IHS Report: Future Viability of Solar Photovoltaic Technology Dependant on Production Cost Improvements

During 2010, new solar photovoltaic (PV) demand worldwide approached 10,000 MW, and is expected to grow by double digit percentages annually for the foreseeable future, if production costs can be driven to market-competitive levels. In response to interest in photovoltaics for industrial and utility scale power, SRI Consulting, now part of IHS Inc. (NYSE: IHS), examines the economics for producing solar cells from three dominant commercial process technologies – monocrystalline wafers (Sunpower), CdTe thin-film (First Solar) and concentrating PV (Concentrix) – in its new techno-economic analysis report entitled Solar Photovoltaic Technology.

In the U.S. and other regions, utility commission renewable power portfolio requirements dictate that specific amounts of grid power be sourced using technologies that do not produce greenhouse gases. As a result, several utilities are now considering supplementing conventional power (nuclear, coal and natural gas) with a combination of wind power, biomass power, solar thermal and solar photovoltaic power.

Demand growth for PV power in the early 2000s averaged 40 percent per year, driven by a combination of technology advancements and generous government subsidies – especially in Spain and Germany – in the form of feed-in-tariffs. The global economic recession of 2008 - 2009 all but eliminated growth, but early 2010 saw demand begin to turn around.

Photovoltaic power is well suited to distributed demand applications where its devices can be mounted on residential homeowner rooftops (< 5 kw capacity), and on small commercial buildings (< 50 kw). Advancements in both manufacturing technology and engineering and design practices are also reducing the cost of ‘balance of system’ components required for the consideration of PV power at utility scale (> 5 MW) at economics approaching conventional peaking power cost (grid parity).

“Advances in technology have significantly improved cost competitiveness, but the commercial world still relies heavily on government subsidies,” said Solar Photovoltaic Technology author and IHS Principal Consultant Anthony Pavone. “Like other renewable energy technologies, societal concerns over greenhouse gas-caused climate change provide the justification for these subsidies.”

Although the integrated product chain can be considered as starting with mined silicon metal, and terminating with a combination of PV modules sold to end-use customers, and turnkey power plants sold to utility customers, the heart of the business is in producing PV cells, mounting them in modules (sometimes called panels) rated at 70 – 400 watts, and installing arrays of modules to satisfy customer requirements. A globally competitive producer requires a capacity base of 500 MW/year, and that a utility scale PV plant will have a capacity of 10 – 50 MW.

Two forms of cell architecture, silicon-based wafer and thin-film technologies, dominate the business, with 80 percent and 20 percent market share respectively. Solar Photovoltaic Technology estimates production economics for the two manufacturing approaches and, using producer-specific information (patents, trade literature, technical publications and business presentations), provides reasonable design basis assumptions. These results are then used to estimate the economics of a PV utility power plant with a 50 MW capacity.

Added to the analysis are speculative economics based upon the limited capacity operating experience of concentrated PV producers Cogentrix in Spain and Innovative Solutions in the U.S. These economics, although not cost competitive with most conventional base load power generation ($0.04 - $0.08 per kwh), are close enough to compete with peaking electric power in most business environments, and with base load electric power in high cost power regions, including Denmark, Italy and California.

“As PV technology improvements reduce cost faster than conventional technologies reduce cost, the world is likely to soon see an environment where PV subsidies are no longer necessary,” added Pavone.

For additional information on Solar Photovoltaic Technology, contact RJ Chang, at rj.chang@ihs.com or +1 650 384 4307, or visit www.sriconsulting.com/PEP.

About SRI Consulting (www.sriconsulting.com)

SRI Consulting is now part of IHS Inc., and is the world’s leading business research service for the global chemical industry. Publishing for over 60 years, SRI Consulting is the preeminent source for in-depth business and process analysis.

SRI Consulting (SRIC) is a trade name and a registered trademark of SRI International, used under license.

About IHS (www.ihs.com)

IHS (NYSE: IHS) is a leading source of information and insight in pivotal areas that shape today’s business landscape: energy, economics, geopolitical risk, sustainability and supply chain management. Businesses and governments around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS employs more than 4,400 people in more than 30 countries around the world.

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