Solar PV Manufacturing

2Solar PV Manufacturing A White Paper by EAI 3 Solar PV Manufacturing A White Paper by EAI Preface These are exciting times in the solar PV sector. The rapidly falling PV system prices, the ever increasing coal and oil prices, and the furious pace of PV production capacity addition happening worldwide and ambitious governmental missions, have set the stage for an exponential growth the of solar PV. The implication of these developments for the Indian solar PV manufacturing sector is significant too. This paper evaluates the diversification opportunities for Indian corporates keen on entering the solar PV manufacturing sector. This includes both crystalline silicon and thin film technologies. The white paper is divided into threesections. The first section examines the global market dynamics of the solar PV sector and the opportunities and challenges for this sector. This section also provides an introduction to the prominent technologies used in solar PV. In the second section, the different parts of the crystalline silicon solar PV value chain are analysed (for both crystalline and thin films), with a view to provide insights on manufacturing opportunities available in these segments. The status of India for each of these segments is provided too. This section should help the reader in comparing the key industry dynamics worldwide and in India for various elements of the value chain. The third section provides the highlights and summary and also provides a framework to enable Indian companies to decide on investing in solar PV manufacturing in India. This report was prepared by Energy Alternatives India (EAI), a leader in the Indian renewable energy consulting and research sector, with a specialised focus on solar. Our solar division is one of the few teams in India that has prior expertise in having worked on all the segments within the solar PV value chain. The report was last updated in December 2011. Narasimhan Santhanam Cofounder and Director EAI - Energy Alternatives India @ www.eai.in [email protected], Mob: +91-98413-48117 4 Solar PV Manufacturing A White Paper by EAI 5 Solar PV Manufacturing A White Paper by EAI Table of Contents SECTION 1 – PV STATUS AND TRENDS INTRODUCTION Global Solar PV Installation Scenario Global PV Manufacturing Scenario PV Technologies Key Differences between Crystalline Silicon and Thin Film Technology Market Share of Different Technologies Key Takeaways 7 9 9 12 13 14 15 16 SECTION 2 – INDIA SOLAR PV MANUFACTURING KEY DRIVERS MANUFACTURING OPTIONS CRYSTALLINE SILICON POLYSILICON Major Factors Influencing Profitability Global Market Scenario Indian Scenario Future Outlook Conclusion 17 19 21 21 23 24 24 25 25 26 INGOT AND WAFER Major Factors Influencing Profitability Global Market Scenario Indian Scenario Future Outlook Conclusion 27 28 29 29 29 30 CELLS Major Factors Influencing Profitability Global Market Scenario Indian Scenario Future Outlook 31 32 32 32 33 6 Conclusion Solar PV Manufacturing A White Paper by EAI 34 MODULES Major Factors Influencing Profitability Global Market Scenario Indian Scenario Future Outlook Conclusion 35 36 36 36 37 39 CRYSTALLINE SILICON VALUE CHAIN COMPARISON MANUFACTURING OPTIONS THIN FILM PV AMORPHOUS SILICON (A-SI) Major Factors Influencing Profitability Global Market Scenario Indian Scenario Future Outlook Conclusion 40 41 41 43 43 43 44 44 45 CADMIUM TELLURIDE (CDTE) Major Factors Influencing Profitability Global Market Scenario Indian Scenario Future Outlook Conclusion 46 46 46 47 47 48 COPPER INDIUM GALLIUM (DI)SELINIDE (CIGS) Major Factors Influencing Profitability Global Market Scenario Indian Scenario Future Outlook Conclusion 49 49 49 50 50 50 THIN FILMS COMPARISON SECTION 3 – SUITABLE PV MANUFACTURING OPPORTUNITY 51 53 7 Solar PV Manufacturing A White Paper by EAI Section 1 – PV Status and Trends 8 Solar PV Manufacturing A White Paper by EAI 9 Solar PV Manufacturing A White Paper by EAI Introduction Solar PV manufacturing is a very dynamic sector that has seen long term growth amidst lots of demand shortages as well as excess production capacities. From being a technology intensive sector based in Europe and USA, solar PV manufacturing has become more of a commoditized business and has moved to lower cost production bases in China and other far-east Asian countries. This shift in PV manufacturing has resulted in huge capacity expansions which have led to significant drop in the price of solar PV systems. This cost reduction in turn has accelerated the adaption of solar PV not only in rich countries like Germany, but also in resource constrained countries in Africa. Global Solar PV Installation Scenario Solar photovoltaics have been around for a long time, but its adaption as a major energy source started only about 10 years back. From a modest 1.5 GW of total global installed capacity in the year 2000, the figure almost touched the 40 GW cumulative installed capacitymark in 2010. The year 2010 alone saw the addition of about 17 GW solar PV installations. The chart below shows the drasticgrowth of solar PV installations all over the world. Global capacity additions in GW 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 1.5 1.8 2.8 0.5 2002 0.6 2003 4.0 1.1 2004 5.4 1.4 2005 7.0 1.6 2006 9.5 6.2 2.5 2007 2008 2009 2010 7.2 15.7 22.9 16.6 39.5 2.3 0.3 0.0 0 2000 2001 Cumulative(GW) Annual(GW) Source: European Photovoltaic Industry Association (EPIA) The key driver for the growth of the solar PV in the past decade has been the enormous contribution of European Union (EU) in general and Germany in particular. The policy initiatives first taken by Germany, and later Spain and Italy, resulted in huge capacity additions. While the installations in the non-EU region grew from 1300 MW to 10777 MW during the period 2000- 10 Solar PV Manufacturing A White Paper by EAI 2010, it grew from 180 MW to 29.25 GW during the same period. In other words, EU had only 12% share in the global PV installations in 2000, but it reached 74% in 2010. The figure below illustrates the point. Cumulative global capacity(GW) 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2000 2001 2002 2003 2004 EU 2005 Non EU 2006 2007 2008 2009 2010 Source: European Photovoltaic Industry Association (EPIA) As mentioned earlier, Germany has been driving the solar PV growth within the EU as can be seen from the chart below. Cumulative Installations in GW 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 17.19 3.78 3.49 1.95 1.02 France 1.80 Germany Spain Italy Czech Republic Rest of the EU Source: European Photovoltaic Industry Association (EPIA) Germany has close to 60% share in EU and 43% share globally in PV installations. 11 Solar PV Manufacturing A White Paper by EAI Installation projections It is expected that the total global installed solar PV capacity will reach about 400 GW by 20201 450 400 350 300 250 200 235 195 160 130 22 7 40 18 60 20 102 79 19 23 27 30 34 40 48 59 73 283 342 415 150 100 50 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Installations/Year (GW) Cumulative(GW) Source: EAI Indian Scenario India, through its Jawaharlal Nehru National Solar Mission, set itself a target of installing a total of 20 GW of grid connected solar power plants by 2022. Out of this, 10 GW will be solar PV projects. The states of Gujarat, Rajasthan and Karnataka also announced policies to support the growth of the solar sector. The highlights of these policies are given below. JNNSM Targets Timelines 20 GW by 2022 Phase 1(2012-13) Phase 2(2013 -17) Phase 3(2017 -22) Applicable for c-Si Modules and Cells; Not applicable for TF Gujarat 1 GW by 2012 & 3 GW (in next 5 years) 300 MW (Grid Connected) by DEC 2011 None Rajasthan 10 GW – 12 GW (in 12 years) Phase 1: 200 MW (PV) up to 2013 Phase 2: 400 MW (20132017) None; But incentives for local manufacturing Karnataka 350 MW 2015 -2016 by 126 MW by 2013 - 2014 40 MW per year till 2016 None Local Content 1 Source: Energy Alternatives India analysis 12 Solar PV Manufacturing A White Paper by EAI Feed-inTariff Reverse Bidding : Round 1 -Solar PV Rs. 10.9 - 12.75/kWh Rs. 15/kW (1 12 years) Rs. 5/kWh (13th to th 25 year) PPAs signed for about 1200 MW st Reverse Bidding Rates: Up to 200 MW. Rs. 14.50 /kWh (max) Current Status Phase 1 : 150 MW PV allotted; 300 MW by end of 2011 Allotment in progress Allotment progress in Source: Various state policies, EAI Global PV Manufacturing Scenario One of the major shifts happening in the global PV manufacturing sector has been the rapid increase of manufacturing capacity in Asia (especially China and Taiwan) during the last decade. For example, LDK Solar of China, one of the leaders in the solar PV manufacturing, started its operation only in 2006. The accompanying chart below shows the shift in manufacturing leadership from western countries to East Asian countries. Source: European Photovoltaic Industry Association (EPIA) The changing manufacturing scenario is leading to a situation where two conditions are critical for the survival of a PV manufacturer. a. Scale, which helps a company remain cost competitive b. Vertical Integration, which also helps a company remain cost competitive and shields it from supply chain fluctuations. 13 Solar PV Manufacturing A White Paper by EAI Most of the PV manufacturing leaders started at some part of the value chain (Polysilicon, Wafer, Cell or Module) with a few tens of MW. But over the last few years, most of them have become vertically integrated and also have expanded their production capacities to the GW range. The following comparison will illustrate the speed of vertical integration of some of the top players. Company LDK, China ReneSola, China REC ASA, Norway Trina Solar, China Yingli, China Polysilicon 2009 2007 2009 -2009 Ingot and Wafer 2006 2005 1994 2005-06 2004 Cells 2010 2009 2003 2007 2004 Modules 2010 2009 2010 1997 2002 System Integration 2010 2010 2010 2009 The table below illustrates how much capacity some of the top companies: Company LDK Solar ReneSola REC ASA YingliSolar MEMC Revenue(US $ million in 2010) 2509.6 1,205.6 2399 616.1 2240 PolySilicon(MT) 12000 3500 17000 3000 13100 Ingots and Wafers(MW) 3500 1300 2375 1000 1200 Cells(MW) Modules(MW) 570 240 550 1000 -1600 400 590 1000 -- PV Technologies PV Technologies can be broadly divided into crystalline Silicon(c-Si) and thin film(TF) technologies. In case of c-Si technology, silicon wafers are converted to semiconductors that generate electricity due to photovoltaic effect. In case of thin films, thin layers of photoactive material are deposited on a substrate. c-Si can divided into two categories Mono-crystalline, and Multicrystalline Thin Film technology can be further classified into 3 types, namely: Amorphous silicon Cadmium Telluride 14 Solar PV Manufacturing A White Paper by EAI Cadmium Indium Gallium (di)selinide Key Differences between Crystalline Silicon and Thin Film Technology Thin film solar cells Thin film made by depositing one or more thin layers (thin film) of photovoltaic material on a substrate. Less efficient than polycrystalline and monocrystalline panels: Efficiency range – 10% to 12% Yes (using glazing) plastic Monocrystalline cells solar Polycrystalline/ Multi crystalline solar cells A polycrystalline cell is cut from multifaceted silicon crystal. Construction Monocrystalline cells are cut from a chunk of silicon that has been grown from a single crystal. Efficiency More efficient than Efficient compared to thin film solar cell but both polycrystalline and less efficient than thin film. Efficiency range Monocrystalline solar – 15 to 19% cell. Efficiency range 11-15% No No Flexibility Weight Heavier compared to thin Light weight compared film but less in weight to monocrystalline and compared to polycrystalline cells. polycrystalline cells, $0.93 per (€0.69 per watt) watt $1.12 per watt (€0.83 per watt) $1.02 per watt (€0.75 per watt) Price Area (Avg. output 0.623 MW per 1000 m2) Stability Less stable 0.98-1MW 0.91MW Good stability and better than thin films. Performance is less compared to monocrystalline cells Very good stability Performance Performance is less Better than polycrystalline compared to cells and thin film solar monocrystalline cells. cells. Temperature Largely unaffected Operate at decreased Operate at wide range while operating under efficiencies in higher of temperatures. higher temperatures temperatures 15 Solar PV Manufacturing A White Paper by EAI Market Share of Different Technologies Crystalline Silicon(c-Si) has been the dominant technology globally. In 2010, c-Si technology cells had more than 80% market share in production. Source: GTM Research The global PV installations are dominated by the crystalline silicon technology but thin film technology has been gaining some market share in the last few years. According to the estimates of Centrotherm (made in 2010), thin film’s market share is expected to increase in the future. Source: Centrotherm 16 Solar PV Manufacturing A White Paper by EAI Key Takeaways Globally, the annual solar PV installations have been accelerating during the past few years from 2.5 GW in 2007 to 17 GW in 2010 The cumulative global installed PV capacity was 40 GW in 2010 and it is expected to reach about 400 GW by 2020 Key European countries along with China, India and USA are expected to drive the global solar PV market. The solar PV manufacturing base has shifted from Europe and USA to Asian countries like China and Taiwan Chinese manufacturers have been scaling up their production capacities at a rapid pace and command more than 50% of market share in many parts of the PV value chain Globally, crystalline silicon technology is the most prevalent technology and commands close to 80% market share in terms of cumulative installations The most critical factors that with determine the success of a manufacturer in the solar PV sector are: o Scale o Vertical Integration 17 Solar PV Manufacturing A White Paper by EAI Section 2 –India Solar PV Manufacturing 18 Solar PV Manufacturing A White Paper by EAI 19 Solar PV Manufacturing A White Paper by EAI Key Drivers Market The solar PV segment in India is expected to achieve very high growth rates over the course of the next few years. While currently, India contributes relatively little by way of manufacturing in solar PV value chain; this contribution is expected to increase significantly. It has been predicted that even under the worst case scenario, India would see installations of about 500 MW in 2012. Drivers for PV Manufacturing in India The following are drivers for accelerated investments in the solar PV manufacturing ecosystem Increasing demand for solar power Domestic content requirements Requirement of technology tailored to Indian conditions Priority sector lending Avoiding the volatility of foreign currency borrowing Growing Demand The recent announcement of winners revealed something that was totally unexpected – Solar has almost attained grid parity in India. The lowest quoted price under the reverse bidding was Rs. 7.49 per kWh(15 cents per kWh),suggesting that the capital cost for solar has gone down significantly – falling from the previous high of about Rs. 14 Crore per MW to possibly Rs. 9 Crore per MW. With solar coming within the reach of the common man, it is highly likely that the levels of capacity addition will be far higher than expected. Considering the future exponential increase in demand, local manufacturers can be assured of good off take Domestic Content Requirements The National Solar Mission currently mandates that for power plants using c-Si technology, both the c-Si cells and modules would have to be manufactured in India. States such as Rajasthan have started providing incentives to manufacturers who are involved further upstream i.e. they provide incentives for manufacturers producing everything from wafers to modules. With states having taken this initiative, it is very likely that the National Solar Mission would follow suit. It is also likely that the domestic content requirements would be enforced on other technologies (Thin Films, CPV etc.). The likely reason that it has not been enforced currently is to ensure that technology transfer takes place from abroad. When domestic 20 Solar PV Manufacturing A White Paper by EAI manufacturers/suppliers start to exhibit significant expertise in this area, it is likely that the domestic requirements would be enforced. Requirement of Tailored Technology Most of the PV technology in use today is tailored to the western markets and their climatic conditions. This is the reason why thin film modules are performing better in India owing to their lower temperature coefficients. With sufficient R&D, factors like temperature degradation can be lowered to better suit the hotter Indian climate. For instance, currently, CdTe based modules offer lower temperature coefficients (-0.25% per K) compared to others but the use of carcinogenic materials may limit its potential. With significant R&D, other technologies such as c-Si and CIGS could be adapted to achieve similar performance levels. These minor improvements in technical characteristics would result in modules that perform better under Indian scenarios, thus providing higher kWh/kW yields. This would act as the USP for indigenous modules leading to higher demand provided the product is marketed properly. Priority Sector Lending Presently, most of the modules used are thin films imported from abroad (primarily USA). The drivers for this are two fold No domestic content requirement for thin film modules under the National Solar Mission Availability of financing at low interest rates from foreign institutions (i.e. EXIM Bank, OPIC etc.) Low interest rates are can significantly impact projected costs and returns. It is likely that the government would learn from this and offer low interest rate loans to both Indian developers and domestic manufacturers to meet the increased demand that this would create (a la China). Avoiding Volatility in Foreign Borrowing The problem with importing modules is that they are all charged at international rates (read: Dollars). With the Rupee currently depreciating rapidly, it would make more sense to not hedge it against the dollar or other foreign currencies. This provides a significant reason for developers to source modules manufactured locally. 21 Solar PV Manufacturing A White Paper by EAI Manufacturing Options Crystalline Silicon The Crystalline solar PV module is produced when a group of Solar cells is interconnected and assembled. The detailed schematic representation of the solar PV value chain is given below. Solar PV Value Chain a-Si, CdTe, CIGS (Thin Film) Polysilicon Ingots & Wafers Cells Modules Rooftop/ Off grid Grid Power Plant Solar Products Micro Mini Lanterns and lights Solar water pumps Other Solar Products 1. Polysilicon Polysilicon is the first part of the crystalline silicon value chain. In the polysilicon process, the feedstock metallurgical grade silicon (MGSi) is first converted to chlorosilane vapours and then reconverted to silicon using the CVD (Chemical Vapour Deposition) process. 2. Ingot and Wafer The polysilicon produced in the first stage of the crystalline PV production is first converted into ingots and these ingots are then sliced to produce thin wafers with thickness of about 180 microns. The wafers can be classified as mono-crystalline and multi-crystalline (or polycrystalline) wafers. Mono-crystalline wafers are slightly more expensive than multicrystalline wafers, but have higher efficiencies. 3. Cells 22 Solar PV Manufacturing A White Paper by EAI The silicon wafer is converted to a photovoltaic material in the cell manufacturing process. The material used and the production process determines the output cell efficiencies. The cSi silicon cells available in the market have efficiencies upto 25% as of August 2011. 4. Modules The solar PV module is the end product which is used to generate power for 20-25 years. The PV module production is essentially an assembly process wherein cells are interconnected and laminated to give the requisite power rating. The efficiency of the module depends on the type of cell used and will be 2-3% points less than the efficiency of the cells used. 23 Solar PV Manufacturing A White Paper by EAI Polysilicon Polysilicon is a common feedstock for both the solar industry and the electronics industry. The level of purity of the polysilicon determines how it is classified. Solar grade polysilicon has a purity level of 99.999999% (6N) whereas semiconductor/electronics grade polysilicon has a purity level of 99.999999999 % (9N). According to WackerChemie, the polysilicon market in 2010 was €6.8 Billion out of which solar sector constitutes 75% and semiconductor market constitutes the rest. The polysilicon demand in the solar sector has been growing at 30% annually while the same for the semiconductor sector has been growing at an annual growth rate of 6%2. As mentioned earlier, polysilicon is produced from Metallurgical Grade Silicon (MGSi) using the CVD process. The commercially popular production technologies are o TCS Siemens using hydrochlorination o TCS Siemens using chlorination & converters o Silane Siemens o SilaneFluidizedBed Reactor About 1.2 to 1.6 Tonnes of MGSi is used to produce oneton of polysilicon. Depending on the scale of the production facility, the total power consumption for the polysilicon plant in the range 100-200 kWh/kg of polysilicon production.The cost of production by large scale manufacturers is $30-$35/kg and it is expected to go down to about $25/kg. It has to be noted that the major cost driver for polysilicon production is the electricity cost. Source: GTM research 2 Source: WackerChemie 24 Solar PV Manufacturing A White Paper by EAI While the costs of polysilicon have been relatively stable, the price of polysilicon has seen huge fluctuations. It briefly touched $500/kg in 2008 and slid to $50/kg in 2010. It was trading in the range of $50-$53/kg in August 2011 and is predicted to reach $35/kg by end of 2011. Polysilicon has one of the highest margins in the entire solar PV Value chain. Just to illustrate the point, the graph below shows the EBIT margin for the polysilicon division of WackerChemie, one of the BIG 4 polysilicon producers. Starting from €74.5 million in 2004, the EBIT margin grew to about €734 million in 2010 which is a tenfold increase. This is fairly representative of the performance of the top companies in the sector. Margins for Wacker Chemie Polysilicon Group 1600 60% 1400 Million Euros 1200 1000 800 600 400 200 0 2004 2005 2006 2007 2008 2009 2010 2011(H1) 50% 40% 30% 20% 10% 0% Total sales EBITDA EBITDA % Major Factors InfluencingProfitability o Capex depreciation–Capital expenditure for a polysilicon plant is very high. For example, a 2500 MT plant will have a capital expenditure of approximately 250 million Euros 3. o Availability of inexpensive and uninterrupted power supply – As mentioned earlier, the electricity requirement can be in the range of 100-200 kWh/kg and this represents a major cost of production. Due to this factor, site selection for a plant is very critical. For example, Lanco solar selected the state of Chattisgarh for its integrated solar PV manufacturing facility because Chattisgarh is a power surplus state. Global Market Scenario The polysilicon market is an oligopoly, with the top five companies commanding a lion’s share (about 75%) of the production capacity and market share. According to EPIA, the total global 3 Source: Centrotherm photovoltaics 25 Solar PV Manufacturing A White Paper by EAI polysilicon production capacity was 350,000 MT in 2010 which is expected to rise to 370,000 MT in 2011. Among the top 10 companies, five companies (Hemlock, WackerChemie, OCI, Tokuyama, Daqo) are pure play Polysilicon producers, but are mostly present in other chemicals production. Three players (GCL, MEMC, M.Seteck) also produce wafers a well. Two other companies (LDK, REC) are fully integrated with their presence in all parts of the crystalline silicon PV value chain. Indian Scenario Currently, no Indian manufacturer makes polysilicon on a large scale. However, to meet the large scale uptake of solar PV installations projected under JNNSM, about 15,000 tons per annum of polysilicon production would be required assuming domestic content requirements stipulated by JNNSM might be extended beyond cell/module to wafer/polysilicon. Large scale production of polysilicon in India would also depend on how the issue of uninterrupted power supply with very little voltage fluctuations is addressed as this is a critical factor that affects cost of production of polysilicon. In addition, polysilicon production, being a capital intensive process would require low interest rate loans (which is currently hard to procure within the country). Companies such Lanco Solar, BHEL and Birla Surya have announced their plans to set up polysilicon plants in India. LancoSolar’s plant is expected to produce 11 N (semiconductor grade) polysilicon, while BHEL’s tie up with BEL is expected to result in an integrated manufacturing facilitythat produces 10,000 tons of polysilicon per annum. Future Outlook Due to the increase in the total production capacity, it is expected the polysilicon market will change drastically. Some of the expected changes are Polysilicon spot price expected to drop to $35/kg and more by end of 2011. Cost of production to drop to $20/kg. However, there are other factors that might actually counteract the above trends. These include: Purity becomes important. More and more customers are demanding 9N purity polysilicon because, higher the purity of the polysilicon, higher the efficiencies that can be achieved at the module level. Shortage of metallurgical grade silicon. Centrotherm Photovoltaics AG expects that the MGSi production capacity will face difficulty in keeping pace with the polysilicon demand. This could lead to a shortage of MGSi in 2014. In this scenario, the polysilicon price is likely to go up. Upgraded Metallurgical Silicon (UMG) gaining market share. With the advancements in production technology, some of the companies are betting that they will be able to produce 26 Solar PV Manufacturing A White Paper by EAI UMG at less than $15/kg at quality levels comparable to those of polysilicon. Some of them expect to capture about 30% market share by 20164 Conclusion Polysilicon industry is going through a phase of massive capacity expansion by the entrenched incumbents. This capacity addition, while creates bigger barriers to entry for newer players, also leads to economies of scale and price reduction. This price reduction is passed through in the value chain and will result in lower PV module prices. For a company evaluating polysilicon manufacturing opportunity, it is important to ensure the following: a. Production capacity should be substantially large as this results in low polysilicon price which in turn ensures that the product is cost competitive in the global market against the offerings from the entrenched market giants b. Ensuring cheap and uninterrupted power supply is a critical factor for successas price of electricity forms a major chunk (26%)of production cost while uninterrupted power ensures efficient polysilicon production c. Along the c-Si value chain, CAPEX depreciation is highest for polysilicon (45%). Thus access to low cost of capital should be ensured to remain cost competitive 4 Source: Photon International 27 Solar PV Manufacturing A White Paper by EAI Ingot and Wafer Multicrystalline modules dominated in the c-Si space with a 68% market share as against 32% market share for monocrystalline modules in 20105. However, with the increasing demand for high efficiency PV modules, it is likely that mono-crystalline technology will become more prominent in the near future. Production of Ingots and Wafers are typically done together in the same plant, even though there are companies that specialize in the manufacturing of either ingots or wafers. The most common commercial wafer production technologies are Czochralski crystallization production process – For Mono-crystalline Ingot manufacturing Bricking/solidification - Multi-crystalline Ingot manufacturing Wafer slicing(using wire saws) – For shaping and slicing the ingots into thin wafers The schematic for the ingot and wafer production is given below Source:MEMC Typically, one Silicon wafer of standard size (156 mm X 156 mm square wafer) is converted to a cell with wattage of approximately 4 Wp. About 6 grams of polysilicon is required to produce 1 Wp of PV wafer. This is expected to reduce to about5.5 grams by 2013. The wafer production cost was about$0.52/Wp in early 20116.The wafer price has been moving in line with the polysilicon prices. The graph below gives the wafer spot price trend. 5 6 Source: WackerChemie Source: Photon International, Apr 2011 28 Solar PV Manufacturing A White Paper by EAI After touching more than $10/wafer in the second quarter of 2008, the wafer spot prices are in the following range as of August 2011. Monocrystalline Wafers (156 mm X 156 mm) – $2.5 - $2.8/Wafer Multicrystalline Wafers(156mm X 156 mm) – $1.9 - $2.4/Wafer Source: EnergyTrend The EBIT margins for the Ingot and Wafer production havehovered around 20% over the year (2011). Major Factors InfluencingProfitability Capex depreciation– The investments for an ingot and wafer plant can be in the range of $0.5 million to $1 million. The capital expenditure for setting up monocrystalline Ingot manufacturing facility is higher than that for a multicrystalline ingot manufacturing facility. This is due to the fact that monocrystalline ingot production process is more complicated than the multicrystalline ingot manufacturing. Ingot production contributes to about 30-40% of the capex and Wafer production contributes to the rest – 60-70% of the capex. Consumables – Materials like crucibles, slurry and sawing wire are used up in the production process and it adds considerably to the cost of production. Availability of inexpensive and uninterrupted power supply – While this factor is not as critical as in the case of polysilicon, electricity cost and availability affects the profitability. On an average, about 30kWh/kg of electricity is required for an ingot and wafer plant. 29 Solar PV Manufacturing A White Paper by EAI Global Market Scenario According to EPIA, the total global production capacity was between 30-35 GW in 2010. Out of this, more than 55% capacity is in China. Of the top 10 Wafer manufacturers, twocompanies (Pillar-Spain, Green Energy Technology-Taiwan) are independent wafer manufacturers. Twocompanies (GCL Poly, MEMC) produce polysilicon as well, whereas onecompany (Trina Solar) is fully integrated except for polysiliconproduction. Five companies (LDK Solar, Solarworld, REC, Renesola, Yingli) are fully integrated. Indian Scenario Currently, there are no Indian companies that manufacture c-Si waferson a large scale. It is estimated that an annual production of about 2000 MW would be required to meet the proposed installation capacities under the National Solar Mission. About 60% of the cost of production of wafers can be attributed to the raw materials used (including polysilicon). The fact that polysilicon cannot be sourced locally is a major source of concern that discourages setting up of wafer manufacturing units within the country. Thus scaling up the domestic polysilicon production would be required for proliferation of wafer manufacturing units. Failing to do this, companies would have to resort to setting up integrated manufacturing units (i.e. producing both polysilicon and wafer) to ensure that they remain cost competitive. As mentioned earlier, Lanco Solar and Birla Surya have announced plans to set up integrated cSi PV plants. Carborundum Universal (part of Murugappa Group) had also announced its intention to enter this segment. The fully integrated Lanco Solar production line is expected to produce about 250 MW of wafers per year catering to both the monocrystalline as well as multicrystalline markets. Future Outlook Globally, many cell manufacturers are backward integrating by getting into wafer production. It is expected that standalone wafer manufacturing companies will find it difficult to compete and will disappear. It is also expected that mono-crystalline wafers will become more popular because of the increasing requirement for higher efficiency modules. The price of wafers will also keep reducing in tandem with the polysilicon prices. The price drops are expected to be so large that some of the big name wafer manufacturers are contemplating a complete shutdown of their wafer manufacturing facilities. For instance, one of the big name wafer manufacturer – REC shutdown their multicrystalline solar wafer plant in Glomfjord, Norway (775 MW production capacity) in October 2011, followed by the temporary closure of part of its 650 MW multicrystalline wafer facility in Herøya, Norway(expected to be closed in December 2011) citing a 30% drop in wafer prices over the year. 30 Solar PV Manufacturing A White Paper by EAI Other wafer manufacturers, like ReneSola, are striving to achieve cost of production of less than $0.2/Wp by end of 2011 to counteract the bottoming wafer prices. The cost reductions are expected to be achieved using more efficient manufacturing processes (reducing the amount of electricity required for production and reducing waste) as well as lowering wafer thickness using advanced sawing techniques over the next few years. It is worth noting that wafer inventory levels have continued to decrease over the year. This can be attributed to the fact that small and medium scale manufacturers are ceasing production while the global wafer demand is met almost entirely by the inventory backlog that the large scale manufacturers currently have. This suggests that the wafer price is expected to be relatively stable for the immediate futurethereby ensuring that the EBIT margins remain fairly stable. Conclusion With the improved manufacturing processes that reduce material losses, reduce electricity consumption and improve the utilization of consumables, the prices of wafers are expected to go down further. Together with the drop in polysilicon prices, this wafer price drop will contribute to c-Si PV system price drop. For a new entrant to the sector, the following key things need to be kept in mind. a. It will be challenging for a stand-alone wafer manufacturer. After establishing the ingot and wafer business, it might become imperative to vertically integrate either forward cell manufacturing or backward to polysilicon manufacturing (or both) b. Scale of the installation is critical, which will help to i. Reduce the production cost ii. Have a better bargaining power in sourcing polysilicon and selling wafers c. Cheap and uninterrupted power supply is another critical success driver 31 Solar PV Manufacturing A White Paper by EAI Cells The solar cell manufacturing process has three main stages After removing any surface damages, the silicon wafers are first treated with a dopant (typically phosphorous) to create a photoactive p/n junction. An anti-reflective coating is applied to the front side of the wafer to increase the absorption of sunlight by the cells. In the next stage known as metallization, narrow contact fingers and two or three wider strips (“bus bars”) perpendicular to the contact fingers are printed on the front side. On the back side, bus bars are applied and the back surface is imprinted with Aluminium. The wafer is then dried and thermally fired (“sintered”) to ensure good electrical contact with the Silicon. Excluding the feedstock (Wafer), the processing cost for cells is in the range of $0.25/Wp – $0.4/Wp. Another major cost in cell manufacturing is the R&D expense incurred on continuously improving the solar cell efficiencies. The solar cell prices have been falling quite drastically over the last few years. Source: EnergyTrend From a high of more than $3.5/Wp in 2008, the spot price of solar cell has dropped below the $1/Wp mark and is trading in the range of $0.7/Wp and $0.9/Wp as of August 20117. The sharp drop in the ASP (Average Selling Price) is taking a toll on the margins as well. From healthy margins of more than 15%, the cell margins fell to about 4% by mid-20118. Many of the cell producers are estimated to have negative margins during the first half of 2011. This was 7 8 Source: Energytrend Source: iSuppli 32 Solar PV Manufacturing A White Paper by EAI caused by excess inventory in the supply chain that led to sharp price cutting by the cell manufacturers in order to liquidate their stock. Major Factors InfluencingProfitability Capexdepreciation– The cost of setting up a solar cell plant comes to about $1 million/MW. Materials–The Ag (Silver) andAl (Aluminum) paste used in the production process. Process media (Phosphorous oxy chloride, other acids, gases like nitrogen, argon, ammonia, etc.) contribute significantly to the cost. R&D– As mentioned earlier, the demand for higher cell efficiencies is relentless. R&D plays a key role in improving cell efficiency. Global Market Scenario In 2010, the total cell capacity was close to 30 GW, out of which more than 50% capacity was in China9. Of the top 10 Cell manufacturers, two companies(JA Solar, Gintech) make only cells whereas five companies(Suntech, Q-Cells, Motech, Sharp, Kyocera) make cells and modules. Onecompany (Trina Solar) is present in wafers, cells and module manufacturing, whereas another company (Yingli Solar) is fully integrated. First Solar, which is among the top 10, is a CdTe Thin Film manufacturer. Indian Scenario The growth in solar cell manufacturing in India has largely been due to the inclusion of domestic content requirements under the National Solar Missions which states that for solar PV projects using c-Si technology, both the cells and modules would have to be manufactured within the country. Cell production in India started with about 20 MW of production capacity in 2001-02. This number has grown to over 700 MW with about 320 MW of capacity being added in 2010-11. Significant capacity additions took place between 2009 and 2011 coinciding with the announcement of the National Solar Mission Guidelines. Currently, there are over 10 companies manufacturing cells in India; the combined cell production capacity is over 600 MW. The installed cell production capacity is expected to double by yearend or early next year considering the fact that at least 500MW of solar capacity is scheduled to be set up over the course of the next few years (of which 350 MW is scheduled to come up under JNNSM which mandates a domestic content requirement). 9 Source: EPIA 33 Solar PV Manufacturing A White Paper by EAI Source: MNRE Company 1 2 3 4 5 6 7 8 9 10 11 Indosolar Moser Baer(includes Thin film) Tata BP Solar Websol Jupiter Solar Euro Multivision USL Photovoltaics KL Solar Central Electronics Shurjo Energy(Thin Film) Bharat Electronics Total Annual Production Capacity in 2010(MW) 160 150 84 60 45 40 35 30 15 6 5 630 Capacity in 2011(MW) (E) 360 250 84 120 145 40 100 100 15 6 5 1225 Source: Photon International (March 2011) Future Outlook The trend of the Chinese manufacturers increasing their market share in the global solar cell market is expected to continue. Large volumes of production from these Chinese companies are expected to further drive down the price of solar cells. For instance, both the multi and monocrystalline cell contract prices have dropped by about 23% over the past month. It is expected that the capacity additions in cell production would be relatively low. Capacity addition would mostly be limited to the large vertically integrated module manufacturers who 34 Solar PV Manufacturing A White Paper by EAI are looking to source a significant portion of their cells in-house so that they can stem the thinning profit margins in the module manufacturing business. Cell manufacturers would need to provide cells with higher efficiencies through better cell design to hope to compete in the market as seen in the case of the high efficiency cells offered by SunPower. From a production of about 30GW(including Thin Films) in 2010, the announced production capacities for 2011 will be close to 50 GW 10. In a market where the total PV installation is expected to be only 22 GW (for 2011), the cell capacity is more than double the demand. Conclusion The year 2010 saw record production of PV cells – about 30 GW, whereas the total global PV installation for the year was less than 20GW. This huge supply-demand gap is expected to continue in the near future and will lead to further reduction of cell and module prices. The following points will influence the success of a newcomer to cell manufacturing industry. Cells are getting increasingly commoditized, and the best way to differentiate a product from the competition is to produce higher efficiency cells. This makes it critical to invest in Research and Development (R&D) - both for process improvements and for material usage. In order to remain competitive, it is highly recommended that the new entrant plans for vertical integration once the cell manufacturing business is stabilized. 10 Source: iSuppli 35 Solar PV Manufacturing A White Paper by EAI Modules Module production is a fairly standardized assembly process wherein cells are interconnected, encapsulated, laminated and framed to produce the final product. The efficiency of the cell drops a few percentage points due to the encapsulation of the interconnected cells. PV cells contribute to about 70% of the total cost of a module and hence, the price of module moves in tandem with the cell price. As seen in the previous sections, prices have been falling in all parts of the value chain and this trend is reflected at the PV module level. The price trend can be seen in the figure below. The price drop has accelerated significantly over the previous year. The module prices were about $1.8/Wp during 2010 and it has dropped to close to $1.2/Wp by August 2011. According to the industry research firm iSuppli, the price of modules is expected to drop below $1/Wp by the second Quarter of 2012. 36 Solar PV Manufacturing A White Paper by EAI Major Factors InfluencingProfitability Since module production is an assembly process, the only major factor that affects the profitability of the module making is the material cost. As mentioned earlier, cells constitute about 70% of the total cost and another 10-15% cost is constituted by other materials like encapsulant, backsheet, glass, frame, etc. Global Market Scenario The module sector has very low barriers to entry because a. The capital costs for setting up a module assembly unit is low(typically $50,000/MW) b. Very low technology risk because the production process is an assembly process c. Standardized production process Due to this, there are several manufacturers of solar PV modules all over the world and the sector is highly fragmented. Many of the top companies are integrated forward and/or backward. Some companies like Q-Cells, MEMC, etc. do contract manufacturing for cell companies. According to reports, there are over 400 module manufacturers in China with varying capacities. Given below is the list of the top 15 Solar PV module manufacturers in 2010. Source: GTM Research Indian Scenario The solar module manufacturing process is largely an assembly process. Due to the low technological as well as capital requirements in this sector, India has seen an explosive growth 37 Solar PV Manufacturing A White Paper by EAI in this segment. Starting with about 20 MW of manufacturing capacity in 2001-02, the current manufacturing capacity is over 1600 MW with about 40 players in the segment. As with the cell manufacturing segment, the growth in module manufacturing is largely dependent on the domestic content requirements stipulated under the National Solar Mission.With the emergence of state specific policies, the annual solar PV capacity addition is expected to rise faster thereby fostering the growth of domestic panel manufacturers provided they remain cost competitive with respect to the global market. The table below gives a glimpse of the various companies involved in module manufacturing within the country. Sl. No 1 2 3 4 5 6 7 8 9 10 Module Manufacturer Solar Semiconductor XL Telecom Ltd. Lanco Solar Tata BP Solar India Ltd. EMMVEE Solar Systems Pvt Ltd. Synergy Renewable Moser Baer Photovoltaic Ltd PLG Power Titan Energy Systems Ltd. Photon Energy Systems Others Technology Multicrystalline / Mono crystalline Polycrystalline Monocrystalline/Multicrystalline Monocrystalline/Multicrystalline Monocrystalline/Multicrystalline 195 192 131 125 114 C-Si Polycrystalline/ Monocrystalline 110 Monocrystalline /Polycrystalline/ Thin 100 film Polycrystalline/ Monocrystalline 100 Monocrystalline/Multicrystalline 100 Monocrystalline/Multicrystalline 50 Monocrystalline /Polycrystalline/ Thin 387 film Total 1604 Source: EAI Future Outlook Module prices are estimated to drop below $1/Wp by the second quarter of 2012and to about $0.8/Wp by 201311. 11 Source: iSuppli 38 Solar PV Manufacturing A White Paper by EAI Source: IHS iSuppli Research, June 2011 There is considerable policy support from various countriesfor dramatically increasing the global installed capacity of solar PV systems by bringing down their prices. One notable programme is the “SunShot Initiative” by the US Government. This initiative targets to achieve a PV system cost of $1/Wpby 2020 from the current system prices of above $3.5/Wp. One key driver for achieving this target will be the reduction of module costs to $0.50/Wp. Source: SunShot Initiative, DOE Consolidation of the module market is expected over the course of the next five years with most of the smaller players going out of business due to the glut of modules available in the market. For instance, in China where there are over 400 module manufacturers, the number is 39 Solar PV Manufacturing A White Paper by EAI set to reduce to about 15 by 2016-17 fuelled mainly by the cutthroat pricing wars amongst the various Chinese panel makers. Conclusion Module making is one sector that is highly dependent on what happens upstream (polysilicon, ingots and wafers, cells) on the cost front and the efficiency front. As seen earlier, the module prices have been falling drastically, thereby increasing the solar PV penetration. For an investor contemplating entry into this sector, there are several considerations that include o Module manufacturing is an assembly process and has the lowest capital expenditure requirement. This means that the barriers of entry to this sector are very low. o The minimum size of a module manufacturing can be about 10 MW or lower. However, higher plant sizes can help in decreasing the cost of production. o Working capital required is relatively high for module manufacturing. o More and more module manufacturers are investing in to branding in order to differentiate their modules from the competition. 40 Solar PV Manufacturing A White Paper by EAI Crystalline Silicon Value Chain Comparison Poly Silicon Margins Investments Optimum Scale of Investment ~ 50% US $ 0.75 million/MW 700 – 1000MW ($ 560 - $ 800 million) Project timeline Cost Drivers 2.5-3 years Electricity, CAPEX Ingot & Wafer ~20% US $ 0.5 to 0.75 million /MW 80 – 100 MW ($ 45 - $ 60 million) 1-2 years CAPEX, Raw materials & Consumables High – continuous run rate 8 players ~ 70% market share 5 of the top 10 companies are vertically integrated Medium – continuous run rate 10 companies ~ 40% of market share. 2 of the top 10 companies are vertically integrated Cells >10% (June 2011) ~ US $ 1 million/MW 30 – 50 MW ($30 - $ 50 million) ~ 1 year Raw materials, R&D Module ~7-10% ~US $ 100k/MW 10 – 20 MW ($ 1 - $ 2 million) 4-6 months Raw materials Utilization requirement Market participation Vertical Integration High – continuous run rate 8 players ~ 80% market share Pure play companies predominant; 2 of the top 10 companies are vertically integrated Low – Run rate variable to demand Fragmented Most players are integrated forward and/or backward. China factor (includes Taiwan) 3 Chinese firms in top 10 6 companies in top 10 6 companies in top 10 - 41 Solar PV Manufacturing A White Paper by EAI Manufacturing Options Thin Film PV Thin Film (TF) technology came into the limelight during the polysilicon shortage of 2008. During this period of shortage, polysilicon spot prices went upto $400/kg and crystalline silicon modules prices were quite high (touching $4/Wp). At this time, many companies turned their attention to the cheaper alternative which uses less material – Thin Film technology. Significant R&D work was done in this sector, which resulting in CdTe and CIGS gaining more prominence. However, the crystalline silicon prices have been dropping since 2009 and today we are facing a situation where c-Si technology is becoming very competitive with TF on cost. In addition, c-Si technology also has much higher efficiencies. This has put more pressure on the TF manufacturers to reduce the cost further to remain competitive with c-Si. There are three major commercially viable technologies in the market today: a. Amorphous Silicon – a-Si b. Copper Indium Gallium (di)selinide- CIGS c. Cadmium Telluride – CdTe A comparison of the three technologies is illustrated below. 42 Solar PV Manufacturing A White Paper by EAI The three technologies have some pros and cons. Some of them are highlighted in the following table. ADVANTAGES a-Si • • • • Low Cost Good Diffuse Light Performance Inexpensive High Throughput Manufacturing Better suited for higher temperature than a-Si High module efficiency than other TFPV technologies No toxicity issues Higher stability Easy manufacture on flexible substrate • • CdTe • • • • CIGS • • • • • • DRAWBACKS Lower efficiencies than other TFPV Moderate stabilities Lower efficiency than CIGS Toxicity issue due to Cd usage Can’t be fabricated on flexible substrate Potential shortages of Te supply High throughput fabrication more difficult Expensive than a-Si and CdTe. Thin Film technology has been growing at a steady pace in the last few years. In 2010, the global production capacity of Thin Film modules was about 3 GW.This value is expected to more than double and reach about 7 GW by 2014. Amorphous silicon (a-Si) will continue to be the leader in production capacity for the foreseeable future, while CIGS and CdTe modules are expected to gain share from a-Si. Unlike crystalline silicon, TF technology production capacity is spread across the world with big capacities in USA (First Solar and Abound Solar-CdTe), Japan(Solar Frontier – CIGS) and EU(mostly a-Si and CIGS). 8000 7000 6000 5000 4000 3000 2000 1000 0 2009 2010 CdTe 2011 CIGS 2012 a- Si 2013 3rd Gen 2014 Source: GTM Research Each of these three technologies is analysed in depth in the followingsections. 43 Solar PV Manufacturing A White Paper by EAI Amorphous silicon (a-Si) This is the only TF technology that uses silicon as its raw material. The manufacturing process for amorphous silicon photovoltaic modules uses an amorphous silicon deposition approach. In this approach, tin oxide-glass plates are coated with amorphous silicon in a single vacuum chamber. The overall manufacturing sequence is: 1. 2. 3. 4. 5. Glass preparation (seams and washes) Deposition of tin oxide & laser scribing of tin oxide Deposition of a-Si & laser scribing of a-Si Sputter deposition of Al & laser scribing of Al Encapsulation and testing Micromorph-Si is manufactured using two types of silicon namely amorphous and microcrystalline. These modules tend to offer higher efficiencies than traditional a-Si modules. The higher efficiency however does not result in a higher price tag. Thus, these modules have a higher market share compared to traditional a-Si modules. The cost of the amorphous silicon module is about $1.1 per Wp. Many of the thin film equipment vendors like Oerlikon are targeting a cost of production of less than $1 per Wp.The price of a-Si modules is about $1.2/Wp. Major Factors InfluencingProfitability About 60% of the cost is due to the materials and process media used. These include Amorphous silicon Process gas Substrate Encapsulant Junction box Global Market Scenario a-Si technology is the leader among thethree different technologies due to the fact that it the oldest of all technologies. However, due to the limited potential to improve a-Si technology, other technologies like CdTe and CIGS are catching up. Some of the prominent a-Si TF companies are given below. Company Country Actual Production in 2010(MW) 195 138 1 2 Sharp Solar Trony Solar Japan China 44 Solar PV Manufacturing A White Paper by EAI 3 4 5 Uni-Solar NexPower Kaneka Solartech Co. Ltd Total USA China Japan 120 85 58 596 Source: GTM Research Indian Scenario a-Si has been gaining significant market share in India. In fact the largest solar PV power plant in India – a 30 MW installation commissioned in October 2011, by Moser Baer in Gujarat uses a-Si modules manufactured by Moser Baer themselves. Further, Moser Baer expects to have a total of 100 MW of installed capacity in operation by year end, all of which would use a-Si modules. In India, Moser Baerand HHV are the only players in the a-Si manufacturing segment. Moser Baer has an annual a-Si production capacity of 50 MW, while HHV has a capacity of 10 MW.HHV is expected to expand its production capacity to 500 MW over the next five years. It is worth noting that HHV is the first Indian company to have developed both the technology as well as the equipment for setting up a thin film module manufacturing facility.In addition, they are the only indigenous vendor for thin film manufacturing equipment. Future Outlook The major challenge for the growth of a-Si is the limitation in efficiency, which is estimated to be limited to 10%. Variants like Micromorph silicon could become more prevalent, but the future is unclear. The recent exit of the top a-Si manufacturing vendor, Applied Materials, has raised questions about the future growth of this technology. Though this may have come as a blow, there are other big names keeping a-Si alive. For example, DuPont (known in the industry as anencapsulant manufacturer) has started churning out a-Si modules through its subsidiary DuPont Apollo who have their capacity sold out for 2011. Like other thin film manufacturers they too are focusing on emerging markets. For instance, in the second half of 2011, DuPont Apollo signed an agreement to supply an Indian company – Wipro EcoEnergy with a-Si modules while also coming up with a proposal to setup a 10 MW power plant in Gujarat using their a-Si modules. Due to the physical properties (primarily flexibility) of a-Si modules, such as those using tandem junctions, the future could be in off-grid applications such as solar powered cars and BIPV. The market is currently prime for investors to gain a first mover advantage. 45 Solar PV Manufacturing A White Paper by EAI Conclusion While a-Si will continue to maintain its market leadership in the thin film segment for the next few years, it is only a matter of time before CdTe or CIGS overtake a-Si Technology. The key things a new entrant to the a-Si market should keep in mind are the following: The limitation on efficiency increase needs to be counteracted by lowering the cost of production. Unlike the other technologies, the raw material – Si, is neither toxic nor a rare earth metal. This eliminates the availability of raw material risk. 46 Solar PV Manufacturing A White Paper by EAI Cadmium Telluride (CdTe) Cadmium Telluride is a technology which is predominantly driven by just one major company – First Solar. CdTe modules are currently the cheapest TF modules available in the market with cell efficiencies(12-17%) higher than a-Si but comparable to CIGS. CdTe technology is however considered risky by many because of its usage of Cadmium, a carcinogen, as one of its raw materials. Manufacturing of CdTe thin film solar cell involves a set of physical and chemical procedures in which the layers are sequentially deposited onto a substrate in a back wall configuration which means that light is incident on the larger bandgap material. The most common structure is glass-TCO-CdS-CdTe-BC where    TCO is the front contact, a transparent conducting oxide which is exposed to light The CdS film represents the n-semiconductor, transmitting a large part of the sunlight into the absorber p-CdTe semiconductor. The sequence ends with a metallic back-contact (BC). Prior to BC deposition, the CdTe layer is submitted to heat treatment in the presence of CdCl2, which deeply affects the properties of the CdTe layer and is essential to achieve high efficiency. The cost of CdTe module is about $0.85/Wp. As it currently stands, the cost of production is about $0.75/Wp.However, First Solar claims to have lower production costs because of its scale. First Solar production capacity is about 1.4GW. The price of CdTe modules is less than $1/Wp making it the cheapest TF technology. Major Factors Influencing Profitability A big part of the cost is due to the materials and process media used. These include Active material : Cadmium Telluride Cadmium Sulfide Substrate Encapsulant Junction box Global Market Scenario First Solar is the biggest Thin Film module manufacturer in the world and till recently, it had production capacities higher than the top c-Si manufacturing firm – Suntech. First Solar is followed by Abound Solar which ranks second in terms of annual production capacity. GE has entered CdTe production in a big way through investments in its recently acquired subsidiary – Primestar Solar. 47 Solar PV Manufacturing A White Paper by EAI Company 1 2 3 4 First Solar Abound Solar PrimeStar Solar Calyxo GmbH Country USA USA USA Germany Annual Production Capacity in 2010 (MW) 1400 65 30 25 Indian Scenario Over 60% of the projects allocated under Batch 1 of JNNSM are scheduled to use Thin Film technology. Of this, a significant portion (over 50%) is expected to be established using CdTe technology. The primary reason for this is the low interest rate loans given by EXIM bank of USA to project developers who import modules made in US (where FirstSolar, a CdTe manufacturer is a major player). In addition to this, there is some on-field data which suggests that power plants using CdTe technology has a higher electricity yield (up to 5% higher in some cases) when compared to the more expensive c-Si modules. For instance, FirstSolar recently inked a deal with Reliance Power to supply 100 MW of CdTe based thin film modules – which is the largest sales deal in India to date (September 2011). It should come as no surprise then that part of the project cost ($84.3 million) is being financed through a loan grant from EXIM bank of US. GE, one of the new entrants into the CdTe market has an R&D base in Bangalore. The R&D being performed here is expected to help GE produce cost effective CdTe modules with high efficiency by employing advanceddevice design. In India, there is no company that manufactures PV modules using CdTe Technology. Future Outlook CdTe is expected to continue to do well in USA and countries where the restriction on usage of Cadmium compounds is limited, with FirstSolar leading the charge. CdTe module makers are likely to shift focus to emerging solar markets such as India due to limited environmental regulations, higher yield under high temperature conditions as well as the demand for low cost modules. Considering the highly carcinogenic nature of Cadmium, a threat of Cadmium ban looms in European Union and other countries where environmental regulations are strong thereby inhibiting the sale of CdTe modules in these markets. CdTe is currently the cheapest module technology available. Further gains in market share would depend on how well it is able to maintain its price edge over the other competing technologies considering the fact that c-Si module prices have almost bottomed out over the past few months. Further, CdTe based modules would also have to see a significant improvement in terms of conversion efficiencies to remain relevant. FirstSolar aims to improve 48 Solar PV Manufacturing A White Paper by EAI CdTe module conversion efficiencies to between 13.5% and 14.5% by 2014 making it highly competitive. Conclusion CdTe has grown remarkably in the past few years, driven mainly by First Solar and possibly will be driven by Abound and GE in the future. CdTe will have the advantages as the cheapest TF technology and also good efficiencies. However questions on the toxicity of Cadmium remain. For a new entrant into CdTe, the following challenges need to be overcome to be a successful player in this segment. Access to production technology that can lead to low cost production Sufficient scale to remain competitive with the entrenched incumbents Overcome the perception problem related to cadmium toxicity 49 Solar PV Manufacturing A White Paper by EAI Copper Indium Gallium (di)selinide (CIGS) CIGS cells have reached higher efficiencies and do not use any toxic material like Cadmium in its production. These cells operate similarly to conventional crystalline silicon solar cells. When light hits the cell it is absorbed in the CIGS the photovoltaic characteristics of the material lead to electricity generation. The basic steps involved in the manufacturing process are given in the flowchart below. 1. 2. 3. 4. 5. 6. 7. 8. Glass preparation Sputter deposition of molybdenum Molybdenum conductor patterning Compound formation to create CIGS Sputter deposition of the zinc oxide transparent conductor Zinc oxide deposition Encapsulation Testing CIGS being the newest technology of all TF technologies, it is still more expensive than others and there is significant potential for cost reduction. The cost of CIGS production is about $1.2$1.3/Wp whereas the price is about $1.4/Wp. Major Factors InfluencingProfitability Most of the cost is due to materials like Active material – Copper, Indium, Gallium Selenium) Cadmium Sulfide Substrate Encapsulant Junction box Global Market Scenario Solar Frontier (Japan) dominates the production capacity with a total of close to 800 MW capacity. Other companies include o o o o Global Solar Energy – total production capacity - 75 MW (USA) Miasole – total production capacity - 60 MW (USA) Nanosolar (US) Avancis(Shell Solar) (Germany) In September 2011, the CIGS market played host to one of the most high profile solar module manufacturer collapse in recent times. Solyndra, a CIGS manufacturer producing innovative cylindrical CIGS modules recently went under in spite of a $500 million loan guarantee from the 50 Solar PV Manufacturing A White Paper by EAI US Government. The reason cited for this collapse is that the modules produced by Solyndra could not compete in terms of price with the crystalline modules offered by the Chinese module makers. Indian Scenario CIGS technology has started to make its foray into India. Solar Frontier, one of the largest CIGS/CIS manufacturers in the world made an announcement in September 2011, that it had closed deals to supply CIS modules to projects in India under the National Solar Mission and the Gujarat State Policy totalling 30 MW. Shurjo Energy has a production capacity of 7MW with plans to increase production capacity to 100 MW in the near future 12. No other company has a CIGS production facility in India. Future Outlook While CIGS has the potential to increase efficiencies, it has to reduce its cost base in order to remain competitive with the c-Si technology. With the exit of equipment vendor VEECO, question remains on the long term success of the CIGS technology. On the flipside, equipment manufacturers such as Centrotherm are putting significant efforts into CIGS R&D to ensure that their equipment guarantees high performance CIGS modules which can compete in the global market. The installed production capacity expanded to 439 MW in 2010. It is expected that the production capacity would increase by close to 200% in 2011 to about 1.3 GW. Some experts say that the production capacity addition by year end to could be as a high 2.2 GW. This would help put CIGS in a more favourable position in the market in hopes that the large volumes of production would drive down prices. Conclusion With higher efficiency potential, if CIGS can reduce costs, CIGS will get more market penetration. For a new entrant into CIGS, the following points are critical CIGS technology is still evolving and the production technology is yet to be standardized. This presents both a challenge and opportunity. CIGS has to find a way to remain cost competitive with the other technologies. The opportunity is that the scope for increasing efficiencies is much higher relative to the other technologies. As we have mentioned for others, scale is important in case of CIGS as well. 12 Source: Shurjo Energy 51 Solar PV Manufacturing A White Paper by EAI Thin Films Comparison a- Si Margins 8% CdTe 32% CIGS 31% Capital Investments* $ 3 Million / MW $ 1.5 Million / MW $ 2 Million / MW Project timeline 2.5 – 3 yrs 1.5 – 2 years ~ 2 Years Cost Drivers Raw materials and consumables, CAPEX depreciation Raw materials and consumables, CAPEX depreciation Raw materials and consumables, CAPEX depreciation Utilization requirement Variable to demand Variable to demand Variable to demand 52 Solar PV Manufacturing A White Paper by EAI 53 Solar PV Manufacturing A White Paper by EAI Section 3 – Suitable PV Manufacturing Opportunity 54 Solar PV Manufacturing A White Paper by EAI 55 Solar PV Manufacturing A White Paper by EAI Summary The previous two sections provided the global and Indian trends in solar PV, the rationale for having a local solar PV manufacturing ecosystem in India and the key characteristics of each stage of the value chain. The following points emerge: The growth of solar PV is expected to be aggressive worldwide, and in India, for the foreseeable future. India has few or no companies operating in the upstream portions of the solar PV manufacturing value chain. China is fast becoming the manufacturing hub for all manufacturing segments in solar PV, and will provide stiff competition from its low cost products, a result of the high scales at which Chinese companies operate. The different manufacturing segments along the value chain display strikingly different characteristics on key parameters such as capital costs, profit margins and the key drivers for success. Choosing the Right Manufacturing Option for Your Company Based on inputs and insights in this document, how does a corporate decide whether or not to invest in manufacturing, and if they decide to invest, which segment of the value chain should they invest in? EAI has provided a simple, preliminary framework to enable such decision-making. This framework, comprising four parameters, provides a quick checklist for your company to eliminate/shortlist options. For companies looking forward to venturing into the solar manufacturing business, the right choice however would depend on: Aspirations o Is your company targeting global leadership or Indian? o What are the profit margins that your company is targeting? Constraints o How much capital is your company willing to invest? o How comfortable is your company to work in tech driven domains? With these questions in mind, the following matrix aims to take your evaluation to the next stage. 56 Solar PV Manufacturing A White Paper by EAI Fully Integrated (Polysilicon to Modules) Wafer->Cell>Module Cell->Module Poly->Wafer Poly Wafer Potential for Global Leadership Medium Potential for Indian Leadership* High Margins CAPEX (per MW) High Technology Requirement High High Medium Low Low Low Medium High Medium High High High Medium Medium to Low High High Medium High Medium High High Low Low Low High Low Low High High High High Medium to High Cell Medium Medium Low Medium Modules Low Low Low Low a-Si Low Low-Medium Low High CdTe Medium Medium-High Medium High CIGS Medium High Medium High * - Assumption – the company is able to compete on cost with global leaders Highlights from the above table The time window is fast closing for new entrants to organically achieve global leadership in any segment of the solar PV manufacturing value chain. With few companies operating in India in the upstream manufacturing sector in the solar PV value chain, opportunities are high for achieving leadership these. While most manufacturing opportunities require medium to high capital investments (except module making, which is essentially an assembling operation), manufacturing of cells (especially thin film) also require a technology orientation for success. In general, one could say that as one goes down the value chain (from upstream to downstream), the overall capital requirements start declining and so do the profit margins, with module companies operating on very low-low margins. The thin film and crystalline PV value chains are dramatically different from each other, with the thin film manufacturing value chain comprising just one single, integrated stage (from raw materials to modules) while the crystalline stage comprises four distinct stages. This distinction highlights the fact that there are more options/choices available within the crystalline silicon value chain than within the thin film value chain. 57 Solar PV Manufacturing A White Paper by EAI EAI - Assisting Your Company for Attractive Manufacturing Opportunities in Solar PV EAI offers intelligence on the overall manufacturing opportunities in Solar PV upstream – Polysilicon, Ingots and Wafers Solar PV downstream – Cells and Modules Thin Film manufacturing Components – sub-components for cells and modules, chemicals and other consumables Balance of systems – inverters, monitoring systems Equipment and machineries – Furnaces, wafer cutting tools, cell production line, module production line Identifying the most attractive opportunities for your company Understanding your company’s aspirations in the context of solar energy sector Understanding your company’s manufacturing competencies Evaluating the fit between your aspirations + competencies and the available opportunities Clearly identifying the attractive opportunities appropriate for your company Feasibility study for shortlisted opportunities Demand and supply analysis Costs and returns estimates Strategic dimensions – extent of competition, buyer and supplier power, dominant designs and industry concentration, degree of innovation, barriers to entry Possibilities of JVs and technology partnerships Identification of key success factors Key characteristics of each opportunity 58 Solar PV Manufacturing A White Paper by EAI Strengths Dedicated Focus on Renewables - We work only in renewable energy and nothing else. Wide Expert Network - We work with over 100 technical and business experts across all primary renewable energy sources. Financial Assistance - We work with over 25 different PE, VC firms and banks providing our client easy access to finance. Clients EAI's consulting team has been assisting several organizations in diverse renewable energy domains. Some of our esteemed clients include: PepsiCo Reliance Industries World Bank Sterlite Technologies Bill & Melinda Gates Foundation iPLON GmbH Minda Group GE Bhavik Energy Agarwal Group Prominent companies that have benefitted from our research and reports: Accenture AT Kearney Shell Lafarge Exxon Mobil Boston Consulting Group Schneider Electric Bosch GE Danfoss Solar IFC Siemens Sharp Gehrlicher Solar AG Reliance Solar Emergent Ventures Videocon Q Cells Emerson Network Power Indian Railways 59 Solar PV Manufacturing A White Paper by EAI 60 Solar PV Manufacturing A White Paper by EAI