Currently, the young thin-film branch is marked by shifts within the production stages. Many companies who were previously lingering in the research and development or pilot phase have recently started production or are enhancing their output. Along with this development, the competition rises. To counter this increasing competitive pressure, market participants will have to position or differentiate themselves adequately. In particular against the background that market growth is not expected to be as high as in the past years. Thus, the positioning or repositioning of companies can occur according to previously neglected factors.
By Patrick Jonas, Rob van der Meulen
In 2009, most thin-film players were still active in the phases of research and development, or pilot, announcement and seed phases, in total about two-thirds. Only about 20% were in the phase of development towards mass production. More than five megawatts were produced by only ten percent of businesses--around 15 companies. However, one year later most companies started with small production outputs, according to findings of EuPD Research¡¯s current study ¡®PV Thin Film Guidebook 2011¡¯. While only 21% of companies are still in the research and pilot phase and 25% are ramping up, over 50% are producing more than five megawatts. Even though a few of them have reached production outputs of more than 30 megawatts, it is an indication for the fast development in the segment and the improvements in handling with the production process.
From a technological point of view, the development affects all techniques. But a-Si/ tandem or triple players are the majority. The main reasons are the long experience with the techniques, the proven long-term performance and massive research and development activities by large players. Many players are also investing in CIS and CIGS as well. This technology is seen as the most promising by many experts due to the relatively high efficiency rates and suitability for rooftop applications as well as flexible properties. Only very few players are making efforts in the field of CdTe, likely due to strong competitor First Solar or the use of the toxic element cadmium telluride in the production and the fear about its possible prohibition.
Market Stagnates, for the Time Being
However, with regard to current market shares, CdTe still heads the thin-film branch. From total thin-film installations of 3,406 megawatts in 2010, its share was at about 46%, as shown in Figure 1. A-Si, tandem and triple stood for 26% installations, while a-Si was at 15%. CIS/CIGS have had the smallest share with around 13%. In comparison to poly- and mono-crystalline installations, thin-film share rose to more than 20%.
In the time till 2015, no significant growth of thin-film market shares, like in the time period between 2007 and 2010, when shares rose from 12 to over 20% for example, is expected. That growth is no longer as strong as in the past is due to several reasons. On the one hand, the market consolidation as expected in 2012 will favor established players and complicate the situation for small companies. Non-established players will have problems ramping up their production output and benefit from decreasing production costs accordingly. Furthermore, established players have sufficient financial power, sales channels, bankable modules as well as established brands. On the other hand, the important European market is expected to shift towards smaller rooftop applications, a market which is dominated by c-Si players. As a result of this, market shares will be almost comparable to 2010.
From the expected total 22.6 GW of PV installations in 2015, thin film will have a market share of 24% (around 5.4 GW) as shown in Figure 2. CdTe will make up half of it, whereas the market share is primarily due to the ramp up of First Solar. The American company announced that they would be increasing their capacity to more than three gigawatts by this time. Serious competition for First Solar only could be GE Energy, who acquired the cadmium telluride player PrimeStar Solar in 2008. If GE Energy/PrimeStar Solar have similar ramp up times, in 2015, they could achieve a production capacity of about 1.5 GW. CIS/CIGS will increase its share to 25%. It is expected that a-Si technologies will lose ground and achieve a maximum of 25% due to the tough competition, primarily from CIS/CIGS and the subpar cost-efficiency ratio.
Time for the Right Positioning
Up till now, the handling of the production process has been the main problem within the young thin-film branch. Only a few companies were able to start mass production. However, the more companies make advancements, the more pressure will rise within the segment. And pressure is strong enough on market players, not least since prices for poly- and mono-crystalline modules have declined tremendously. When companies continuously increase their production outputs, the right positioning will be a decisive factor for future success.
Until now, positioning within the thin-film branch has been obvious, and has primarily depended on advantages of each technology. A-Si-based companies are currently pursuing the cost leadership strategy. This is due to the low production costs of this technology and the scaling effects of big players like Sharp, Trony or MHI. CdTe players are also following the cost leadership strategy, based on the flagship company in scaling strategy, First Solar. CIS/CIGS players mainly prefer the differentiation strategy because of high efficiency rates and flexible properties. However, several experts expect that many CIS/CIGS manufacturers will pursue a hybrid strategy of differentiation and cost leadership when they have the production process under control, resulting in a strong ramp up in production activities. First implications can be seen in the market. For example, the Japanese company Solar Frontier has built a CIS factory that could reach a capacity of about 900 MW when fully ramped up in 2012. Also, other manufacturers are in the ramp-up process in two- as well as three-digit range or in negotiation with investors to build new or enhance existing production facilities.
Several Ways to Differentiate from Each Other
As the global market demand is expected to stagnate, not all manufacturers can survive, and a market shakeout is expected. Companies that are not ¡®best-in-class¡¯ within their PV technology segment will face uncertain times. Many market participants have been ramping up their capacities to benefit from economies of scale and pursue the cost leadership strategy. However, the majority of thin-film companies do not have such strong production output as to follow this strategy. Furthermore, the number of companies following this strategy is limited. Hence, they have to search for alternatives, and here, differentiation comes to play.
One way could be a differentiation by markets, or by specific countries as well as regions. That could be a strategy particularly for technologies with comparatively low efficiency rates like a-Si. Due to their good temperature coefficient, which provides a lower decrease of output at warm temperatures in comparison to other technologies, they have advantages in hot regions. However, in a survey carried out within the thin-film study of EuPD Research with thin-film manufacturers, they named the established EU markets as well as North America as the markets with the most importance until 2015, even before the Sunbelt region. Too strong seems to be the established sales market from the perspective of the thin-film players. A survey under c-Si players shows they too are best suited in the same regions as thin-film, in the established EU markets and in North America. However, compared to their competitors, they see more potential in the emerging EU markets. Focus on sunny regions can be a successful form of differentiation, but it is not possible for all manufacturers to become active there because demand is still very low.
Another form of differentiation could be the specialization on a specific segment. According to EuPD Research¡¯s survey, thin-film players surprisingly see potential in the field of rooftop installations, the major segment of its mono- and polycrystalline competitors. Further segments they see are commercial and residential BAPV and, not surprising, BIPV, where flexible solutions are favored.
Concerning product differentiation, silicon-based thin-film manufacturers see their USPs compared to other products primarily in the performance aspects and production quality. CIS/CIGS players have taken a different approach to a-Si, tandem and triple manufacturers, focusing on BIPV products, for which aesthetics are more important. The results largely match up with installers¡¯ opinion about the features crucial for selling a thin-film module brand successfully. Performance and quality are their top rankings. An industry best practice shows meanwhile that some manufacturers are already active or announcing future efforts in many different forms of differentiation.
With regard to the product, examples are semi-transparent modules, flexible and lightweight thin-film cells on flexible substrate. Flexible PV modules have especially significant advantages due to their high throughput and low Balance of System (BoS) costs. Roll-to-roll process allows a high throughput in comparison to batch-processes. As soon as the manufacturers gain control of the production process, a fast ramp-up of production capacities is possible, and production cost is reduced due to economies of scale. In addition, the BoS costs are significantly lower compared to rigid modules due to their ease of assembly and the lack of requirements for a mounting structure. Furthermore, there is a lower risk of module breakage and thus the replacement rate is lower.
Beside the aforementioned differentiation by market, segment and product, several other ways are imaginable. Hence, companies can orientate themselves to the customer¡¯s needs, especially from the installer¡¯s point of view. The focus on niche applications or the development of a unique distribution strategy is another way to differentiate from the competitor. However, companies should be aware that they need to communicate their solutions adequately. ¡°Along the path of differentiation, there are many dimensions to leverage in creating a unique product, but it is also important that customers understand the value in the distinctive features of the product,¡± comments Veit Robert Otto, Consultant of the market research institute, EuPD Research, the differentiation strategies of thin-film manufacturers.
The Sustainability of Sustainable Energy Sources
Beside all differentiation efforts in terms of products or segments, e.g., photovoltaic modules are becoming more and more homogenous. When differentiation becomes increasingly difficult, other, previously unexpected factors gain relevance, such as the environmental impacts of the production process.
Against the background of climate change and the nuclear disaster of Fukushima, factors concerning the environment have become more important in the awareness of the public. In the search for alternative forms of power generation, PV technology is enjoying increasing focus as a sustainable energy source. For manufacturers, one way of evaluating the environmental impact of their products is to calculate their carbon footprint. The evaluation of the carbon footprint can be described as the CO2 emissions generated by the production, transportation, operation and disposal of a product. In the case of PV, the product is the system. Measuring the carbon footprint is part of the Life-Cycle Assessment (LCA) that evaluates the environmental impact of a product over its entire life-cycle.
Methods for Evaluation
Several software solutions help to deal with the carbon footprint problem. In the field of renewable energies, and especially PV, the database ecoinvent is used for the analysis of such impacts. Various recent updates in software and databases will allow PV manufacturers to accurately model their fabrication facilities by creating, updating and customizing materials and energy inventories, processes and outputs. Hence, the global warming potential from a PV manufacturer¡¯s perspective is relatively easy to model, especially if manufacturer data is already available on the material and energy flows. Categories within the database could be for example: Energy consumption, materials, auxiliary chemicals, transport of materials, energy carriers, semi-finished products, etc. To compare the emissions caused by the module with other technologies, an additional unit is required. An appropriate one for reporting the impact on global warming is CO2-eq per kWh.
Variation in CO2 Footprints: Differentiation Opportunity
The latest study on this topic was carried out by the Brookhaven National Laboratory (BNL), and shows substantial variations, for instance, a-Si based modules show from 20-220g CO2-eq per produced kWh solar electricity. Most thin-film technologies, however, generally show around 50g CO2/kWh levels (when deployed in southern Europe). The exceptionally high variation for a-Si-based modules mainly results from the difference between a-Si and -Si technologies and the usage of strong Greenhouse Gases (GHG) (e.g., SF6, NF3 gases: approx. 20,000 times stronger GHG than CO2) in the production process by manufacturers. However, it is important to compare these figures to other technologies to get a better perspective on what these numbers mean.
In comparison to conventional fossil fuels, of which the best practice examples fall between 400g CO2/kWh levels (e.g., gas-fired combined-cycle power plants), and 1,000g CO2/kWh levels (lignite power plants), PV and other renewable sources are favorable as shown in Figure 3. While thin-film technologies may prove to have higher carbon footprints than wind (11g CO2/kWh) or nuclear sources (6g CO2/kWh), they can still offer an 80-90% improvement in comparison to ¡®clean¡¯ coal technologies. The large variation in CO2 footprints for different PV modules shows that a clear differentiation opportunity exists for those that show a leading footprint. In the future race for market shares in the thin-film segment, factors like the carbon footprint of a product will gain relevance when customers make buying decisions.
For most of thin-film companies, it¡¯s important to differentiate products and services, since the industry dynamics will no longer accept companies who are ¡®stuck-in-the-middle¡® of several strategies. Therefore, the concept of life cycle assessments could be very promising. Those who do so can avail of the opportunity to position themselves as a thought leader and gain considerable market power through the communication of advantages and differentiation that a low carbon footprint provides. However, even this will probably not save them from liquidation if their product price-performance ratio is not competitive.
Patrick Jonas studied business economics at the University of Applied Science in Koblenz, Germany, and holds a degree in business administration. A particular focus of his degree was on marketing. As part of his thesis, he developed a communication strategy for a photovoltaic company on behalf of EuPD Research. Since completing his studies, Patrick Jonas has been employed in the communications department of EuPD Research (www.eupd-research.com).
Rob van der Meulen studied physics, economics, and environmental engineering at Utrecht University, TUDelft and Columbia University (New York City). He has published several scientific papers in the area of clean processing in PV solar production. Prior to joining EuPD Research, Rob van der Meulen worked in the Netherlands as Corporate Social Responsibility Consultant with a focus on carbon management. At EuPD Research, he is specialized in the fields of thin-film industry analysis and carbon consulting for the PV industry.
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