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Shrinking Markets, Falling Demand: Hard Times for the Solar Energy Sector

Funding cuts are slowing down demand for solar modules in Europe and driving the photovoltaic industry towards consolidation. The manufacturers are responding with innovations and heavy price cuts.

By Sascha Rentzing

 

 

 

Grey clouds have now gathered over the solar energy industry. It is in trouble, and that is reflected not least in the fact that even companies previously used to succeed are having to make cutbacks. While firms such as Conergy, Q-Cells or Solon have already been announcing poor figures for quite some time, companies such as SolarWorld or inverter manufacturer SMA were regarded as safe growth candidates. Now, however, SolarWorld is announcing that it will be shutting down production capacities and cutting jobs. And SMA has sent its own share price on a downward spiral with its forecast of reduced profits.

At first glance, the trend is surprising because 2011 is after all the year of the nuclear disaster in Fukushima and the energy turnaround. The aim is for renewable energies to replace nuclear power, which is set to become history in Germany within a decade.

However, in many European countries with energy feed-in compensation for solar electricity, Photovoltaic (PV) has fallen from grace because the marked expansion in solar power stations is getting out of control. In the energy turnaround year of all years, governments are, therefore, cutting the feed-in compensation for PV instead of passing resolutions for its accelerated expansion.

 

In Germany, for example, with 7,247 Megawatt (MW) last year, double the volume of PV power went online compared to 2009. The strong growth has led to spiraling funding costs for solar energy, which in accordance with the Renewable Energies Act (EEG), are passed on to the consumers: the EEG reallocation charge increased in 2011 by 70% to 3.53 cent per kilowatt hour (kWh). In order to cut costs, the federal government immediately capped the rates as of January 1, 2011 by 13%. That means: the basic degression of nine per cent was raised by four percentage points. The measure has had a slowing down effect on the German market: This year we are expecting maximum expansion of 5,000 MW, says Carsten Kornig, CEO, German Solar Industry Association (Bundesverband Solarwirtschaft).

 

Leading Markets Are Shrinking

 

Other markets are also threatening to shrink. According to the European Photovoltaic Industry Association (EPIA), with 16,629 MW the newly installed PV capacity worldwide more than doubled in 2010. Now the governments are back-pedaling: In Italy, the solar energy rates have been cut to such an extent that investments have become less attractive since June 2011.

As a result, compared to earlier expectations, the level of expansion in 2011 is set to be noticeably lower. The EPIA expects new installations of 3,000 to 5,000 MWcontrasting with 3,600 MW the previous year.

Spain, France and the Czech Republic, also powerful solar energy markets, are taking even stronger action against PV. Since the lavish funding drove expansion on the Iberian Peninsula to 2,708 MW in 2008, the Spanish government has been nipping every solar energy concept in the bud. Restrictions in the claim to feed-in compensation and a rigid capping on expansion to 500 MW per year led to a market slump in 2009 to 17 MW. Specific measures are keeping it at a very low level. In this connection, the compensation for open-air and major commercial roof installations, the two previous growth drivers, has been cut to such an extent that now even steadfast investors have fled the country.

 

They are not able to find any new opportunities in Spains neighbor France, because a new funding scheme has been in force in that country since spring, according to which only 500 MW per year are funded. Although already-approved projects have been given the go-ahead for implementation, which is why the EPIA believed that growth from 719 to between 1,000 and 1,250 MW was possible last year, Paris is, however, retaining the 500 MW upper limit, which is leading experts to assume that the market could be abruptly halved in 2012. In the Czech Republic, the expansion program has already come to a standstill. Following a record-breaking year in 2010 with new installations totaling 1,490 MW, the EPIA only expects 100 to 200 MW in 2011, as Prague completely cut funding for open-air installations in March.

Is PV thus running out of steam just before reaching its status as a competitive source of energy? Although new markets are expected to be created in the form of China, India and the U.S.A., they cannot, for the time being, compensate for the slump in Europe.

This has created a serious problem for the solar energy industry: many manufacturers have recently invested in new production lines. The older factories, which produced at costs, which now no longer have any markets to sustain them, are now causing massive surplus capacity. According to U.S. market researcher iSuppli, production capacity will grow to 42,000 MW by 2012coupled with demand of just around 20,000 to 27,000 MW. We are faced with an impending market adjustment process, which only a few companies will emerge from unscathed, predicts Stefan de Haan, Analyst at iSuppli.

 

Race for Efficiency

 

In order to survive among the competition, the manufacturers are endeavoring to ensure the rapid further development of their products. They are investing in increasingly cost-effective productions and moving the commercialization of new cells with higher efficiency levels forward with great commitment and effort. The companies are doing everything to avoid becoming victims of the market adjustment process, explains de Haan. In the process, the machinery and plant manufacturers are assisting them with their innovations. Companies such as centrotherm or Grenzebach supply production equipment, which enables the manufacturers to increase the degree of efficiency coupled with a reduction in manufacturing costs.

At the current time, it looks as if the Chinese manufacturers are racing away from the competition. Yingli Green Energy, for example, is seeking to increase the efficiency level of its cells up to 20% using a special type of silicon, mono-crystalline n-type silicon, and so-called Metal Wrap Through (MWT) technology. Silicon cells consist of two areas of different thicknesses, which possess varying degrees of conductivity. In standard cells, a lower, thicker layer is enriched with boron in order to achieve a surplus of positive charge-carriers, in the upper emitter, by contrast, phosphor ensures a surplus of negative charge-carriers. n-type cells are structured in exactly the opposite way. Their advantage is that boron is less critical for the degree of efficiency due to its atomic properties. As a result, it is either possible to use cheaper silicon containing more impurities or to manufacture cells with higher efficiency. Yingli is implementing the MWT concept by placing the electricity busbars necessary for individual cell relay in the reduction of shade levelon the reverse and connecting them with the metal contacts on the front using tiny holes. The higher light incidence generates an increased amount of electricity.

In turn, JA Solar from China has developed a solar cell, which with an average 17.5% efficiency, converts exactly one percentage point more of sunlight into electricity compared to its previously standard cells made of multi-crystalline silicone. The key to higher efficiency is a new semi-conductor called Quasi-Mono. It is produced similar to simple multi-crystalline silicon, but has mostly mono-crystalline properties and even has less crystal defects, which can be detrimental to energy generation. As a result, the energy output of solar modules can be clearly increased with just minimal additional expenditure, says Philipp Matter, Vice-President JA Solar Deutschland. The company has been selling modules consisting of Quasi-Mono cells since this summer under the Maple brand.

To avoid getting left behind in terms of technology, the German manufacturers are keeping up through their innovations. Bosch Solar Energy and Schott Solar are now also producing MWT cells and manufacturing selective emitters. Q-Cells, in contrast, has optimized the reverse of their cells in such a way that, compared to previous Q-Cells standard cells, the efficiency has increased by more than one percentage point to 19.5% for multi-crystalline and 20.2% for mono crystalline material. Special anti-reflective (glare) and passivating coatings minimize light reflections and charge-carrier losses, explains Head of Technology Peter Wawer.

 

Competition for Crystalline?

 

Advances in new PV applications such as the thin-film or concentrated PV systems are, however, making the situation more difficult for the suppliers of crystalline technology. In series production, CIGS modules, for example, now reach an efficiency level of 14%. CIGS stands for a semi-conducting combination of Copper, Indium, Gallium and Selenium. The usual level for thin film is around ten percent efficiency, on average around 16%t is achieved by modules in crystalline silicon. As a result, thin film is making inroads into efficiency areas which were previously the preserve of silicon technology.

A key reason for the increased degree of efficiency in thin-film applications is rapid advances in the production techniques and materials. Previously one of the greatest problems in manufacture was the separation of the semi-conducting layers quickly and homogenously on large surfaces. The latest vacuum coating machines produce more even absorbers thus increasing the efficiency of the modules. Innovations in glass also play a key role in increasing efficiency and reducing costs. Specially treated surfaces coated with light traps or anti-reflective layers ensure that more light penetrates the module and remains there. At the same time, the industry is constantly reducing the thickness and weight of its glass thus reducing costsa decisive aspect for the solar energy industry, which is desperately searching for rapid cost reduction measures.

The use of so-called concentrator systems is a further approach aimed at PV cost cutting. The technology has passed the laboratory stage and is on its way to commercialization. The globally installed concentrator performance could be increased from the current level of 100 to 2,000 MW by 2015, says Arnulf Jager-Waldau from the Joint Research Centre of the EU Commission. The basic idea behind the technology is simple: Attractively priced optics replace expensive semi-conductor material. The systems work with lenses or mirrors, which similar to a burning lens, concentrate the suns rays on one cell. A tracker ensures that the units follow the suns position. Stagnating markets, an increasing number of technical optionsa hotly contested battle for a place in the sun has begun.

 

Sascha Rentzing is a freelance author writing for Messe Dusseldorf/solarpeq (www.messe-duesseldorf.de).

 

 

For more information, please send your e-mails to pved@infothe.com.

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