off on efficiencies, performance, and life. They stated a target of 2008 for initial pilot production.

Chevron Energy Solutions solar entry:

One of speakers, William Golove, announced that he was leaving Lawrence Berkeley Labs where he has been a long time solar applications performance expert, to join Chevron Energy Solutions to lead a renewable project development effort. I believe this will mark an expansion by Chevron in this area, so it was exciting to hear.

2 replies
  1. Daniel
    Daniel says:

    Do you think that module makers would be interested in reducing their silicon use/costs per Wp by 30%? Any ones specifically?I'm looking to license some IP that would allow/enable this.

  2. John Addison
    John Addison says:

    Neal, thanks for another informative article. In addition to Kyocera, I thought that Conergy had strong vertical integration including large-scale systems integration. Where do you see Conergy?

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