PV Savvy
Knowing the Key Characteristics of
Solar PV Value Chain
AN INTELLIGENCE REPORT FROM EAI
Preface
As a renewable energy source, solar energy presents an exciting opportunity for India. While the current contribution of solar energy to the total India's energy needs is insignificant, in the medium and long run, it is expected that solar energy, especially solar PV will form a vital component of the country's energy mix.
The most important barrier that had stopped Solar PV from becoming a mainstream renewable energy resource is the high cost of producing power from the resource. This high cost is in turn a direct result of the high capital costs of the solar PV panels and the balance of system required.
The good news is that the capital costs for solar PV panels are expected to decrease significantly over the next 5-10 years. In addition, solar PV technology is continuously improving in terms of its efficiency. As a result of this combination of capital cost reduction and efficiency increase, by 2015, solar PV is expected to reach grid parity in some parts of the world and by 2020, in most parts of the world.
For India, the National Solar Mission and its incentives provide an additional reason for entrepreneurs and investors to explore this industry. The convergence of decrease in capital costs, increase in efficiency and significant financial support by the government is likely to result in a wide range of attractive business opportunities.
While solar power production is the final benefit derived from solar PV, there are other distinct stages along the solar PV value chain – starting from polysilicon and ending with solar modules.
A number of Indian entrepreneurs are keen to know the key characteristics of each of these segments to evaluate entry into one or more of these segments. This white paper on the characteristics of these distinct segments has been developed to provide this intelligence. This white paper has been prepared by Energy Alternatives India (EAI), a leading consulting and research organization for the Indian renewable energy industry.
EAI is glad to be part of the RenewCon Solar 2011 Conference which has a focus on the exciting solar PV sector. We hope that this white paper PV Savvy focusing on the opportunities present in the solar energy sector will assist entrepreneurs and businesses in their efforts to build a more vibrant and powerful solar PV ecosystem.
EAI thanks theenergybusiness and UBM for providing the opportunity to present this white paper as part of the conference, and wishes the very best for the success of the conference.
Narasimhan Santhanam Director - Energy Alternatives India; [email protected] Mar 5 2011, Chennai
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List of Contents
1. India’s Presence in the Solar PV Value Chain
2. Key Characteristics of Value Chain Segments
2.1 Polysilicon Production
2.2 Ingot and Wafer Manufacturing
2.3 Solar PV Cell Manufacturing
2.3.1 Crystalline Solar Cell Manufacturing
2.3.2 Thin Film Solar Cell Manufacturing
2.3.3 Concentrating PV Cell Manufacturing
2.4 Solar PV Module Production
3. Summary and Inferences
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1. India’s Presence in the Solar PV Value Chain
The solar PV value chain starts with the production of polysilicon and proceeds until the
stage when the solar PV modules are used in power plants or in a variety of products such as
lanterns streetlights, solar power packs for captive solar production and more.
Grid- connected
Power Generation
Polysilicon Ingots/
Wafers Cells Modules
Off-grid
Application
Solar PV Products such as lantern,
streetlights etc
Until recently, Indian entrepreneurs and businesses have focused mainly on producing modules and cells. Currently, only a few Indian companies have sizable cell manufacturing facilities and no company produces polysilicon or wafers on a significant scale. In order for India to have a vibrant solar PV based energy generation industry, it is felt that we need to build a complete ecosystem that supports the ultimate goal of producing power from solar. The government also has started thinking along these lines, and has come up with policies that require local content requirements for solar PV. For instance, there is a mandatory requirement of solar modules (and subsequently cells) to be made in India under the National Solar Mission policies.
The good news is that many Indian companies have started exploring entry into these uncharted segments of the solar PV value chain. At the same time, there is little information available for these businesses and entrepreneurs about these segments in the Indian context. In order to fill this gap, we provide inputs on the key characteristics of each distinct segment of the solar PV value chain in this white paper.
These inputs, we hope, will provide the entrepreneur an idea about the contours of opportunities at each segment. Most of the opportunities highlighted in this report are manufacturing / production related. Needless to say, there are many more opportunities that lie within each segment, and these opportunities could vary significantly in size and investments required. These other opportunities need not only belong to manufacturing but could also belong to trading and services segments.
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2. Key Characteristics of Value Chain Segments Entrepreneurs and businesses keen on exploring the various segments along the solar PV value chain need inputs on some key parameters / characteristics for each segment. These inputs will enable them to understand the dynamics of the segment and evaluate the suitability of the segment based on their aspirations, core expertise and financial capabilities.
Key characteristics discussed for each segment
• Type of entrepreneurs / investors who can benefit
• Scale of investments required
• Insights on whether it is an R&D oriented domain or commodity production
• Bottlenecks/threats
• Competition
• Market size
• Supply and demand
• Indian scenario
These characteristics are discussed for the following distinct segments
• Polysilicon production
• Ingot and wafer manufacturing
• Solar cell manufacturing
• Solar module production
2.1 Polysilicon Production
Polysilicon Wafers Cells Modules
Polysilicon is used to manufacture crystalline wafers. Around a quarter of the cost of a crystalline module goes just for polysilicon.
Type of entrepreneurs
/ investors who can
benefit
Entrepreneurs keen on building up capital intensive manufacturing
facilities for an emerging market.
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Scale of investment
Typical investments of $500 million - $1 billion for building a
polysilicon production plant.
High R&D or
commodity
manufacturing?
Commodity manufacturing
Bottlenecks/threats
High capital requirements, high energy input requirements and
long-term supply contracts could be deterrents to new entrants.
Competition
The industry is dominated by a few companies that supply around
90% of the total polysilicon market. Some of the prominent
companies are Hemlock, OCI, Wacker Chemie Tokuyama, REC
(subsidiary SGS and ASiMI), and MEMC
Market size
The world market of polysilicon has been growing 30-40% annually
since 2004, primarily from the growth in solar PV industry. The
market size of the solar cell polycrystalline silicon market in 2009
was $5.13 billion.
Supply and demand
Following undersupply since past few years, polysilicon production
capacity entered a fast-growth phase in 2009, which resulted in an
oversupply situation, in response to increase in production capacity
and growth in demand from the end markets. It is forecasted that
the demand for polysilicon will continue to increase at more than
ten percent for the period 2010 to 2012. Polysilicon oversupply will
also trigger a long term decline in its prices, which peaked to the
highest levels in 2008 in response to its supply shortage.1
Indian scenario
Companies such as Lanco, Bhaskar Solar and Acharya are reportedly
setting up polysilicon manufacturing plants in India, though these
are pretty much early days for polysilicon in India.
1
Global Polysilicon Market Report: 2010 Edition
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2.2 Ingot and Wafer Manufacturing
Polysilicon Wafers Cells Modules
The process of melting polysilicon into ingots and subsequently cutting them into wafers is wedged between polysilicon production and cell manufacturing.
Yet, it is a distinct process that does not require physical proximity to upstream or downstream processing. Consequently, some companies specialise in just doing that. Typically, ingot and wafer manufacturing are done by the same company.
Type of entrepreneurs /
investors who can
benefit
Companies that have been operating in metal cutting and
finishing, abrasives and related industries could be ideally
suited to enter this segment.
Ingots and wafer manufacturing requires minimum
investments in the range $50-75 million (the typical minimum
capacity recommended is about 60 MW per year).
Scale of investment
High R&D or commodity
manufacturing
Commodity manufacturing
Bottlenecks/threats/bar
riers
There is a threat of backward and forward integration by
large solar cell manufacturers and polysilicon producers
respectively; thus, this segment is under threat of being taken
over by its suppliers and customers in search for capturing
more stable value
Competition
The wafer industry is dominated by a few (5) companies
sharing over 90% of the market, with Shin-Etsu and Sumco
(Japan) alone having a third each, the remaining being
Siltronic (Germany), MEMC (USA) and LG Siltron (South
Korea). There are however, many smaller companies fighting
for share.
Market size
The global solar PV wafers production capacity has been
increasing year by year, from 1,900 MW in 2004 to 23,079
MW in 2010 at a CAGR of 51.6%.
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It is expected that there will be a decline in the capacity
expansion of wafers due to considerable supply which can
meet the market demand. Shift towards thin-film technology
will also reduce the utilization of wafers in PV. The production
of wafers is projected to increase from 17,309 MW in 2010 to
reach 29,000 MW by the end of 2015 at a CAGR of 10.9%.
Supply and demand
The global wafers industry caters to both solar and
semiconductor industry. The demand for PV wafers continued
to increase driven by rapid growth in PV installations during
2001-2010. While a decline in the capacity expansion of
wafers is expected due to considerable supply to meet the
market demand and due to a shift towards thin-film
technology, the production is still expected to increase at a
CAGR of almost 11% until 2015.
Indian scenario
As of end 2010, the Indian government has received 7
proposals adding up to investments of about $16 billion to set
up manufacturing units for polysilicon, single and multi
crystalline ingots, wafers, solar cells, photovoltaic modules,
etc. Companies such as Lanco Solar, Bhaskar Silicon, and
Carborundum Universal are reportedly having plans for
setting up integrated polysilicon plants with ingot and wafer
manufacturing facilities
Other notes
While there is a threat of backward and forward integration
by both customers and suppliers respectively of wafers,
vertical integration into producing solar cells and modules is
somewhat common too with companies manufacturing ingot
and wafers.
2.3 Solar Cell Manufacturing
Polysilicon Wafers Cells Modules
Cell manufacturing involves creating the all-important pn-junction, coating and layering. It is an important step in the value chain that is responsible for about 15% of a solar PV module cost and it is here where significant technical differentiation is created.
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Details of three different types of solar cells are provided in this section
• Crystalline solar cells
• Thin film solar cells
• Concentrating PV solar cells
2.3.1 Crystalline Cell Manufacturing
Type of entrepreneurs /
investors who can benefit
Ingot and wafer manufacturers who are keen on forward
integration can exploit this opportunity.
Scale of investment
Medium-Large. A rule of thumb guide to the capital
investment in building a solar cell plant is US$1-1.25
million/MW for crystalline silicon and US$ 2 million/MW or
more for thin films. The minimum economical size for a
solar cell factory is about 20 MW.
High R&D or commodity
manufacturing
Technology is constantly evolving in the case of solar PV
cells manufacturing.
Bottlenecks/threats/barriers
Cell manufacturers face the critical challenge of rigourously
estimating the demand requirements from the end user
market. The past decade has shown how badly the cell
manufacturers could be affected if there is a significant fall
in demand or oversupply in the market. High capital
requirements for the manufacturing line, combined with a
need for economies of scale can make it difficult for new
entrants.
Competition
There are an ever-growing number of cell manufacturers,
and the industry is not dominated by a few big players. The
top 10 producers in 2008 produced just over 50% of the
total. The market leader, Q-Cells, commands a market
share of 10%.
The end-use markets for solar installation is still dominated
by Germany, the United States and Japan, though India is
also expected to become important in the near future,
owing to the National Solar Mission. The Chinese market
for solar remains small, hence most of the solar cells and
modules are exported to other countries worldwide. The
Chinese makers have slowly started catering to the
domestic market too. The easy financing from the Chinese
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Government has helped many manufacturers to expand
into the solar supply chain becoming vertically integrated
companies. Overproduction in China has brought down the
prices of solar cells worldwide. The low prices of solar cells
have made manufacturers in other parts of the world
difficult to compete. Overall, the government in China has
played a pivotal role in increasing the solar wafer and cell
production capacity within China and lowering the prices.
Market size
World solar cell production reached a consolidated figure
of 9.34 GW in 2009, up from 6.85 GW a year earlier. China
and Taiwanese production continued to build share and
now account for 49% of global cell production. The Top 7
polysilicon manufacturers had 114,500 tonnes per annum
of capacity in 2009, up 92% on their 2008 level.2
Supply and demand
The supply and demand gap in this industry is expected to
fluctuate. For instance, while there had been a significant
supply-demand gap in some of the years prior to 2008, the
excess of solar cell production over market demand caused
weighted crystalline silicon module price average for 2009
to crash 38% over the prior year level.3
Indian scenario
Fewer than a dozen companies in India manufacture
crystalline PV cells. Prominent among these are (as of Mar
2010): Moser Baer, Tata BP Solar, XL Telecom, Solar
Semiconductors, Surana Ventures, Indosolar, USL
Photovoltaics, Websol Solar, and BHEL, Maharishi Solar
Technology.
2
http://www.cotechsolar.com/NewsView.Asp?ID=20 3
http://www.cotechsolar.com/NewsView.Asp?ID=20
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Other notes Strategy of partnering with thin film manufacturers - The
main alternative to crystalline cells is thin-film. However,
switching costs for manufacturers would be high. Instead,
to mitigate the risk, cell manufacturers partner with thin-
film producers.
Fragmented industry of module manufacturers - While
some cell manufacturers are forward-integrated into
modules, there are many more module- than cell-
manufacturers, many of whom have no global presence.
2.3.2 Thin-film Solar Cell Manufacturing
Manufacturing thin-film modules comprises depositing photovoltaic material on a substrate, structuring it into cells to form an electric circuit and wire and frame it depending on application.
The key suppliers for the thin-film industry are chemical companies that produce high-purity metals such as CdTe, GaAs etc. The supply chain is less constrained than that for polysilicon (used in crystalline solar) and therefore much more reliable. This industry experiences a diverse mix of big-hitters (Sharp), start-up companies and universities. Companies with a long-term vision should start investing in this field.
Type of entrepreneurs /
investors who can benefit
Chemical companies that produce high-purity metals
such as CdTe, GaAs are in a good position to exploit this
opportunity. Glass manufacturers are also in a good
position to exploit this opportunity. Equipment firms
that have traditionally supplied printing machinery or
manufacturing equipment to the semiconductor and
display industry see the burgeoning thin film industry as
a potentially lucrative market, especially as their
hardware can often be easily adapted to manufacture
thin film cells and panels. At the same time, these
equipment manufacturers are not finding it that easy to
enter the TFPV space because module manufacturers
are choosing to design and build proprietary equipment
rather than buy it in.4
4 http://social.thinfilmtoday.com/industry-insight/tfpv-manufacturing-equipment-proprietary-or-shelf
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Scale of investment
This industry experiences a diverse mix of big-hitters
(Sharp), start-up companies and universities. A rule of
thumb guide to the capital investment in building a
solar cell plant is US$1-1.25 million/MW for crystalline
silicon and US$ 2 million/MW or more for thin films.
The minimum economical size for a solar cell factory is
about 20 MW.
High R&D or commodity
manufacturing?
Opportunities exist for R&D and innovation in this
exciting sector. Prominent segments where significant
innovation possibilities exist are: efficiency, new thin
film materials, design and process.
Bottlenecks/threats/barriers
For development and small-scale production, there are
few barriers, as companies like Aja International
specialise in providing small-scale sputtering
equipment. However, when scale becomes important,
access to capital might become a barrier.
This is a very dynamic segment with lots of startup
companies, some venture-funded. There are also a
number of companies that also produce crystalline
technologies. Those companies tend to be in the
amorphous silicon thin-film segment. The organic
photovoltaics segment is mostly covered by research
institutes rather than private companies.
Competition
The production volume has increased steadily as
165MW in 2007 and 357 MW in 2008. The share of thin
films is expected to increase significantly and expected
to reach about 25% of total in 2013. (EPIA data).
Market size
Supply and demand
The thin film solar cell production reached a
consolidated figure of 1.68 GW in 2009 out of the total
3.58 GW capacity available, indicating that there is
some amount of surplus capacity. However, the
demand supply gap could look very different in future
with enhanced offtake of thin film world over.
Indian scenario
There are only a few Indian companies such as Moser
Baer and HHV Solar that make thin film solar cells. A
few others such as Kirloskar are also exploring this field.
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2.3.3 Concentrating Solar PV
In concentrating PV (CPV), concentrators use optics to concentrate sunlight onto a small area of solar cells, thus allowing for a decrease in cell size. Because a CPV module needs less cell material than a traditional PV module, it is cost effective to use higher quality cells to increase efficiency. However, the technology makes up a very small portion of the solar industry.
CPV system manufacturers assemble the solar cells, concentrator unit and heat sink to form a module. Where applicable, companies will either integrate a tracking device or offer it as a separate product for free-standing module installations.
Type of entrepreneurs /
investors who can benefit
CPV is currently quite R&D driven, with a number of
innovations taking place in this area. The types of
entrepreneurs who will find this domain suitable are
those who have scientific R&D backgrounds and have
access to funds for significant R&D investments.
Scale of investment
Medium-high, as significant research is involved and
manufacturers of solar CPV systems will need scale for
their products.
High R&D or commodity
manufacturing
High R&D. There is no dominant design as yet. And, it
may never converge to just one, as different
applications may dictate different concentration ratios.
As of now, there is a high degree of product
differentiation.
Being R&D driven, entrepreneurs run the risk of their
competitors coming up with a superior technology that
could become the market standard.
The timeframes for the maturity for CPV technology is
not clear, making it difficult for entrepreneurs to plan
their projects accordingly.
Bottlenecks/threats/barriers
As a rather recent technology (being commercialized),
there are new entrants, many of whom are venture-
funded. Some of the prominent ones are: Amonix
(California), SolFocu (California), GreenVolts (San
Francisco), Concentrix Solar (Germany) etc.
Competition
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Market size
The CPV market is estimated to reach $266.0 million in
2014 from about $63.9 million in 2009
Indian scenario
There are only a few Indian companies like Square
Engineering that produce concentrated solar PV
systems
Other notes
This is a promising technology. However, as a
newcomer, it will need to demonstrate that it delivers
significant improvements over other established PV
technologies.
2.4 Solar Module Production
Polysilicon Wafers Cells Modules
Solar PV module manufacturing involves assembling the cells into a module to form an electric circuit. This is the last manufacturing step before it is distributed to wholesalers.
Type of entrepreneurs /
investors who can benefit
Cell manufacturers, who are keen on forward integration,
or those making solar products or providing turnkey
solutions for solar power plants. Companies which have
expertise or interest in product assembly.
Scale of investment
A module plant can be viable as small as 10 MW/year,
with investment of about $0.1-0.2 million per MW.
High R&D or commodity
manufacturing?
Commodity production.
Bottlenecks/threats/barriers
Low barriers to entry. Capital requirements and energy
requirements for modules are much less than for the
other processes.
Competition
There are a large number of panel manufacturers. Many
of the leading module manufacturers are also cell
manufacturers. Worldwide, Q-Cells, Sharp Solar and
Suntech Power Corporation are the top three solar
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module manufacturers. In India, there are about 35 PV
module producers, and this number is expected to
increase significantly in the near future with the increase
of module off-take in India and worldwide.
Market size, supply and
demand
Initial estimates suggest that the worldwide photovoltaic
installations in 2010 were about 17.5 GW – this is an
almost 140% growth over the installations that happened
in 2009, which was 7.2 GW. This pace of growth is
expected to continue for the near future. In India, solar
module production during 2009-10 was about 326 MWp
and in 2010-11 it is estimated to be about 444 MWp.
Currently, the existing capacities and supplies are in tune
with the demand. With the Chinese companies going for
large scale expansions of their module production
capacities, there could be an oversupply in the market in
the near future, though the demand-supply equation
could become more balanced over the subsequent years.
Indian scenario
There are about 35 companies in India that
produce crystalline solar modules.
With a large number of module manufacturers,
overcapacity and few distinguishing features, this industry
is set for more consolidation. Most companies in this
segment are forward integrated into turnkey solutions,
wholesale or have partnerships with distributors.
Other notes
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3. Summary and Inferences Within the solar PV value chain, opportunities exist for Indian entrepreneurs at each of the four distinct stages – polysilicon, wafers, cells and modules. Owing to the significant differences in characteristics of each with regard to scale of investment, R&D orientation, and types of core skill sets required, it can be expected each of these segments will be attractive to different types of Indian companies and entrepreneurs.
The Indian economy is on the ascendance, and Indian companies large and small are keen on contributing significantly to the solar energy segment. With a large domestic market expected for solar PV modules from the government thrust following the launch of the National Solar Mission, it is expected that in a few years from now, every segment of the solar PV value chain will have Indian companies providing significant value addition.
It can be said with a good amount of confidence that it is well within the capabilities of the Indian companies to participate in each segment and build a powerful solar PV ecosystem that brings about significant cost reduction and ensures that India is self-reliant in solar PV.
4. About EAI
EAI is a boutique research and consulting firm in renewable energy technologies. Our expertise ranges from Solar
PV and Wind Energy to Algae fuels and Jatropha biodiesel. Our work has been sought after by some of the largest
corporate and multilateral organizations in the world such as The Bill and Melinda Gates Foundation, Reliance
Industries, World Bank, PepsiCo, iPLON, Vedanta Group, Accenture, Boston Consulting Group, and more.
Our range of services include –
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To hear more on how we can help your organization procure power, write to us at [email protected].
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