Photon Consulting picks low-cost solar survivors

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With plummeting polysilicon prices, module overcapacity and weaker-than-expected demand, caused by the lack of capital and global economic recession, the solar industry is in a race to reduce costs and become the first-choice alternative energy source. According to a new report from market research firm Photon Consulting, the cost leaders and potential cost leaders across the supply chain will be the winners, while others are expected to fail or be acquired over time.

Photon Consulting calculates that at the sector level, the ‘true cost’ of solar power has already seen a remarkable decline, averaging <US$2/W for c-Si modules and <US$5/W for systems. This means that the levelized cost of electricity, without support from the various incentives, currently sits at  <$0.25/kWh (higher radiance areas). The race is to get to <US$1/W as soon as possible.

Module costs are seeing significant declines that indicate that some suppliers are already approaching this cost structure. Photon Consulting believes that costs of <$0.10/kWh could be reached by 2012, creating a significantly larger market for solar on a global basis.

However, companies on the cost reduction path highlighted by the research firm would seem to be made up of a small number of industry players.

A key reason for this, Photon argues, is that many PV manufacturers still face relatively high polysilicon feedstock prices, despite the recent rapid declines in prices. Though the average cost of producing Si is put at <$40/kg, many companies were paying >$130/kg in 2008, generating a large spread between cost of production and cost of use. Although price declines benefit all users, there is a divide between those that can obtain competitive pricing and those that cannot.

This is exacerbated by cell processing costs, according to Photon, which calculates that low-cost cell processors have costs of under $0.4/W, while many competitors have processing costs 50% higher. However, cost leadership in certain process steps doesn’t always convert through the complete process, now or in the future. This limits the number of players that will eventually be able to control costs competitively through the complete manufacturing sequence.

Based on benchmarking hundreds of companies in the industry, Photon has identified only 35 players with potential for achieving very low costs, which include, First Solar, LDK Solar, Q-Cells, REC, SolarWorld, SunPower, Suntech, and Yingli Green.

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