Thin-film cadmium telluride promises to drive down costs of solar energy
Friday, August 6, 2010 at 01:17PM
Analysis: Canadian metals firm eyes place under the sun
By Jennifer Robin Raj and Aftab Ahmed
BANGALORE (Reuters) - As the solar industry seeks to cut costs, once-niche products such as thin-film panels with cadmium telluride (CdTe) are boosting the profile and profits of suppliers like Canada's 5N Plus Inc.
The solar industry, worth around $40 billion globally, has lagged other alternative energy sectors due to its high costs, but thin-film panels coupled with CdTe are emerging as a viable low-cost rival to wind power, hydro power and natural gas.
The success of thin-film market leader First Solar Inc, which uses CdTe in its modules and has the lowest costs in the industry, and favorable government regulations have prompted firms such as GE Inc, Q-Cells and privately-held Abound Solar to shift toward CdTe.
"The interest in CdTe comes from the promise of the technology driving down costs, not relying on silicon, and making significant gains in efficiency," said solar industry analyst Thomas Maslin at advisory firm IHS Emerging Energy Research.
Conventionally, solar cells are made using various forms of silicon, whereas thin-film panels apply very thin layers of semiconductor material such as CdTe to inexpensive materials such as glass, plastic or metal.
CdTe is reckoned to have a 10-15 percent cost advantage over the more widely used silicon, and prices at less that $1 per watt of electricity produced, around half the cost of silicon, analysts estimate.
However, the supply of tellurium, a tin-colored component of CdTe and a byproduct of the copper industry, could be a limitation as it is not widely available.
That said, the CdTe solar market could be worth $5 billion this year and $6 billion in 2011, estimates Michael Willemse at CIBC Capital.
First Solar, which saw second-quarter revenues rise 12 percent to $588 million, plans to double both its capacity and its market share, to around 30 percent, though it has trimmed its 2010 sales forecast because of weaker prices.
The industry's lowest-cost producer continues to cut production costs, and has trimmed 5 cents from its per watt cost to an industry-leading 76 cents per watt.
5N Plus, which earns most of its revenue from supplying CdTe, looks well placed to seize the growing market potential, but will face competition from Apollo Solar and Vital Chemicals Inc in China, PPM Materials based in Germany, Japan's Nikko Metals, and Honeywell Electronic Materials, a unit of Honeywell International Inc.
"We're expecting a ramp up in (CdTe) demand in the second half," said Versant Partners analyst Massimo Fiore. "We also expect more growth in 2011-12."
5N Plus -- the name comes from the 99.999 percent purity of its products, or five nines and more -- should see a profit boost from next year as thin-film panel makers increase output. It is due to report fourth-quarter earnings on Aug 10.
The company has a long-term growth rate of 57 percent, according to Thomson Reuters Starmine data.
The Montreal-based firm, valued at $234 million, has an edge over rivals with its scale advantage, a proven relationship with tellurium suppliers and a supply contract with First Solar, noted National Bank Financial analyst Rupert Merer.
CHINA TO GET IN ON THE ACT?
Most Chinese solar panel makers use polysilicon, though 5N Plus CEO Jacques L'Ecuyer has hinted this could change.
"We think there are quite a few others that will jump on the bandwagon, and we wouldn't be surprised if the Chinese got into CdTe as well," he told Reuters.
Spot prices for polysilicon have slumped to around $50 per kg from $400 in mid-2008, denting panel prices, which are forecast to slip further. Prices of thin-film materials like CdTe are far less volatile.
However, with production costs of $30-$40 per kg, some Chinese polysilicon manufacturers have narrowed the gap to thin-film panel prices.
Sources told Reuters in June that Beijing was freezing IPOs of some renewable energy companies to ease an oversupply that had battered wind equipment and polysilicon prices, though official media quoted a regulatory official denying that.
5N Plus' L'Ecuyer said CdTe has a big advantage from a cost per kilowatt hour perspective as it operates more effectively under low light illumination conditions. He also noted it's cheaper to set up a production facility and quicker to recover the energy put in the module.
Thin-film panels can be made using other semiconductor materials like copper indium gallium selenide (CIGS), but these have yet to gain the same levels of traction.
"There's a lot of talk about CIGS potentially being more competitive longer term because the efficiency can be higher, but it's a much more complex material to work with in terms of manufacturing and getting all those different components working together on the module," said IHS' Maslin.
"In terms of track record, (CdTe) is far ahead," he added.
Thin-film panels with CdTe are not, however, expected to displace silicon panels, as they need more space to generate power, said CIBC's Willemse.
"The market will have a number of niches and a number of technologies that can survive," said National Bank Financial analyst Rupert Merer.
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