Cost is king in battle for solar dominance

In the face of renewed pricing pressures, solar device manufacturershave had to refocus on minimizing costs and maximizing performance tomaintain profit margins.

Advances in crystalline silicontechnology, and the falling cost of the polysilicon raw material, haveonly increased the pressure on manufacturers of emerging thin-filmtechnologies, including thin-film silicon (TF-Si), cadmium telluride(CdTe), and copper indium gallium diselenide (CIGS) – many of which areunder the gun to improve margins or face extinction, according to a newreport from Lux Research.

The report, titled “Module CostStructure Breakdown: Can Thin Film Survive the Crystalline SiliconOnslaught?,” compares incumbent multicrystalline silicon (mc-Si)technology (representing roughly 80 percent of the crystalline siliconmarket) on a $/W basis against three challengers: thin-film silicon(TF-Si), cadmium telluride (CdTe), and copper indium gallium diselenide(CIGS).

The report surveys process changes and cost reductionefforts that module developers have undertaken, and forecasts whichtechnology will gain a long-term cost advantage at the module level.

“Crystalline silicon is dominant by volume and remains the cost/price benchmark forsolar modules. Cadmium telluride is limited in efficiencies, but is theabsolute leader in cost. We project these two technologies will continue to be highly profitable,” said Ted Sullivan, a senior analyst for LuxResearch, and the report’s lead author. “The profitability of thin-filmsilicon is much dicier, but CIGS is positioned to outplace crystallinesilicon in profitability by 2013 as leading developers improve processstability.”

To forecast how module developers would reduce thekey components of cost – capital, materials, utilities, and labor – LuxResearch built detailed cost-of-goods-sold (COGS) models for the fourkey technologies – mc-Si, TF-Si, CdTe and CIGS – through 2015, including both glass and flexible substrates for CIGS. Among the report’s keyobservations:

Multicrystalline silicon remains highly profitable as COGS decline. The dominant technology will continue to be profitable throughout thevalue chain as vertically integrated players drive cost from $1.45/W in2009 to $0.93/W in 2015, assuming poly pricing at $70/kg. Efficiencywill be a key driver of cost reduction, rising from 14 percent in 2009to 16.1% in 2015.

Oerlikon will give thin-film silicon new legs. Improvements enabled by Oerlikon’s new ThinFab line will push thin-film silicon efficiencies from 9 percent to above 11 percent. Significantimprovements in output will cut depreciated capex per watt, and help toreduce TF-Si costs from $1.32/W in 2009 to $0.80/W in 2015.

CdTe technology remains the long term leader in terms of COGS. Led by First Solar, CdTe has a significantly lower cost structure thanmc-Si, and its cost reductions will march onward, keeping it the mostprofitable solar technology, as COGS falls from $0.80/W in 2009 to$0.54/W in 2015.

Costs for select CIGS technologies drop dramatically. CIGS sputtered on glass – which is Lux Research’s benchmark given itscritical mass of developers – will see COGS plummet from $1.69/W to$0.76/W as efficiency improves from 10 percent to 14.2 percent, andfactory nameplate capacity and yields grow, allowing the top developersto earn gross margins over 30 percent.

“Module Cost StructureBreakdown: Can Thin Film Survive the Crystalline Silicon Onslaught?” ispart of the Lux Solar Intelligence service. Clients subscribing to thisservice receive ongoing research on market and technology trends,continuous technology scouting reports and proprietary data points inthe weekly Lux Research Solar Journal, and on-demand inquiry with LuxResearch analysts.


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