Thursday, August 14, 2008

First Solar: Quest for the $1 Watt

In some parts of the world, competing with grid electricity itself may be an easy game during peak consumption hours. But if you want the off-peak market, you’ll have to price your cells at about US $1 per watt. That price is called grid parity, and it’s the holy grail of the photovoltaic industry. At least 80 firms around the world, from Austin to Osaka, are in the chase.

Surprisingly, at the moment no company is ­closer to that grail than a little start-up called First Solar, which until very ­recently had been known only to specialists. It’s located in Tempe, Ariz., and analysts agree that it will very likely meet typical grid-parity prices in ­developed countries in just two to four years. It’s got a multibillion-dollar order book, it’s selling all the cells it can make, it’s adding production capacity as fast as it can, and its stock price has rocketed from $25 to more than $250 in just 18 months.

The most tantalizing fact about First Solar? The company will not talk to reporters. At all.

The company’s coyness seems to be related to the nature of its industrial secrets. These have less to do with First Solar’s device—a decades-old design based on a thin film of cadmium telluride—than with the way the company manufactures it. Somehow, First Solar has scaled up the light-catching area from postage-stamp to traffic-sign dimensions. What the company does ­reveal is that its product has three massive cost benefits. Its ­active element is just a hundredth the thickness of the old standby, silicon; it is built on a glass substrate, which enables the production of large panels; and manufacturing takes just two and a half hours—about a tenth the time it takes for silicon equivalents.

Today’s modules deliver up to 75 W at a conversion efficiency of 10.6 percent and have a manufacturing cost of $1.14/W. This is way below the selling price of $2.45/W, so the company enjoys a healthy profit margin. However, to compete against fossil-fuel sources on the free market and pick up a tidy profit, the company will have to get manufacturing costs down to ­between $0.65/W and $0.70/W. To do so, it has told investors that it needs to reduce manufacturing costs and increase conversion efficiency to 12 percent. Getting there is entirely feasible, as CdTe cells have a theoretical maximum of well over 20 percent; the National Renewable Energy Laboratory, in Golden, Colo., has already produced cells with 16.5 percent efficiency.
The sooner solar gets to grid parity the better. If First Solar can do it in 2-4 years that would be fantastic, and now would still be a good time to pick up some of that FSLR stock.

Makes you wonder if they did talk to reporters what would be the impact? Would other competitors be able to copy their techniques? If so, would this give First Solar more competition and lower the price of solar power? And if the price of solar power were lowered would this lead to increased sales and more solar power being used? Then by not talking to reporters are they slowing the adoption of solar power in order to increase their profit margin and stock price?

On the other hand, it certainly appears First Solar can't keep up with their own demand, so if another company were to jump into the mix, the sales of First Solar wouldn't be impacted at all. In this case, by not talking to reporters they are slowing the adoption of solar power in the world and getting no benefit for themselves. Either way I think the world would be better off if others could use First Solar's techniques to produce solar power so cheaply.

The article goes into more detail about how they actually produce their cells and is an interesting read.

via IEEE Spectrum

2 comments:

Anonymous said...

"In this case, by not talking to reporters they are slowing the adoption of solar power in the world and getting no benefit for themselves."

Really? I'm thinking the ability to charge as much as the market will bear at the level of what other producers are selling is a great benefit to themselves. They are a public company with shareholders. There is a board of directors whose job, if done correctly, is to maximize value for shareholders. They've done a great job so far.

Don't make the mistake of equating social moral belief for market based actions. Although there are few who would say that teachers should be paid the level they are, most fail to realize that the reason for the low wage is the sheer number of people in the labor pool that can teach. Plus you get summers off, which if you get a second job/career for that time the overall yearly wage goes a lot closer to the median overall wage.

I don't disagree that it would be great if there were a way for everyone to make it cheap (solar), but that's the fault of govt more than anyone else. If they had actually been funding it at more than a token level maybe they could have then done what you are talking about by being the one who owns the tech.

Fat Knowledge said...

Hi Anon,

Thanks for the comment.

As you will see in my original post, I see one of two scenarios: either restricting reporters leads to greater profits or because demand is so great for solar that they will still sell as much, still charge the same and have the same level of profitability.

I am not sure which is correct.

"Don't make the mistake of equating social moral belief for market based actions"

For me, I think the market should be setup to maximize the good of society. If you believe in Adam Smith's invisible hand, then that occurs by default in a market economy (given his assumptions are held). If it doesn't, then why exactly do you want a market economy at all? If it isn't maximizing the good of society, then what is it doing> And why not tweak it so it does?

"They are a public company with shareholders. There is a board of directors whose job, if done correctly, is to maximize value for shareholders. They've done a great job so far."

But, how do you know they wouldn't be even better if they had let reporters in or if they licensed their "special sauce" to other companies? The belief that secrecy leads to a maximization of profits is not one that I am convinced about.

"If the govt had actually been funding it at more than a token level maybe they could have then done what you are talking about by being the one who owns the tech."

What if the govt were to pay FSLR to make their special sauce public and available to everyone? What if they purchased their patents for a reasonable price and made it public to all? What if they forced FSLR to do so for the good of the country/world?

I am not sure that is the correct thing to do, but I am not sure why the gov't can't be more active in intellectual property and paying innovators to make their knowledge publicly available to all. Instead of the gov't funding researchers, why not just pay those who have already invented something?

I have thought of this with regard to drug patents, but the concept would apply to this as well.

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