Solar Market Status

Since the 2nd quarter this year, the Average Selling Price (ASP) of solar module was gradually flattening due to quickly expanded supply from the upstream and unclear policy initiatives worldwide. This pricing dynamics is estimated to continue till the end of this year. Will the bright future of solar industry change? Let’s go back to the initiation for going GREEN.

Following the Kyoto Protocol, parties in the United Nations Framework have taken responsibility to reduce greenhouse gas emission in a well-planned strategy. For example, Japan (one of the world’s biggest supporters for renewable energy development), has an action plan for cutting greenhouse gas emission by 25% in 2020, and 60-80% by 2050. Similar cases happening elsewhere including the U.S.A. and Germany, etc., have proven that the ‘Big Picture’ should continue and the engine of whole renewable energy industry is still turning on. PV power generation, characterized by the unlimited source and less overall CO₂ emission, plays as a key role and should benefit from this promising outlook.

Even with a bright future, finding the right market for sustainable business growth is an important issue for every industry. In the solar industry, on-grid power plant project behaves like a fresh ‘Apple’. Because of its hundred MW scale, everyone wants to get a share to secure high sales volume in one shot and, therefore, squeezing the marginal profit across the board. It, therefore, becomes a tough game─the winner should achieve high level in both economies of scale and technology improvement. Therefore, players run aggressive expanding scheme after achieving great fiscal year result in 2010. The target capacity expansion is usually double within a short period of time. Especially in crystalline, increasing capacity in hundreds of MW scale is common. However, the industry can take a quick turn if the Feed-in Tariff (FiT) policy suddenly changes, like what’s happening in European Zone right now. But, the story for off-grid solar market is different. Projects completed for off-grid applications mainly focus on single digit to several tens in MW scale. And, it involves more modifications in overall module manufacturing because of numerous specifications tailoring different needs.

In the developing world, regional and local desertification is caused by depletion of fuel wood and other biomass sources in an inefficient way, causing localized pollution and millions of deaths annually. Therefore, a fully sustainable renewable power supply is the only way to secure energy for all and avoid environmental catastrophe. According to World Wide Fund (WWF), a fifth of world’s population still has no access to reliable electricity. The number involved is 1.4 billion people. Facing the continuous increase in energy price, those people will continue to be excluded if doing nothing. This represents a huge under-penetrated market, which is ready for cost-effective solutions that address the real problem: energy system that reliably deliver basic utility such as lighting, cell phone charging or television.

Why Armophous?

In addition, there is an increasing demand for electricity worldwide driven by population growth and economic development, which is unsustainable due to ever-depleting sources of traditional fuels and associated environmental impacts from their emissions. Industry experts agree that alternative energy sources, especially renewable energy, must become meaningful proportion of supply to the power utility for grid-connected users of electricity. Solar PV comes into play in this space in two principle forms. One is centralized power generation, in the form of solar farms, where power generated will become part of a source portfolio mix, and distributed through utility networks. Another is distributed power generation, typically installed on industrial or residential roof-tops or other building structures, where power generation is mostly consumed locally. Solar, especially amorphous silicon (a-Si) thin-film PV has demonstrated its advantages in the entire life-cycle of product: low carbon production chain, high energy return, and superior energy harvesting capability under a wide range of climates.

For solar farm applications, the key issue facing the industry is cost. Recent market conditions have created great pressure on module manufacturers, resulting much reduced production cost of modules of all kinds. However, to achieve the goal of ‘carbon parity’, a cost level competitive to fossil fuels, there needs to be even greater cost reduction of modules and other balance of system components. a-Si module manufacturing has an attractive technology roadmap leading to cost of production of per watt well below that of crystalline panel technology, which currently has the main market share, and ultimately to cost per watt and per kilo-watt energy at a level to complete with fossil fuels.

Closer to consumer, that means people can feel what they save─their expense on electricity and the environment. Undoubtedly, this makes thin-film PV the ubiquitous solution in development countries. As mentioned before, more than one billion of people have no access to electricity, such as the people in Africa, India and South America regions. Regarding this, World Resources Institute predicts a US$433 billion market for energy in its paper ‘The Next 4 Billion’. Driven by the cost-effective applications offered, such as lighting and the replacement of disposable batteries (for radios, torches, etc.), thin-film PV is already surviving in a market with great potential. According to information from Lighting Africa Programme (supported by International Finance Corporation), African households and small enterprises spend over US$10.5 billion for lighting, nearly 80% are used by off-grid households. In 2015, the whole market value is projected to exceed US$12.5 billion with the increasing off-grid households. Even the sales revenue involved is high, but no one player dominates this market in Africa today. Looking for this opportunity, thin-film PV finds a good way to secure its long-term prospect by providing high-quality integrated solutions in terms of off-grid.

Besides manufacturing cost, conversion efficiency improvement in thin-film PV shows significant value in revolutionizing the solar industry. First Solar (Nasdaq: FSLR), the world’s leading thin-film PV company in on-grid market, has announced a new world record using its proprietary Cadmium Telluride (CdTe) system, reaching 17.3% with a test cell constructed by using commercial-scale manufacturing equipment. Noticing the average efficiency of its deliverable modules at 11.7% right now, thin-film PV demonstrates its significant advancemently over crystalline PV. Even in environmentally friendly technology using a-Si as active layer, remarkable results are demonstrated by focusing the development on a-Si/μc-Si tandem thin-film solar cell. Noticing the value of conversion efficiency offered, the range for improvement is from high single digit to more than ten in percentage. It supports that thin-film has greater potential on further cost reduction comparing with crystalline, close to market acceptable level when comparing with cost for using traditional energy. Referring to the revised PV roadmap (targeting 2030) of the New Energy and Industrial Technology Development Organization (NEDO) in Japan, the target efficiencies are 14% in 2017 and 18% in 2025. Taking this as a benchmark, together with the manufacturing improvements in both substrate size and tact time, thin-film PV is showing signs of threat to the dominant position of crystalline PV in the near future, even for hundreds MW on-grid market. In term of reduction in manufacturing cost and period of energy payback, it is not difficult to imagine the economic value offered by thin-film PV, which is effective and sustainable for sure. Equally important is, numerous off-grid applications would appear with the increasing efficiency. But, it’s not simply happening in direct proportional basis, but in multiple-scale, thus generating large commercial value no one ever predicted accurately right now.

New Areas: BIPV and Flexible

According to the latest analyst report from NanoMarkets, it claims that revenues in the BIPV product market will surpass US$11 billion by 2016. In addition to this fivefold increase in revenue, the paper, titled ‘Building Integrated Photovoltaic Markets, 2011’ states that capacity within the sector will also rise from 343 MW to 3.6 GW during the same time period. BIPV glass will generate over US$6.4 billion (versus US$1.17 billion in 2011), tiles and floating panels’ income will rise to US$3 billion (from US$691 million) and flexible products will increase to around US$1.9 billion (from US$153 million). In China, BIPV market is just getting started. The PRC Ministry of Finance and the Ministry of Housing and Urban-Rural Development jointly issued the ‘Guidelines for Declaration of Demonstration Project of Solar Photovoltaic Building Applications’, which sets aside a subsidy of up to RMB20 per watt for BIPV projects using solar-integrated building materials and components and up to RMB15 per watt for BIPV projects using solar-integrated materials for rooftops or walls. These government subsidies are expected to further increase the demand for BIPV products. In recent years, investors pay more attention to the market prospects of Building-Integrated Photovoltaic (BIPV), which generates higher profit margins compared with traditional standard PV modules.

Considering social awareness and modernization in architectural design, more project developers and contractors are willing to contribute to BIPV market with thin-film PV-related technologies.

Projecting Global Market Status

In conclusion, solar market is positioned for a bright future, supported by the view of many analysts. Regarding the roadmap announced for those developed and developing countries, the demand should suffice for the planned increased output by companies producing crystalline and thin-film. Also in China, the government has revised its target for the 12th five-year plan in solar-related construction in August this year. The target accumulated capacity is above 10 GW in 2015, meaning domestic growth is 1-2 GW per year in the coming five years. More will be coming for encouraging the use of solar in different areas.

Recently, prices for solar companies are volatile for months due to pessimistic view towards short-medium term demand in solar panel when there is uncertainty in Europe─ main consumer in the world. However, that the situation should recover to a healthy condition for solar energy is a widely-accepted answer to carbon reduction and sustainable clean energy.

Off-grid and mobile power applications is an established market that has grown steadily over the past decades, an acceleration of demands is expected as solar PV becomes better understood. With more and more people feel and value the needs for being ‘Green’, BIPV should also have a bright future as technology improves and governmental policies become more transparent. In addition, reduction in cost of production of modules will allow amorphous silicon technology to be adopted by wider applications, including mainstream power generation utility.

Dr. Huashan Wang is Senior Vice President of Marketing at Trony Solar Holdings (www.trony.com). Dr. Wang is responsible for the strategic development of the group. With his experience, he implements the group off-grid marketing strategy by introducing integrated solutions to satisfy the need from different target markets. Prior to joining Trony, Dr. Wang was the global marketing technical manager of GE Plastics (now known as SABIC Innovative Plastics) from 2004 to 2008.

Trony: Targeting Thin-Film Off-Grid Market

Trony believes in thin-film technology and target marketing. Its distinguished business model lessens

the impact of the market crisis and makes its future bright.

Founded in 1993 by Mr. Li Yi, Trony Solar Holdings is now ranked the 1st in off-grid application and 3rd in thin-film solar industry in terms of production capacity. Driven by its strong IP portfolio and successful market strategy, Trony earns its leading position in China’s off-grid industry and keeps expanding (2011 capacity: 265 MW) to fulfill strong demand from emerging markets including Africa and South-East Asia regions. Because of its effort in China BIPV application development, Trony is also the preferred provider of BIPV products awarded by the PRC Ministry of Housing Construction for Urban and Rural Areas. In 2009, Trony was authorized to use the China Green Star logo, an accreditation for environmentally friendly products, on its BIPV modules.

Distinguished Business Model

Off-grid applications involve more modifications in overall module manufacturing becuase of numerous specifications tailoring different needs. Trony finished more than 200 specifications in 2010. Through providing technical know-how in the designing process with end-users, Trony has been able to maintain relatively stable selling price. More importantly, the company‘s end-market demand is not driven by FiT policies. Users of Trony’s products are mainly in consumer sectors. It explains why the impact of FiT changes on the company is not high because of the distinguishable business model.

Ability to Custom-Make Solar Cells

With the right target marketing, Trony is on track of sustainable expansion in both module sales and complete off-grid solar system offerings.

Trony has accumulated substantial know-how and actual product integration in energy systems that reliability deliver basic utility such as lighting, cell phone charging or television, combining amorphous thin-film solar panel with advanced lithium battery and control technologies. Trony focuses on the delivery of a life-changing service enabled by solar PV in all of its system, or ‘solar kit‘, products, and it firmly believes this is what differentiates it from most solar companies. Another unique feature to Trony’s flexible production process is its ability to custom-make solar cells that can be embedded into a very wide range of OEM products, ranging from solar garden lights to consumer electronics such as calculators or toys, to remote monitoring instruments. The monolithic cell construction enabled by its proprietary production process means it can design and produce to specification in short time, supporting this highly seasonal and fast changing industry.

Trony has been a pioneer in the BIPV segments in China, and its products are suited to urban building environment due to its ability to offer good aesthetics and power generation under imperfect installation conditions.

Trony has been active in its internal R&D to reduce manufacturing cost, and kept abreast of technology development by global process equipment makers. There are now feasible options to cost effective capital equipment with attractive returns on investment.

Strategy for the Off-Grid Market

To run a business with fast-growing technology, you need to find the right market to sell. To tap its target off-grid market, Trony puts most of its marketing effort into developing channel during the years, mainly in Africa and South-East Asia regions (on-grid market is not an economic way for electricity generation because of its high cost in grid formation). Through cooperation with localized NGOs (who provide funding for solar applications such as computer power supplies for schools, refrigeration power for healthcare and communication systems), Trony offers pre-packaged solution kits for selected applications. The result already proves that thin-film PV is workable there and more projects are carried on, which contributes to the company‘s sales and most importantly is improving the life quality for those people--generating a win-win business model. According to Frost & Sullivan, the total off-grid applications manufactured in China for domestic installation and exports are forecasted to increase from 405 MW in 2009 to 1,479 MW in 2013, representing a CAGR of more than 30%. As such, off-grid applications present Trony with significant market opportunities. Other estimates put the number of people using off-grid systems by 2030 at 1.6-2.6 billion, and this does not include portable and consumer electronics PV solutions. If thin-film technologies can be manufactured with continuous lower cost, the goal will make it affordable to everyone.

A BIPV Pioneer

The inherent characteristics of thin-film technology allow greater degree of design freedom in shape, dimension and level of transparency, all critical to architectural solutions for BIPV. In this scenario, Trony has an aggressive expansion plan through partnering with construction companies and architects to implement innovative appearances and mounting methods.

In addition to glass-based thin-film cell technology, the company is also introducing a cell on flexible polymeric substrates, with breakthrough advancement in areas such as impact resistance, curvature and conversion efficiencies. This type of solution is not available to crystalline module technology, therefore, creating a segment of highly differentiated solutions and sustainable growth with margin protection. Trony will be one of the few companies that have access to this technology and the know-how to integrate into BIPV products.