Giving Credit

The question I am most often asked while giving presentations about falling module prices and disproportionately strong policy support in the United States is some variant of, "Yes, but if the banks are all seized up, how can any solar be deployed at all?" While seemingly urgent and important, the implicit view is heavily skewed by the current hip social meme that has emerged around the economic "collapse" and "depression" economics. It is far too influenced by the evening news and Hollywood stars dressing down at the Oscars to reflect the current scarcity (only diamond earrings, not the necklace too). Puh-leeze!

The fact is that all recessions are bad, and credit-led recessions are the worst of the lot. Think of the economy as a house (goods and labor markets) resting on a foundation (credit markets), and you can understand how much more time consuming and expensive relative repairs might be. (Fixing foundations always means you will have to do some house work later as well, while the converse is not true.)

Despite the seriousness of the situation, looking at the problems of GM and AIG is not the best method of looking at the prospects for First Solar or Sun Edison. In truth, these businesses are poised to weather the storm quite differently. First, the new stimulus package not only throws a ton of money at the renewable energy industries, it has provisions for jump starting projects through tax treatment, grants, and loans-even if credit markets continue to stay slow.

Second, lenders must lend to someone. According to our recently released report Anatomy of a Shakeout II, solar projects in California will benefit from increased subsidy and falling module prices, creating unlevered project returns in excess of 20 percent. Lenders (and equity investors) will find this very interesting indeed for multi-year, essentially fixed, returns.

Finally, some innovative programs have emerged to accelerate local participation, including the recent announcement that the Berkeley First municipal-backed program has issued its first funding. People will be difficult to dissuade from installing clean energy that makes them high returns on investment. Let's give credit where it is due. The sky is falling, indeed -- it is raining money.

Travis Bradford is the founder of the Prometheus Institute for Sustainable Development.

Will the Real CIGS Vendors Please Stand Up?

Global Solar claims to lead the pack in flexible CIGS PV More than 35 companies claim to manufacture CIGS-based photovoltaics.  But, only a few of them are actually producing product in meaningful commercial volumes. Large firms like Würth Solar, Avancis (a Shell/St. Gobain joint venture), and Honda are working on CIGS and a number of VC-funded firms are trying to commercialize this technology. But according to Tim Teich, the VP Sales/Marketing at Global Solar, “Global Solar is in the lead. We are the only company with CIGS on flexible substrates in volume production.

Spun out of ITN Energy in 1996, Global Solar has developed CIGS using multiple deposition methods (both physical vapor sputtering and evaporation at vacuum and atmospheric pressures) on glass, plastic, metal and for BIPV. Global Solar recently focused its business to pursue CIGS on flexible stainless steel foil in a continuous roll-to-roll process. The focus has begun to pay-off as Global Solar has moved from a 4.2-megawatt pilot scale project to scaling up commercial manufacturing, ramping to an intended capacity of 40 megawatts in the U.S. and 30 megawatts in Germany with intentions of adding another 100 megawatts by 2011.  The company's cell efficiencies exceed 10 percent. The company sells CIGS cells, CIGS modules encapsulated in glass, and flexible modules.

“Our CIGS cells are drop-in replacements for crystalline silicon solar cells," added Teich. Solon, the German PV giant, owns 19 percent of Global Solar with the balance of the firm owned by an unnamed European private equity group.  One of the largest CIGS installations in the world, a 750-kilowatt system that helps power a Global Solar factory, uses Global Solar CIGS cells incorporated into panels by Solon, installed and operated via a PPA by MMA Renewable Ventures. So what about other CIGS players? Here's a list of the top five recipients of VC funding in the CIGS/CIS universe.

Despite raising a shipload of funding, few of the VC-funded firms have broken past the pilot production phase. According to an email from Martin Roscheisen, CEO at Nanosolar, “2009 is the year where CIGS will become real in the market..." But CIGS is already real at Global Solar and Würth Solar (which uses a glass substrate for its CIGS panels). 

Maybe this is the year that Nanosolar joins the CIGS leaders in volume production and lets the world know what it's done with that half billion dollars.  Nanosolar recently showed off a picture of one of its installations. 2009 could be the year that CIGS broke. Here’s an inspiring video of some seriously off-grid PV using Global Solar's CIGS cells. For more research on this topic: The Greentech Innovations Report focused on CIGS in this recent issue. And Shyam Mehta, one of our crack solar analysts, looks at the future of CIGS here.

CIGS Predictions, Binomial Distributions and Market Implications

Our just published report, PV Technologies, Production and Costs, 2009 Forecast predicts an installed capacity of 3+ gigawatts by the end of 2012. This may seem quite aggressive for a technology offering that remains largely unproven. While it's a valid concern, we're sticking with our numbers for now, and here's a brief summary of the logic driving our estimates:

1. Far from taking CIGS manufacturers at their word, our estimates are derated versions of company-announced figures, sometimes by as much as 80 percent -- meaning that to a large extent, our supply estimates already incorporate the possibility of delays and technology/throughput issues. Our final capacity/production estimates, therefore, while seeming extremely aggressive, are actually the result of a conservative modeling methodology.

2. We've been talking to CIGS manufacturers to gauge their progress, and the signs are encouraging at present -- there is evidence that some (Miasolé, Showa Shell) may be approaching the other end of the tunnel with respect to yield and throughput issues. Remember, 2012 is more than three years away -- and let me remind you that First Solar's total installed capacity at the beginning of FY2006 stood at a mere 25 megawatts. No, I didn't miss a zero. People then were similarly (and understandably) skeptical when informed of their ambitions, but few doubt their 1+ gigawatt capacity estimate now. It's a good example of the dangers of assuming the past serves as precedent for the future.

3. There are around 15 companies in the space that are on a roughly similar timeline when it comes to their ramp-up plans. Our logic -- even if the technology risk is high individually, the overall probability that a mere few succeed (which is pretty much what we're assuming in our forecasts) is pretty reasonable. And that doesn't count other "wild card" producers with disruptive but unproven technologies that we have not even considered for forecasting purposes (I'm not naming names here for fear that people in black suits will whisk me away).

Let's flesh this last point out a little more. It comes down to something what's termed the binomial probability distribution. Reasonably simple math dictates that with n independent events where the probability of a "success" in any given event is p, the probability of k successes is given by

Where

Here, n is the total number of CIGS companies that are trying to get to multi-hundred MW capacity over the next few years, p is the probability that any one will succeed in view of the technology risk, and k is the number of companies that we are wondering will succeed.

So let’s run some numbers. If we define “scale" as around 750 megawatts, we need 3,000/750 or 4 companies to succeed to make our predictions reasonable. What’s the probability as determined by the binomial distribution? Well, it’s 1 minus the probability that 3 or less succeed. With n = 16, k = 4, and p at say, 25 percent, this comes to 60 percent. With p = 30 percent, it’s 76 percent, and with k = 2 and p = 25 percent, it’s 81 percent. Not bad, eh?

Of course, this is far from a mathematical proof of a CIGS ramp (as if any such thing could exist), and the fact remains that at this stage, we’ve yet to see results. Is there downside risk to our forecasts? It’s possible, and only time will tell. It’s crucial, therefore, to keep a close eye on how the CIGS landscape evolves in 2009. For our part, we’re going to keep monitoring the situation. To the extent we see CIGS players facing the same old problems as before (as could be the case with Heliovolt as we recently learned), you can be sure that we’ll be refining and updating our forecasts.

Some final food for thought. If CIGS does fail to ramp materially and occupy a meaningful share of the global PV market, what would the ramifications be for the market at large? To assess this scenario – which we refer to as the “Slow CIGS Ramp" case -- we conducted a sensitivity analysis by slashing our CIGS production estimates in a company-agnostic fashion by a further 75 percent, over and above the existing derates.

What effect does this have on the bottom line? As it turns out, not very much (see the chart below). What you see when you reconcile the “CIGS-less" stacks with the demand curves is that there’s almost no change in equilibrium demand or clearing prices, because of the shape of the demand curve and the flatness of the supply stacks near the point of intersection. The producers that come into play in this scenario are those on the margin -- namely, the standard multicrystalline producers who are at large scale, and to the failure of CIGS to ramp would be a boon for them.

With the recession and the credit crunch underway, the transition to a demand-constrained world, and the looming threat of a new challenger to the throne, 2009 promises to be a very interesting year for the PV industry, regardless of the specific outcomes. If you are still hungry, watch this space -- there’s more where this came from.