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Cost Is King In Battle For Solar Dominance

With a clear edge in both efficiency and profit margin, crystalline silicon solar modules threaten to steal market share from thin film solar technologies.

In the face of renewed pricing pressures, solar device manufacturers have had to refocus on minimizing costs and maximizing performance to maintain profit margins. Advances in crystalline silicon technology, and the falling cost of the polysilicon raw material, have only increased the pressure on manufacturers of emerging thin-film technologies, including thin-film silicon (TF-Si), cadmium telluride (CdTe), and copper indium gallium diselenide (CIGS) – many of which are under the gun to improve margins or face extinction, according to a new report from Lux Research. The report, titled “Module Cost Structure Breakdown: Can Thin Film Survive the Crystalline Silicon Onslaught?," compares incumbent multicrystalline silicon (mc-Si) technology (representing roughly 80% of the crystalline silicon market) 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 reduction efforts that module developers have undertaken, and forecasts which technology will gain a long-term cost advantage at the module level. “Crystalline silicon is dominant by volume and remains the cost/price benchmark for solar modules. Cadmium telluride is limited in efficiencies, but is the absolute leader in cost. We project these two technologies will continue to be highly profitable," said Ted Sullivan, a senior analyst for Lux Research, and the report’s lead author. “The profitability of thin-film silicon is much dicier, but CIGS is positioned to outplace crystalline silicon in profitability by 2013 as leading developers improve process stability." To forecast how module developers would reduce the key components of cost – capital, materials, utilities, and labor – Lux Research built detailed cost-of-goods-sold (COGS) models for the four key technologies – mc-Si, TF-Si, CdTe and CIGS – through 2015, including both glass and flexible substrates for CIGS. Multicrystalline silicon remains highly profitable as COGS decline. The dominant technology will continue to be profitable throughout the value chain as vertically integrated players drive cost from $1.45/W in 2009 to $0.93/W in 2015, assuming poly pricing at $70/kg. Efficiency will be a key driver of cost reduction, rising from 14.0% in 2009 to 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 9.0% to above 11.0%. Significant improvements in output will cut depreciated capex per watt, and help to reduce 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 than mc-Si, and its cost reductions will march onward, keeping it the most profitable solar technology, as COGS falls from $0.80/W in 2009 to $0.54/W in 2015. Costs for select CIGS technologies have dropped dramatically. CIGS sputtered on glass – which is Lux Research’s benchmark given its critical mass of developers – will see COGS plummet from $1.69/W to $0.76/W as efficiency improves from 10.0% to 14.2%, and factory nameplate capacity and yields grow, allowing the top developers to earn gross margins over 30%. “Module Cost Structure Breakdown: Can Thin Film Survive the Crystalline Silicon Onslaught?" is part of the Lux Solar Intelligence service. Clients subscribing to this service receive ongoing research on market and technology trends, continuous technology scouting reports and proprietary data points in the weekly Lux Research Solar Journal, and on-demand inquiry with Lux Research analysts. Lux Research provides strategic advice and on-going intelligence for emerging technologies.

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