Archive for the ‘Solar Supply & Demand’ Category

Solar Mapping Makes Urban Deployment Easy

A recent trend to make solar energy deployment easier in urban areas is the use of internet mapping tools combined with solar industrysolar energy map software tools. Solar maps, such as the original San Francisco solar map at right, provide a comprehensive, one location file on a proposed site. This includes solar power potential, visual site images, financial incentives, a system cost estimate and energy savings.

As they are in progressive California, San Francisco introduced a solar mapping tool first. A number of other major cities have followed including, Boston, Los AngelesPortland, Oregon, and Salt Lake City.  New York City will have a solar map for 2011.

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The Pain and the Joy of the PV Module Price Decline, or Why I Wish I was Close to 1GW Manufacturing Capacity Already . . . .

As discussed in my previous post, photovoltaic (PV) module prices have dropped by 50% or more over the past 18 months. Recent Wall Street guidance by Tier 1 crystalline (c-Si) companies says that they will easily reach a manufactured cost of $1/Watt by mid 2011.  First Solar, the leading thin film manufacturer, already has an aggressive cost structure at $0.80/W currently (and is heading to $0.74/W in 2011).  Together, these two price drivers make the launch of a new solar energy PV modules product extremely difficult.

solar energy, photovoltaic thin-film, solar cells

Thin-film on Glass Production

Many new thin-film photovoltaic companies have been caught off-guard by the steep economic downturn and the lack of access to technology development and expansion capital. During this time, mature PV module companies greatly expanded their manufacturing capacity, lowered non-material production costs and increased yield ( Grade A salable product) resulting in the cost advantages described above. Thin-film companies’ strategic models created 4- 8 years ago used assumptions that c-Si companies would never achieve a manufactured cost below $1.50/W and they are now scrambling to compete with these new solar energy market dynamics.

Unfortunately for many of these promising companies, the days of doing incremental 50MW to 100MW capacity expansions annually is over. While expansion capital is hard to secure in the best of circumstances, the real problem is the manufacturing economies of scale required to reach production costs below $1W. Most successful companies with aggressive <$1/W cost structures are close to, or exceed 1GW of production capability.  Going from less than 100MW total production to 1GW has never been done before in the PV industry (although Solar Frontier is bravely in that process now). The operational scale-up risks of not “getting it right” is quite high, not to mention that finding approximately $1.3B in capital to finance that scale of production is almost impossible to secure. To overcome this GW scale necessity, new thin-film companies need exceptional (>12% efficient) solar cell technology combined with very lost-cost manufacturing machinery costs. This is a very rare combination, as semiconductor machinery is very high-cost and production line solar cell efficiencies are 6% – 11% depending on technology type. A good piece on this situation from Vinod Khosola can be found here.

photovoltaic thin-film, solar energy

Thin-film Production Line

Products based on amorphous silicon (a-Si) photovoltaic technology are under the most pressure, as solar cell efficiencies are generally below 10% and manufacturing costs are well above $1.45 on average. Recent scaling back announcements from early stage Sunfilm and Signet Solar are examples of this pressure, as is ENER’s running at substantially less than 50% of full production capacity with negative gross margin sales data. These are well run companies that unfortunately have been caught by exceptional market dynamics.

The PV module industry is heading toward the perfect storm of commoditization and temporary oversupply. Downward sales price pressure will continue while solar energy module supply in 2011 will exceed demand by more than 50%. M&A activity along with bankruptcies will be on the rise. And this is happening before the hyper-efficient electronics manufacturing giants such as Samsung, Foxconn and others drive down costs further as they become fully operational in the fast approaching $100B global PV marketplace.

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The Pain and Joy of the PV Module Price Decline

Solar energy, photovoltaics, solar cells

Source" GTM Research

In the past 18 months, photovoltaic module prices have dropped by over 50%. This solar energy market condition has been driven by a number of factors, including manufactured product oversupply, manufacturing capacity exceeding demand by 100% or more, and technology advances. The main activity creating these multiple price reduction drivers is the scale-up to near- or beyond-gigawatts scale manufacturing capacity which is required to achieve photovoltaic manufacturing economies of scale (with the resulting lowest ex-works cost).

This situation has brought pain for entities in the PV module manufacturing supply chain, but sheer joy to large project developers and small system installers. Average system level costs (modeled on a 1MW ground mount installed system) are now hovering around $4.25/Wdc with a kWh cost of energy at $0.17.  Forecasted PV module price reductions, based on publicly traded module companies’ guidance, indicate a system level cost of $3.25/Wdc by mid-2011. These numbers make many more projects viable, increase solar energy penetration, and reduce the need for large government subsidies.

While this is a good scenario for the PV industry generally, the module cost reductions are creating some interesting ripple effects. Modules used to account for as much as 70% of the cost of a completed solar installation but now are less than 45%.  With recent intense focus on the levelized cost of energy (LCOE) of a solar energy installation, the reduction of all non-module costs is under the microscope. These include system design, balance of systems (inverters, controlling electronics), project developers’ overheads, financing costs, installation methodology, labor cost, and operations and maintenance.

PV project developers’ overhead costs are increasing at a time when their supplier costs are decreasing. As mentioned in my post of May 4th, PV project developers face, on average, over a year of work just to bring a small utility scale project to shovel-ready.  While they face many challenges relating to real estate, financing, power purchase agreements, grid interconnection, and permitting, a recent installer survey shows the costs and challenges relating to only permitting can be as high as 20% of total development costs.  These costs can be direct fees paid (as much as 5% of total install cost in some jurisdictions) to the permitting authority and overhead costs relating to long and laborious permitting cycles of local and regional governing bodies.

The long permitting process can be attributed to some degree to unfamiliarity with PV generation plants, but also general indifference to PV. A recent large commercial rooftop installation was subjected to numerous county permitting office signoff delays spanning 2 months after project completion for issues such as having the wrong color placards, insufficient detail on permit document signoffs, and non-conformance to code which was not required in the original permit. When the inspector finally arrived for the final review, the building owner was told, “solar is a passing fad and useless energy.”

With numerous, differing permitting standards and attitudes such as the above inspector, the challenge of permitting solar energy and renewable energy in general needs attention by legislative bodies at all levels of government to reduce this unnecessary developer line item cost.

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A Good Visualization of the U.S. PV Markets

The National Renewable Energy Laboratory (NREL) has created an excellent historical visualization of solar installations in the U.S. from year 2001 to present. Clearly illustrates the impact of state subsidies and why California is the 4th largest PV market globally. This picture may change to more of a national market in the near future with less dependence on state subsidies as PV module, balance of systems and installations continue the steep cost decline. A U.S. market dependent on only federal solar subsidies may be just around the corner based on the manufactured cost forecasts contained in Photon Consulting latest report, “The True Cost of Solar, A Race to $1W”

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