Analysts are predicting a bloodbath in the thin film market as smaller companies struggle to compete with low-cost crystalline PV.
A world with just two thin-film PV companies? It may have sounded unlikely a couple of years ago given the enthusiasm and vibrancy of the nascent thin-film market. But it now seems increasingly likely if the sombre assessments of analysts consulted by PV Insider are anything to go by.
With traditional PV prices going through the floor, thin film, which formerly had an advantage because of cost, is essentially redundant, and only the largest and richest companies in the sector are likely to be able to achieve the economies of scale needed to survive, experts warn.
And right now there are probably only two companies that are large and rich enough to make it through thin film’s perfect storm.
Survival of the fittest
The frontrunner is cadmium-telluride (CdTe) module efficiency record holder First Solar, while copper, indium and selenium (CIS) panel maker Solar Frontier, which is fully owned by Shell subsidiary Showa Shell Skiyu, is the analyst’s second choice of survivor in 2012.
“The key reason why both have done so well is they have been a long time in the market,” states MJ Shiao, a solar analyst for GTM Research, “and in the case of Solar Frontier they have a bankable parent and are at scale.”
Solar Frontier has built a 900 MW-capacity factory in Japan and signed 500 MW of deals in the past year, Shiao adds. Earlier this month it won a contract for a 150 MW-peak plant owned by enXco, a subsidiary of EDF Energies Nouvelles, in Kern County, California.
Stefan de Haan, principal photovoltaic analyst at IHS iSuppli, is also willing to bet on Solar Frontier. “What I hear, what I see, what I think is that once they have ramped up their plants then they are definitely competitive,” he says.
“They have a competitive product in terms of cost and efficiency, and they have a strong financial background, of course, so they in principle are in a position to increase their share and to grow further. They are on a clear expansion track.”
Nevertheless, he insists, currently the only thin film player with the scale to compete with traditional PV globally is NASDAQ-listed First Solar.
Formed in 1999, the manufacturer launched its first commercial products in 2002 and has achieved the lowest manufacturing cost per watt in the industry, breaking the US$1-per-watt barrier in 2008. It expects to make between $3.7bn and $4bn in 2012.
Mike Ahearn, the company’s chairman and interim chief executive, last month said in a press statement: "Our diverse business model and robust project pipeline will help First Solar generate a significant amount of cash in 2012, while improving operational efficiencies.”
However, he added: “We are recalibrating our business to focus on building and serving sustainable markets rather than pursuing subsidized markets."
De Haan says this is an important transformation for the company. “They can survive,” he says, “but they see their margins eroding and they have to change their business model.
“They are already doing it, with a clear shift away from the established market that depends on subsidies to the future growth markets that are self-sustainable in emerging countries, and not necessarily the key European markets that many suppliers have relied on so far.”
Sadly, the consensus among analysts is that smaller thin film players will find little comfort anywhere, despite the short-term optimism triggered by a 23% quarter-on-quarter rise in the overall European PV market, according to data from NPD Solarbuzz.
Difficult market, difficult measures
“A lot will still be around,” believes Shiao, “but for some of the smaller CIGS players, like Soltecture, it’s going to be difficult to compete in the market as it’s looking to be in 2012.”
De Haan is more pessimistic: “There are some promising approaches in the CIGS space, but they still have not shown that they really can control volume production.
“If they can, and more or less repeat the Solar Frontier story, then there might be a few that can have that space, although their chance is not too high, I would say.”
Another option for CIGS makers is to sell out to companies that can afford to keep them going until the market improves.
Shiao says Santa Clara, California-based MiaSolé might make a promising takeover target thanks to its 13%-efficient commercial modules and plans to ramp up to a production capacity of 120 MW.
For thin film companies championing technologies other than CIGS or CdTe, however, the outlook is bleak indeed. CIGS and CdTe currently account for 70% of the thin film market, de Haan says, and “for the silicon-based thin-film technologies I don't really see a future at all.
“Most of those players will either go out of business or revise their business model and move downstream. It's already started. We've seen a lot of bankruptcies and insolvencies.”
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