Over the past 30 years, the solar industry has made a number of false starts, and the underlying photovoltaics (PV) technology has gained a reputation for being impractical without government subsidies. However, recent advances and conditions are converging to create what this time promises to be a sustainable market. That was the message delivered by photovoltaics industry veteran, SunPower president and CTO Richard Swanson, who spoke at The ConFab event, a three-day meeting of leading semiconductor manufacturers and suppliers, sponsored by Solid State Technology and our parent company PennWell. Swanson offered an update on the solar industry and argued that PV technology represents a major new opportunity for semiconductor suppliers and manufacturers.
The early years of the solar industry, from about 1975 to 1985, were characterized by the rapid growth of small start-up companies, thanks in part to technological advances achieved by a Department of Energy PV research program. But during the next ten years, the industry suffered massive losses, as government-funded R&D stalled and start-ups were acquired by large oil companies, who used the acquisitions largely as “green veneer” and offered little in the way of R&D support.
For the past ten years, however, after the entry into the market by Japanese companies, particularly Sharp, the industry has adopted a true manufacturing mentality and has made impressive strides. The efficiency of PV cells has climbed from about 14% to as much as 20%; the global solar power capacity is now increasing at a rate of 2GW per year; costs have dropped to less than 20 cents per kilowatt; and industry revenues have been averaging a CAGR greater than 40%.
While these successes have established PV as a serious market, visions of what’s on the horizon for the industry are likely even more responsible for attracting a recent influx of capital investment. Indeed, at a recent Industry Strategy Symposium, hosted by SEMI, Alexander Wong, head of venture capital at D.E. Shaw & Co., offered an optimistic outlook for the industry from the investment community’s perspective. The most dramatic statistic he cited is that in less than 35 years, the solar industry is expected to be bigger than the oil industry, as traditional fossil fuels will not be able to meet future energy demands. In fact, estimates are that the world will consume more energy in the next 60 years than in all prior recorded history. Against this backdrop, PV revenues are projected to grow from $10 billion to more than $50 billion over the next five years, and of all the new power-generation systems that will be installed during the next 10 years, PV’s share will grow from 1% to 18%.
This growth is creating significant opportunities for semiconductor equipment suppliers, which is not surprising, given that PV manufacturing is similar to chipmaking in terms of wafer processing, diffusion, oxidation, metallization, and other operations. But the differences are that the PV industry requires much higher volumes and larger areas, yet with much lower tolerances and defect requirements. So as the demand for equipment optimized to meet these new parameters grows, the PV tool market is expected to expand from about $1 billion in 2010 to about $10 billion by 2020.
Another opportunity is in materials, particularly for polysilicon, which is currently in short supply. According to SEMI figures, of the 26,000 metric tons of polysilicon produced in 2005, some one third of that was consumed by the solar industry, whose use has been growing 30% a year. This increased demand has created a steep rise in pricing from $24 per kg in 2003 to $36 per kg in 2005. Because silicon represents roughly 30% of solar cell cost, any drop in pricing can make a big difference.
Finding synergies between the PV and IC industries will also be needed. In fact, Swanson is looking to exploit the IC manufacturing expertise of SunPower’s parent, Cypress Semiconductor, to further reduce costs and improve performance in next-generation PV technology. As a result, he estimates that PV manufacturing costs will drop from current levels of about $2 per watt to $1 per watt by 2012. “That is the tipping point at which PV can be widely used without any sort of incentive and at which it will be a very attractive business,” he said.
In the meantime, the PV market is already big enough to warrant interest and is positioned to continue growing for a long period at a very high rate. By applying their skills, semiconductor suppliers and manufacturers not only stand to benefit by expanding their markets, but can also play a major role in moving this key renewable energy market forward.