Sharp shifts downstream

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Following in the footsteps of First Solar, SunPower, MEMC and the like, Sharp has decided it also wants to be in the PV utility market with the acquisition of Recurrent Energy for up to US$305 million. Interestingly, with a claimed 2GW project pipeline, the majority in North America, Recurrent was one of only a handful of independent power developers left in the market, after those mentioned above had acquired the rest.

Although Sharp noted in what was a very short statement that it needed to enter the utility market to expand its PV business, there are other factors that could be at play.

First Solar’s foray into that market enabled the company to grab a significant guaranteed demand for its CdTe thin-film modules at a time when it was adding significant new manufacturing capacity. As any thin-film manufacturer will confirm, thin film’s inherent lower manufacturing costs only really apply when you have very high fab utilization rates for long periods of time.

Relying on market forces to keep lines fully loaded isn’t enough as the PV market ebbs and flows because of both feed-in tariff volatilities and seasonal weather conditions. This is simply not conducive to driving cost down on a permanent basis.

In the case of First Solar, it has been able to push out large-scale utility projects, mainly in the U.S. from this year into next, as it struggles to keep up with demand for modules from European markets, notably Germany.

An expected softening of the market in Germany next year now allows First Solar to switch emphasis to utility projects, thus continuing to keep high utilization rates in 2011.

It would seem that Sharp is very much mirroring First Solar’s strategy as it has aggressive capacity expansion plans of its own, both in conventional crystalline and thin-film module production.

Although Recurrent says it will remain product/technology neutral when it selects modules for projects, I would not be surprised to see a growing number of projects use either technology from Sharp.

There are the competitive cost issues to consider, such as the fact that the likes of First Solar can offer a one-stop shop for projects, inherently lowering costs. Recurrent, should it have remained independent, would have found it harder and harder to remain competitive.

Sharp is also expected to reach over 1GW of c-Si cell production in 2010 and would expect further capacity expansion plans announced before its new financial year in April. It is also ramping its silicon thin-film facility to nearly 500MW over the coming few years (market demand dependent) and has another plant in Italy with similar nameplate capacity that will also need to be ramped over the next few years.

Guaranteeing end-market demand for thin-film products has proved a very successful strategy for First Solar, and Sharp looks set to tread the same path.

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