This is the second in a series of GTM Squared articles looking at the companies poised to manufacture the building blocks of Europe's new clean-energy economy. In the first piece, we looked at Europe's emerging battery supply chain. In this second installment, we explore the potential for a European solar manufacturing revival.
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European solar manufacturing has two things in great abundance: a string of cutting-edge patents and a trail of bankruptcies.
Much of the technology embedded in today's solar modules can trace its roots to Europe. But as the industry scaled up in the last decade, China took control. The combination of a vast feed-in tariff program to support deployment in China and incentives to establish local manufacturing capacity caught the rest of the global industry off-guard, and most companies didn't make it.
As Chinese producers including Trina Solar, Jinko Solar and JA Solar grew to multi-gigawatt scale, the European Commission belatedly tried to protect local manufacturers. Germany's SolarWorld sparked a solar trade war that simmered on both sides of the Atlantic for the better part of a decade.
Ultimately, Europe's solar tariffs increased prices for installers and developers, dampening a market that once led the world. And the tariffs failed to protect European manufacturers. Many went bust, such as Sovello, Solar-Fabrik and eventually, SolarWorld. Others simply left the sector, including Bosch and BP. Japan's Sharp closed its U.K. solar manufacturing facility in 2014.
But a new dawn may be on the horizon as the cost of solar continues to drop. After bottoming out at a mere 5.5 gigawatts of new solar installations in 2017 — down from 22 gigawatts in 2011 — Europe's solar market is growing again, and increasingly on an unsubsidized basis.
The opportunity for manufacturers is big, but so is the competition: Last year the European Union installed 16.9 gigawatts of new solar but made just 1.5 gigawatts of modules locally. In other words, China's Jinko Solar could have provided every single module installed in Europe on its own.
Europe's solar tariffs are now nearly nonexistent. Even so, some European companies are once again betting that the market is opening the door for a revival of local manufacturing, even if the Chinese juggernaut is unlikely to be derailed anytime soon.
Meyer Burger: Competing with Factory China
One of the most promising sources of domestic manufacturing in Europe is the Swiss firm Meyer Burger. For years, the company was among those that made the factory equipment and tools that shaped the evolution of PV modules. But the more it succeeded in making efficient tools to help lower the cost of solar, the smaller its own market became. CEO Günter Erfurt says the company was stuck in an inescapable “negative spiral.”
Erfurt gives the example of Meyer Burger's Diamond Wire Saw, used to saw very thin slices — or wafers — from a solid block of processed silicon with very little waste. Eliminating wasted silicon saves the module makers big money; imagine the difference between a decent bread knife and a bread knife as thick as your finger.
Erfurt says a saw with 10 megawatts of throughput cost 950,000 Swiss francs ($1.05 million) initially. Just a few years later a 70-megawatt tool cost just 450,000 Swiss francs amid intense competition from rival Chinese toolmakers.
Today Meyer Burger is pursuing a new strategy: The company won’t make tools for anyone else, and it won’t license its technology. Instead, it will make the leap to manufacturing modules itself. If you want to access Meyer Burger’s technology, you’ll have to buy its solar panels.
Meyer Burger recently closed a share issue to raise funds to buy SolarWorld’s old factory and distribution center in Germany. Contracts have been signed that will enable it to establish a 400-megawatt cell line (where the real technological magic happens) and a similarly sized module assembly line.
By 2026 Meyer Burger plans to have 5 gigawatts of manufacturing capacity, growing to 7 gigawatts by 2027. Those are big ambitions; for comparison, U.S.-based First Solar currently has 5.5 gigawatts of capacity.
Erfurt tells GTM that in addition to using technology such as the Diamond Wire Saw, new modules will also benefit from innovations the company had not yet offered to the open market — and now, it never will.
Meyer Burger's recently acquired facility in Freiberg, formerly used by SolarWorld. (Credit: Meyer Burger)
NexWafe: Cutting costs with new ideas
Just up the road from Meyer Burger’s new digs in Germany, another innovation-led manufacturer plans to scale up. NexWafe makes wafers, but it eliminates the need for processed crystalline silicon altogether. Instead, it produces its wafers using silane gas using a process developed at Germany's Fraunhofer ISE research institute, from which the company was spun out in 2015.
NexWafe CEO Stefan Reber led a department at Fraunhofer IFE researching silicon materials. “One of the technologies was so promising and so unique that we decided we had to take it to scale ourselves,” Reber told GTM.
The benefits of NexWafe's technology are twofold, Reber says: First, the resulting wafer is higher in quality and so enables higher efficiencies; second, it costs half as much as traditional units. With wafers representing 40 percent of the cost of a module, that’s an instant 20 percent decrease in prices.
The company is in the process of establishing its final pilot line before it scales up next year. The site of a now-idle polysilicon plant will see work begin on 400 megawatts of wafer capacity in mid-2021, Reber says. It will then grow to 3 gigawatts during the following two to three years, but Reber says a final scale of around 10 gigawatts is not unreasonable. He estimates that a 3-gigawatt plant would create and sustain 400 direct jobs.
The existing crystalline-silicon-to-wafer process is a familiar one, and NexWafe will need to convince customers to make the leap. The genesis of the company and its ties to Fraunhofer ISE will go some way to achieving that. Also, given that its wafer is a "drop-in" product, it doesn't add any additional complexity.
As a supplier to cell and module manufacturers, NexWafe's fortunes are also tied to those of the rest of the European supply chain. Reber says NexWafe won't license its technology and will hold its intellectual property close to its chest. More PV manufacturers are developing premium products with patents closely guarded, Reber says. Those potential customers will appreciate the extra gains NexWafe can provide, in a way that can't be copied.
"We have a vast...portfolio of patents, and we also have numerous trade secrets based on decades of [research and development], which is embedded in the technology. The best way to keep control over this IP is to produce wafers by ourselves," he says.
Oxford PV: The perovskite curveball
Perovskites have been talked about for many years in solar research circles. That circle of interest is widening and the edge they could offer solar is sizeable.
Let’s go back to first principles. Perovskite is the name given to a mineral, calcium titanium oxide, but also used to describe any material with the same crystal structure. That structure gives perovskites superb properties for use in photovoltaics, LEDs and even in energy storage. A perovskite crystal can do the same job as the silicon wafer, but it's transparent.
Oxford PV is another spinoff, this time launched from Oxford University. Founded in 2010, the company is backed by strategic investment from Meyer Burger, Chinese wind turbine OEM Goldwind, U.K. insurance group Legal & General, and Norwegian oil major Equinor.
Oxford PV's focus was originally on potential applications for power-generating windows. Now, the objective is to add a transparent perovskite solar cell on top of a standard cell, resulting in what's called a tandem cell.
While the layer on top does block some light from reaching the silicon cell below, the power generated by the perovskite cell outweighs the losses. As with other European solar companies, the hope is that this technological edge will offset the huge economies of scale on offer from Chinese manufacturers.
“The theoretical limit of silicon cells is 29 percent,” says Frank P. Averdung, CEO at Oxford PV. “The best cell ever made is 26.7 percent, and in an industrial environment, we can expect efficiencies to peak at 25.5 percent, maybe 26 percent. Those final efficiency gains are really painful."
Averdung says Chinese manufacturers are “playing the end game” for their current silicon technologies. “They’re adding as much capacity as they can as quickly as they can to maximize the benefit of scale. When they all hit the wall of 25.5 percent, there will be no product differentiation, and they will only compete on cost. That’s when we come to the rescue."
As an immature technology, perovskite PV cells are today capable of hitting efficiencies of 15 to 17 percent, says Chris Case, Oxford PV's chief technology officer. But there is scope for real-world cells — not those in a lab — to reach 25 percent. Around half the light filters through to the silicon cell, adding another 12 percent of efficiency to the module.
That presents a possible route to a tandem solar cell with an efficiency of 37 percent, compared to the 25.5 percent “wall” that dozens of gigawatts' worth of brand-new Chinese manufacturing capacity will never surpass, according to Oxford PV.
The company is in the middle of installing a 125-megawatt Meyer Burger heterojunction pilot line at its facility in Brandenburg an der Havel, Germany. This will be running and paired with the perovskite manufacturing equipment by the middle of next year. Once it has products out in the field, fundraising for a gigafactory will begin. The expectation is that an initial 2 gigawatts will be ramped in mid-2024. Annual gigawatt-scale expansions and annual 1 percent additions to the efficiency will then follow. As a strategic partner, it's entirely likely that Oxford PV's technology will appear in a Meyer Burger-branded module in the future.
A cold splash of reality
The cost of the first generation of modules produced by Oxford PV will be high. That will limit their market to residential and commercial rooftops and other installs with space constraints and high balance-of-system costs. But once the manufacturing scale surpasses 1 gigawatt, Averdung believes the levelized cost of energy will leapfrog silicon, allowing Oxford PV to enter the utility-scale solar market.
Of course, while Chinese solar giants are indeed adding multiple gigawatts of existing technologies, in particular mono-PERC, they have their own plans for new cell architectures.
Xiaojing Sun, a senior research analyst at Wood Mackenzie, says Chinese firms are currently pursuing two roadmaps for emerging technologies known as TopCon and HIT to boost efficiencies beyond the lifespan of the now-dominant mono-PERC cells. HIT is the underlying tech used by Panasonic.
As the Chinese producers make progress with their new technologies, European manufacturers could, yet again, face a tough slog.
A company like Meyer Burger "may have an uphill battle in front of them," Sun says, adding that the proposed timelines for scaling production in Europe open the door for the likes of Jinko and JA Solar to boost their own efficiencies.
“It's probably enough time for the Chinese manufacturers to flex their muscles on HIT," Sun says. "From a technology perspective, Meyer Burger will always have a leg up compared to its Chinese competitors, but I think it all comes down to cost. If Meyer Burger’s [HJ module] is 10 to 20 percent more expensive but half a percent more efficient, I’m not sure the math will work out.”
If a temporary period of technical differentiation eventually gives way to another battle on cost, European manufacturers will at least be able to take comfort in knowing their competitors will also be producing new cells from scratch. That will provide more of a level playing field when it comes to economies of scale.
What Europe’s solar sector needs next
With subsidies now something of a dirty word in renewables, the question becomes how the EU and European national governments can help this new wave of homegrown manufacturers compete.
Easier access to debt finance and grants would make a big difference. So would greater attention to the carbon footprint of modules. Meyer Burger's Erfurt suggests the use of an "eco-label" to drive buyers toward locally made panels. A previous iteration of French solar support included an embedded carbon rule that happened to boost the prospects of France-based manufacturing. First Solar's 100-megawatt thin-film manufacturing partnership with EDF was extremely beneficial given that its technology is inherently lower-carbon than anything produced using silicon.
Erfurt has another idea: “Learning from China could help,” he says.
Specifically, he points to China's Top Runner program, which offered favorable feed-in tariff rates to projects using the very latest technology as a means of ensuring that emerging technologies had an end market, even if they weren't the cheapest option. The program was a huge factor in getting a critical mass of bifacial modules out in the field ahead of global adoption.
Once funds from the EU’s latest €1.82 trillion budget begin to find a home, there will undoubtedly be scope for solar to benefit. As a carbon-cutting, job-creating opportunity that also happens to boost energy security, it ticks a lot of boxes.
NexWafe’s Reber hopes that this time around Brussels will look at investing in solar with a long-term view in mind. “People always look at the cost, but only a few of them look at what it brings. And it brings so much,” he says, admitting to getting a little emotional about the issue.
“In Europe, we are completely dependent on China. And if they would decide for political reasons...that they won't deliver solar to Europe anymore, what do we do then?”
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The European Commission has set out along the road to achieving a climate-neutral economy by 2050. But where do the opportunities lie and what technologies are poised to benefit?
Wood Mackenzie has launched a European Green Deal guide to help businesses understand how the European Green Deal will shape the future energy market and evaluate the potential new opportunities. Click here to find out more.