Solar 2.0: a brave new profitless world of 100GW demand

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Since 2011, Brad Mattson has been chief executive at Solexant, which announced a technology re-start as it switched from cadmium telluride nanoparticles to CIGS earlier this year. But like many in the solar industry, particularly in Silicon Valley, Mattson made his start in silicon semi-conductors and has been a few times around the block in terms of industry overcapacity leading to company collapse and consolidation. At last count, Mattson reckons he has witnessed at least five of these cycles that typically last between four and five years.

Despite the gloom, Mattson reckons that brighter days are ahead for the solar industry. For the past year, he has been priming those in Silicon Valley for the launch of his book, Solar 2.0, which seeks to explain these business cycles and explores why their failure points to solar's ultimate success as the dominant renewable technology.

With no publication date yet announced, we're no closer to being able to read his eagerly anticipated book. But at the NPD SolarBuzz conference in San Jose this summer, Mattson previewed the findings in his book.

Even at an average selling price (ASP) of US$2.50, the industry saw growth of 1200% during the “Great Recession” over the past five years.

“It looked really exciting and huge when we were in it but that was a really bad macroeconomic environment in the US and Europe and still we had tremendous growth,” he said.

Meanwhile, despite the deep trough that the industry has plunged into due to excess capacity and low, negative or zero margins because of rapid price declines, it is also seeing enormous demand. There is now tension between the need for higher ASPs to achieve the profitability required to expand and low ASPs to drive downstream growth.

But Mattson claims that we are on the verge of the second wave, as we move from the megawatt to the gigawatt era at a time of 70c/watt ASPs and 100GW global demand.

“With these costs, if we have the US recovering [and] prices are much lower, the second wave is going to be huge as PV reaches grid parity. This is going to be a tsunami of demand.

“You need higher ASPs so they can get profitability somewhere in the foodchain. But we really need low ASPs to drive demand … the upstream problems could really choke the downstream growth. This could be the new GW profitless world of solar.”

The challenge is going to be profitability and only those suppliers selling at the lowest cost will survive. Mattson believes that the leaders in solar's ‘2.0’ world will be completely different to leaders in 1.0.

As reported last week in this blog, not all solar start-ups end up where their business plans expected.

In yet another example of the fortunes of the solar price war, Alta Devices in August announced a controversial application for its high-efficiency flexible gallium arsenide (GaAs) thin-film products on military drones – a far cry from the company's flower-powered Berkeley University origins.

But chasing efficiencies like Alta Devices', verified by the National Renewable Energy Laboratory this year at 30.8%, comes at a price few commercial organisations can justify.

“In Solar 1.0 there was a lot of focus on efficiency,” Mattson said. “It shouldn't be an efficiency-driven business, it should be a cost-driven business. Everyone selling efficiency will tell you it reduces costs. The efficiency improvements out there do not reduce costs, they increase costs.

“Alta Devices was meant to be 50c a watt, but when you go for optimising efficiency you end up at US$10/watt and sell to the military. So this focus on efficiency, which was supposed to translate into cost [reductions], in most cases failed.”

Efficiency should take a second seat to costs but we also need better metrics based on cost of ownership, said Mattson: “Cost of ownership is the measurement of choice in semi-conductors. It's going to have to become prevalent in solar because you really need to know the cost of every process step.”

But on technology, Mattson has been somewhat prescient, by almost predicting the shakeout at Nanosolar, a CIGS thin-film solar cell and module manufacturer.

“I really believe it's game over for most of the technologies,” he said. “These technologies had trouble competing when solar was US$1.50 per watt. So basically it means there are a lot of living dead technologies.

“There's still a lot of money being thrown at these technologies. One of the challenges as an industry is that we can't afford to have another Solyndra. We can't afford to waste another US$100 million of VC or government money.”

Double and triple junctions, concentrated PV, amorphous silicon, high-efficiency GaAs, nanostructures, quantum dots, bi-facial, organic or dye-sensitised PV, plasmons etc have all made it onto Mattson's hit list of “living dead” technologies. But of course, c-Si and CdTe and CIGS will survive, presumably along with Solexant.

“Silicon solar technologies still have a very small substrate but I really believe we're going to run out of room on scaling in crystalline silicon; then thin film will have a chance and we can get to 40c/w and below. We are entering this brave new world, a real economically driven market as opposed to a subsidy driven market.”

At another preview event in February, I asked Mattson for an advance copy. But he declined, refusing even to share his slides with me, as he was not confident of some of his figures.

Indeed, some of the other more academically-minded, rather than policy or commercially-minded folk, huffed and puffed through large chunks of his presentation. Via email, one member of the audience noted: “His talk contained some wonderful and energetic ideas, some of them new, but – as one of the questioners behind us pointed out – it also needed to be fact-checked and peer-reviewed.

“Though well meaning, the recent history of my field of solar energy has been plagued with this approach in favour of the advice of people who have just entered the field and claim they understand what needs to be done. Science and history has been de-emphasised from decision making for solar energy investments, as people race to cash in on what they believe to be the next quick investment return.

“Policy makers and investment firms have turned to so-called 'experts' and a few industry leaders rather than to form a consensus that is based on discussion, collaboration and debate.”

Mattson is all too aware of the perils of mis-steps in solar. He referred to the February Fox News gaffe which claimed that Germany's solar industry is larger than that in the US because Germany has more sun.

“It no longer matters in America if we develop the best technology,” he said. “It doesn't matter what technical milestones we meet, it doesn't matter because solar is living in a toxic environment, a cesspool of negativity. A lot of it is caused by indecent politicians and Fox News … they don't really provide independent and accurate news coverage.

“My next book will be entitled Why is it OK for your daughter to marry someone from the solar industry? We need to start a dialogue on how we will be successful in solar in the US.”

I'm sure Mattson's book is now in its own 2.0 revision stage, but I for one am looking forward to its publication if it kick-starts a dialogue about where the industry is heading. Mattson himself appears to hope that the book will start this “discussion, collaboration and debate”. One of the problems with writing a book about such a dynamic industry is that things are so quickly out of date. I just hope that it won't take another year to finally publish it.

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