SunPower's Doug Rose, the senior director of technology strategy, presented at the Silicon Valley PV Society in a talk titled, "Technology and Economics of High Efficiency c-Si PV." Of course, the thrust of the talk was the strength of SunPower's high-efficiency solar cells and panels, and the impact of efficiency on the cost and payback of a solar system.

The high efficiency of SunPower's solar cell stems in most part from its back-contact technology – a technology pioneered by founder Dick Swanson in the early 1980s at Stanford with low-cost manufacturing breakthroughs in 2001. The back contact design avoids gridlines on the front of the cell so there's no metal obscuring the cell and therefore more light gets converted to power. According to Rose, other design advantages are gained from the back-contact architecture – it allows better optimization of the front surface through texturing, an optimized backside mirror, localized contacts, and obviously backside gridlines.

The all back-contact cells allow SunPower to get to median production efficiency of 22 percent at the cell level. And while they're at it – cell thicknesses in the 150 micron range at about 6 grams of silicon per watt.

Rose raised the question: "How can high efficiency cells be cost effective? You're not using the same platform as everyone else." The response was: "Sunpower spends a little more in cell processing to deliver savings across the value chain."

That's the value proposition of high efficiency cells. The cells are more expensive but cost savings are realized all down the line. 

So how much exactly is this "efficiency bonus?"

According to research performed by crack Greentech Research analyst Shyam Mehta – gains in efficiency drive cost reductions at all steps of manufacturing on a $/W basis, from feedstock cost to module conversion – a 1 percent improvement in efficiency leads to a 5 percent to 7 percent decrease in fully loaded module cost. (Shyam's most recent report is on PV Manufacturing in the US and can be found here). His efficiency thesis is charted below:

In a solar market where prices are plunging, margins are crumbling and market consolidation is on the horizon – how much of a premium can SunPower command for its high-end product? A banker friend believes the dollar per watt premium is only 10 percent to 20 percent over conventional silicon or thin film PV.  With SunPower at a less than $2 per Watt module price in the fourth quarter of 2009 and some c-Si vendors below $1.50 per Watt – can SunPower command a 35 percent premium?

SunPower believes it can. My banker friend says no.

Here are some of the benefits of higher efficiency and the SunPower cell structure:

• Lower area-related costs
• Reduced installation costs
• Reduced shipping costs
• Reduced Balance of Plant (BOP) costs
• Allows more Watts in area-constrained sites, which reduces the $/W cost of project costs such as sales, permitting, design, etc.
• Delivers more energy per rated watt because of a better temperature coefficient, low light performance, broad spectral response, no LID

All factors resulting in a lower LCOE.

A Very Few Words on LCOE

A simplified formula for Levelized Cost of Energy (LCOE) is:

LCOE = Panel cost + BoP cost + O&M costs / Sunlight collection * Conversion efficiency

But, unfortunately it's not really that simple.  SunPower has detailed calculations and displayed the many factors influencing LCOE in its presentation. NREL has its own byzantine formula for LCOE.

An accurate measure of LCOE will have to include:

• Initial investment
• Depreciation tax
• Annual costs
• System residual value
• System energy production

And LCOE calculations have a very high sensitivity to certain input variables such as:

• Annual panel degradation
• Differences in annual discount rate / cost of capital
• System life (inverter replacement, etc.)
• Annual O&M

The major contributors to LCOE are:

• Capital costs
• Modiule $/W
• Area related BoS
• Electrical BoS
• Project related costs

"If someone says the LCOE of my technology is x cents per kilowatt-hour, it still doesn't tell you a lot," said Rose.

Differentiation and Branding in a Commodifying Market

A healthy cost structure, a good balance sheet, and the right level of vertical integration are what will distinguish winners from losers in the coming solar shakeout. Differentiation is going to help as well. And SunPower has that technical differentiation by virtue of the highest efficiency commercial solar product – a 22 percent median efficiency in 2006 looking for over 23 percent in its Gen3 cells. Combined with itss one-axis trackers which increase capacity factor by about 30 percent to match energy production with summer load, an important point for utilities – SunPower has some of the crucial ingredients for survival in the demand-constrained solar landscape.

Single axis tracking is a tremendous lever to reduce the LCOE of power plant, and to deliver significantly more power when the utility companies most want it (late afternoon in summer).

Of further interest in the differentiation department is SunPower's recent plunge into consumer branding of its panels. Ride a bus in San Francsisco and you'll see a SunPower-branding consumer ad campaign. 

Three questions for our readers:

• Do consumers care which brand of solar panel they're buying?
• What is the real value, the real premium for high efficiency?
• And contrarily – what is the penalty for low efficiency?  Where does 6 percent to 8 percent efficient a-Si or OSC fit into the solar landscape?  Or does it?

We welcome your thoughts.

At the risk of sounding slightly self-congratulatory, it feels nice to be right (at least once in a while). A week after the publication of GTM Research's report on U.S. PV manufacturing, which predicted that a major build-out of domestic manufacturing capacity was gathering momentum (the numbers say that the U.S.'s share of module manufacturing capacity will grow from 5 percent in 2008 to 14 percent by 2012), three major announcements vindicated this thesis: Trina Solar, Clairvoyant, and SunPower all made declarations this week to establish manufacturing module assembly plants in the U.S.

These developments aren't particularly surprising when one considers the 2.7+ gigawatts of U.S. PV projects in the pipeline over the next half-decade, combined with the knowledge that module assembly has historically followed markets. Barring a few exceptions, however, media attention on the U.S. PV landscape has focused almost exclusively on the demand side of the coin. It's somewhat understandable given that the stimulus funds made available through State Energy Program grants are all deployment-focused and that installation holds more employment creation potential than manufacturing, being more labor intensive. Still, it's frustrating that this issue continues to be ignored by most: 20,000 manufacturing jobs ain't no joke, especially at a time when unemployment is approaching 10 percent. On top of this, a build-out of PV production in the U.S. will also create all manner of opportunities for their vendors – for example, producers of polysilicon, glass, and encapsulants, and equipment, to name a few.  Perhaps most importantly, while deployments uneasily await the return of credit markets to resume, growth in manufacturing is happening here and now.

And not to beat a dead horse, but this development is all the more interesting in light of the recent competing trend of outsourcing PV production to "low-cost" locations. It certainly provides a tangible counterpoint to those in the industry who believe that, like consumer electronics, PV production will eventually be reside almost entirely in Asia. My guess: While this is likely to be true for crystalline silicon cells and wafers (MEMC, anyone?), the U.S. will be home to a sizeable chunk of thin-film and c-Si module assembly plants over coming years. Then again, with China making all the right noises about gigawatt-scale PV deployment, I could end up having to eat my words. Which, I suppose, is all the more reason to flaunt it when you got it.

SunPower's Doug Rose, the senior director of technology strategy, presented at the Silicon Valley PV Society last week in a talk titled, "Technology and Economics of High Efficiency c-Si PV." Of course, the thrust of the talk was the strength of SunPower's high-efficiency solar cells and panels, and the impact of efficiency on the cost and payback of a solar system.

The high efficiency of SunPower's solar cell stems in most part from its back-contact technology – a technology pioneered by founder Dick Swanson in the early 1980s at Stanford with low-cost manufacturing breakthroughs in 2001. The back contact design avoids gridlines on the front of the cell so there's no metal obscuring the cell and therefore more light gets converted to power. According to Rose, other design advantages are gained from the back-contact architecture – it allows better optimization of the front surface through texturing, an optimized backside mirror, localized contacts, and obviously backside gridlines.

The all back-contact cells allow SunPower to get to median production efficiency of 22 percent at the cell level. And while they're at it – cell thicknesses in the 150 micron range at about 6 grams of silicon per watt.

Rose raised the question: "How can high efficiency cells be cost effective? You're not using the same platform as everyone else." The response was: "Sunpower spends a little more in cell processing to deliver savings across the value chain."

That's the value proposition of high efficiency cells. The cells are more expensive but cost savings are realized all down the line. 

So how much exactly is this "efficiency bonus?"

According to research performed by crack Greentech Research analyst Shyam Mehta – gains in efficiency drive cost reductions at all steps of manufacturing on a $/W basis, from feedstock cost to module conversion – a 1 percent improvement in efficiency leads to a 5 percent to 7 percent decrease in fully loaded module cost. (Shyam's most recent report is on PV Manufacturing in the US and can be found here). His efficiency thesis is charted below:

In a solar market where prices are plunging, margins are crumbling and market consolidation is on the horizon – how much of a premium can SunPower command for its high-end product? A banker friend believes the dollar per watt premium is only 10 percent to 20 percent over conventional silicon or thin film PV.  With SunPower at a less than $2 per Watt module price in the fourth quarter of 2009 and some c-Si vendors below $1.50 per Watt – can SunPower command a 35 percent premium?

SunPower believes it can. My banker friend says no.

Here are some of the benefits of higher efficiency:

• Lower area-related costs
• Reduced installation costs
• Reduced shipping costs
• Reduced Balance of Plant (BOP) costs
• Optimized for area constrained roofs or sites
• SunPower's product has a better temperature coefficient, tighter distribution and better low-light performance

All factors resulting in a lower LCOE.

A Very Few Words on LCOE

A simplified formula for Levelized Cost of Energy (LCOE) is:

LCOE = Panel cost + BoP cost + O&M costs / Sunlight collection * Conversion efficiency

But, unfortunately it's not really that simple.  SunPower has detailed calculations and displayed the many factors influencing LCOE in its presentation. NREL has its own byzantine formula for LCOE.

An accurate measure of LCOE will have to include:

• Initial investment
• Depreciation tax
• Annual costs
• System residual value
• System energy production

And LCOE calculations have a very high sensitivity to certain input variables such as:

• Annual panel degradation
• Differences in annual discount rate / cost of capital
• System life (inverter replacement, etc.)
• Annual O&M

The major contributors to LCOE are:

• Capital costs
• Modiule $/W
• Area related BPS
• Electrical BPS
• Project related costs

"If someone says the LCOE of my technology is x cents per kilowatt-hour, it still doesn't tell you a lot," said Rose.

Differentiation and Branding in a Commodifying Market

A healthy cost structure, a good balance sheet, and the right level of vertical integration are what will distinguish winners from losers in the coming solar shakeout. Differentiation is going to help as well. And SunPower has that technical differentiation by virtue of the highest efficiency commercial solar product – a 22 percent median efficiency in 2006 looking for over 23 percent in its Gen3 cells. Combined with itss one-axis trackers which increase capacity factor by about 30 percent to match energy production with summer load, an important point for utilities – SunPower has some of the crucial ingredients for survival in the demand-constrained solar landscape.

Of further interest in the differentiation department is SunPower's recent plunge into consumer branding of its panels. Ride a bus in San Francsisco and you'll see a SunPower-branding consumer ad campaign. 

Three questions for our readers:

• Do consumers care which brand of solar panel they're buying?
• What is the real value, the real premium for high efficiency?
• And contrarily – what is the penalty for low efficiency?  Where does 6 percent to 8 percent efficient a-Si or OSC fit into the solar landscape?  Or does it?

We welcome your thoughts.