PV Savvy

Knowing the Key Characteristics of

Solar PV Value Chain

AN INTELLIGENCE REPORT FROM EAI

Preface

As a renewable energy source, solar energy presents an exciting opportunity for India. While the current contribution of solar energy to the total India's energy needs is insignificant, in the medium and long run, it is expected that solar energy, especially solar PV will form a vital component of the country's energy mix.

The most important barrier that had stopped Solar PV from becoming a mainstream renewable energy resource is the high cost of producing power from the resource. This high cost is in turn a direct result of the high capital costs of the solar PV panels and the balance of system required.

The good news is that the capital costs for solar PV panels are expected to decrease significantly over the next 5-10 years. In addition, solar PV technology is continuously improving in terms of its efficiency. As a result of this combination of capital cost reduction and efficiency increase, by 2015, solar PV is expected to reach grid parity in some parts of the world and by 2020, in most parts of the world.

For India, the National Solar Mission and its incentives provide an additional reason for entrepreneurs and investors to explore this industry. The convergence of decrease in capital costs, increase in efficiency and significant financial support by the government is likely to result in a wide range of attractive business opportunities.

While solar power production is the final benefit derived from solar PV, there are other distinct stages along the solar PV value chain – starting from polysilicon and ending with solar modules.

A number of Indian entrepreneurs are keen to know the key characteristics of each of these segments to evaluate entry into one or more of these segments. This white paper on the characteristics of these distinct segments has been developed to provide this intelligence. This white paper has been prepared by Energy Alternatives India (EAI), a leading consulting and research organization for the Indian renewable energy industry.

EAI is glad to be part of the RenewCon Solar 2011 Conference which has a focus on the exciting solar PV sector. We hope that this white paper PV Savvy focusing on the opportunities present in the solar energy sector will assist entrepreneurs and businesses in their efforts to build a more vibrant and powerful solar PV ecosystem.

EAI thanks theenergybusiness and UBM for providing the opportunity to present this white paper as part of the conference, and wishes the very best for the success of the conference.

Narasimhan Santhanam Director - Energy Alternatives India; narsi@eai.in Mar 5 2011, Chennai

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List of Contents

1. India’s Presence in the Solar PV Value Chain

2. Key Characteristics of Value Chain Segments

2.1 Polysilicon Production

2.2 Ingot and Wafer Manufacturing

2.3 Solar PV Cell Manufacturing

2.3.1 Crystalline Solar Cell Manufacturing

2.3.2 Thin Film Solar Cell Manufacturing

2.3.3 Concentrating PV Cell Manufacturing

2.4 Solar PV Module Production

3. Summary and Inferences

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1. India’s Presence in the Solar PV Value Chain

The solar PV value chain starts with the production of polysilicon and proceeds until the

stage when the solar PV modules are used in power plants or in a variety of products such as

lanterns streetlights, solar power packs for captive solar production and more.

Grid- connected

Power Generation

Polysilicon Ingots/

Wafers Cells Modules

Off-grid

Application

Solar PV Products such as lantern,

streetlights etc

Until recently, Indian entrepreneurs and businesses have focused mainly on producing modules and cells. Currently, only a few Indian companies have sizable cell manufacturing facilities and no company produces polysilicon or wafers on a significant scale. In order for India to have a vibrant solar PV based energy generation industry, it is felt that we need to build a complete ecosystem that supports the ultimate goal of producing power from solar. The government also has started thinking along these lines, and has come up with policies that require local content requirements for solar PV. For instance, there is a mandatory requirement of solar modules (and subsequently cells) to be made in India under the National Solar Mission policies.

The good news is that many Indian companies have started exploring entry into these uncharted segments of the solar PV value chain. At the same time, there is little information available for these businesses and entrepreneurs about these segments in the Indian context. In order to fill this gap, we provide inputs on the key characteristics of each distinct segment of the solar PV value chain in this white paper.

These inputs, we hope, will provide the entrepreneur an idea about the contours of opportunities at each segment. Most of the opportunities highlighted in this report are manufacturing / production related. Needless to say, there are many more opportunities that lie within each segment, and these opportunities could vary significantly in size and investments required. These other opportunities need not only belong to manufacturing but could also belong to trading and services segments.

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2. Key Characteristics of Value Chain Segments Entrepreneurs and businesses keen on exploring the various segments along the solar PV value chain need inputs on some key parameters / characteristics for each segment. These inputs will enable them to understand the dynamics of the segment and evaluate the suitability of the segment based on their aspirations, core expertise and financial capabilities.

Key characteristics discussed for each segment

• Type of entrepreneurs / investors who can benefit

• Scale of investments required

• Insights on whether it is an R&D oriented domain or commodity production

• Bottlenecks/threats

• Competition

• Market size

• Supply and demand

• Indian scenario

These characteristics are discussed for the following distinct segments

• Polysilicon production

• Ingot and wafer manufacturing

• Solar cell manufacturing

• Solar module production

2.1 Polysilicon Production

Polysilicon Wafers Cells Modules

Polysilicon is used to manufacture crystalline wafers. Around a quarter of the cost of a crystalline module goes just for polysilicon.

Type of entrepreneurs

/ investors who can

benefit

Entrepreneurs keen on building up capital intensive manufacturing

facilities for an emerging market.

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Scale of investment

Typical investments of $500 million - $1 billion for building a

polysilicon production plant.

High R&D or

commodity

manufacturing?

Commodity manufacturing

Bottlenecks/threats

High capital requirements, high energy input requirements and

long-term supply contracts could be deterrents to new entrants.

Competition

The industry is dominated by a few companies that supply around

90% of the total polysilicon market. Some of the prominent

companies are Hemlock, OCI, Wacker Chemie Tokuyama, REC

(subsidiary SGS and ASiMI), and MEMC

Market size

The world market of polysilicon has been growing 30-40% annually

since 2004, primarily from the growth in solar PV industry. The

market size of the solar cell polycrystalline silicon market in 2009

was $5.13 billion.

Supply and demand

Following undersupply since past few years, polysilicon production

capacity entered a fast-growth phase in 2009, which resulted in an

oversupply situation, in response to increase in production capacity

and growth in demand from the end markets. It is forecasted that

the demand for polysilicon will continue to increase at more than

ten percent for the period 2010 to 2012. Polysilicon oversupply will

also trigger a long term decline in its prices, which peaked to the

highest levels in 2008 in response to its supply shortage.1

Indian scenario

Companies such as Lanco, Bhaskar Solar and Acharya are reportedly

setting up polysilicon manufacturing plants in India, though these

are pretty much early days for polysilicon in India.

1

Global Polysilicon Market Report: 2010 Edition

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2.2 Ingot and Wafer Manufacturing

Polysilicon Wafers Cells Modules

The process of melting polysilicon into ingots and subsequently cutting them into wafers is wedged between polysilicon production and cell manufacturing.

Yet, it is a distinct process that does not require physical proximity to upstream or downstream processing. Consequently, some companies specialise in just doing that. Typically, ingot and wafer manufacturing are done by the same company.

Type of entrepreneurs /

investors who can

benefit

Companies that have been operating in metal cutting and

finishing, abrasives and related industries could be ideally

suited to enter this segment.

Ingots and wafer manufacturing requires minimum

investments in the range $50-75 million (the typical minimum

capacity recommended is about 60 MW per year).

Scale of investment

High R&D or commodity

manufacturing

Commodity manufacturing

Bottlenecks/threats/bar

riers

There is a threat of backward and forward integration by

large solar cell manufacturers and polysilicon producers

respectively; thus, this segment is under threat of being taken

over by its suppliers and customers in search for capturing

more stable value

Competition

The wafer industry is dominated by a few (5) companies

sharing over 90% of the market, with Shin-Etsu and Sumco

(Japan) alone having a third each, the remaining being

Siltronic (Germany), MEMC (USA) and LG Siltron (South

Korea). There are however, many smaller companies fighting

for share.

Market size

The global solar PV wafers production capacity has been

increasing year by year, from 1,900 MW in 2004 to 23,079

MW in 2010 at a CAGR of 51.6%.

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It is expected that there will be a decline in the capacity

expansion of wafers due to considerable supply which can

meet the market demand. Shift towards thin-film technology

will also reduce the utilization of wafers in PV. The production

of wafers is projected to increase from 17,309 MW in 2010 to

reach 29,000 MW by the end of 2015 at a CAGR of 10.9%.

Supply and demand

The global wafers industry caters to both solar and

semiconductor industry. The demand for PV wafers continued

to increase driven by rapid growth in PV installations during

2001-2010. While a decline in the capacity expansion of

wafers is expected due to considerable supply to meet the

market demand and due to a shift towards thin-film

technology, the production is still expected to increase at a

CAGR of almost 11% until 2015.

Indian scenario

As of end 2010, the Indian government has received 7

proposals adding up to investments of about $16 billion to set

up manufacturing units for polysilicon, single and multi

crystalline ingots, wafers, solar cells, photovoltaic modules,

etc. Companies such as Lanco Solar, Bhaskar Silicon, and

Carborundum Universal are reportedly having plans for

setting up integrated polysilicon plants with ingot and wafer

manufacturing facilities

Other notes

While there is a threat of backward and forward integration

by both customers and suppliers respectively of wafers,

vertical integration into producing solar cells and modules is

somewhat common too with companies manufacturing ingot

and wafers.

2.3 Solar Cell Manufacturing

Polysilicon Wafers Cells Modules

Cell manufacturing involves creating the all-important pn-junction, coating and layering. It is an important step in the value chain that is responsible for about 15% of a solar PV module cost and it is here where significant technical differentiation is created.

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Details of three different types of solar cells are provided in this section

• Crystalline solar cells

• Thin film solar cells

• Concentrating PV solar cells

2.3.1 Crystalline Cell Manufacturing

Type of entrepreneurs /

investors who can benefit

Ingot and wafer manufacturers who are keen on forward

integration can exploit this opportunity.

Scale of investment

Medium-Large. A rule of thumb guide to the capital

investment in building a solar cell plant is US$1-1.25

million/MW for crystalline silicon and US$ 2 million/MW or

more for thin films. The minimum economical size for a

solar cell factory is about 20 MW.

High R&D or commodity

manufacturing

Technology is constantly evolving in the case of solar PV

cells manufacturing.

Bottlenecks/threats/barriers

Cell manufacturers face the critical challenge of rigourously

estimating the demand requirements from the end user

market. The past decade has shown how badly the cell

manufacturers could be affected if there is a significant fall

in demand or oversupply in the market. High capital

requirements for the manufacturing line, combined with a

need for economies of scale can make it difficult for new

entrants.

Competition

There are an ever-growing number of cell manufacturers,

and the industry is not dominated by a few big players. The

top 10 producers in 2008 produced just over 50% of the

total. The market leader, Q-Cells, commands a market

share of 10%.

The end-use markets for solar installation is still dominated

by Germany, the United States and Japan, though India is

also expected to become important in the near future,

owing to the National Solar Mission. The Chinese market

for solar remains small, hence most of the solar cells and

modules are exported to other countries worldwide. The

Chinese makers have slowly started catering to the

domestic market too. The easy financing from the Chinese

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Government has helped many manufacturers to expand

into the solar supply chain becoming vertically integrated

companies. Overproduction in China has brought down the

prices of solar cells worldwide. The low prices of solar cells

have made manufacturers in other parts of the world

difficult to compete. Overall, the government in China has

played a pivotal role in increasing the solar wafer and cell

production capacity within China and lowering the prices.

Market size

World solar cell production reached a consolidated figure

of 9.34 GW in 2009, up from 6.85 GW a year earlier. China

and Taiwanese production continued to build share and

now account for 49% of global cell production. The Top 7

polysilicon manufacturers had 114,500 tonnes per annum

of capacity in 2009, up 92% on their 2008 level.2

Supply and demand

The supply and demand gap in this industry is expected to

fluctuate. For instance, while there had been a significant

supply-demand gap in some of the years prior to 2008, the

excess of solar cell production over market demand caused

weighted crystalline silicon module price average for 2009

to crash 38% over the prior year level.3

Indian scenario

Fewer than a dozen companies in India manufacture

crystalline PV cells. Prominent among these are (as of Mar

2010): Moser Baer, Tata BP Solar, XL Telecom, Solar

Semiconductors, Surana Ventures, Indosolar, USL

Photovoltaics, Websol Solar, and BHEL, Maharishi Solar

Technology.

2

http://www.cotechsolar.com/NewsView.Asp?ID=20 3

http://www.cotechsolar.com/NewsView.Asp?ID=20

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Other notes Strategy of partnering with thin film manufacturers - The

main alternative to crystalline cells is thin-film. However,

switching costs for manufacturers would be high. Instead,

to mitigate the risk, cell manufacturers partner with thin-

film producers.

Fragmented industry of module manufacturers - While

some cell manufacturers are forward-integrated into

modules, there are many more module- than cell-

manufacturers, many of whom have no global presence.

2.3.2 Thin-film Solar Cell Manufacturing

Manufacturing thin-film modules comprises depositing photovoltaic material on a substrate, structuring it into cells to form an electric circuit and wire and frame it depending on application.

The key suppliers for the thin-film industry are chemical companies that produce high-purity metals such as CdTe, GaAs etc. The supply chain is less constrained than that for polysilicon (used in crystalline solar) and therefore much more reliable. This industry experiences a diverse mix of big-hitters (Sharp), start-up companies and universities. Companies with a long-term vision should start investing in this field.

Type of entrepreneurs /

investors who can benefit

Chemical companies that produce high-purity metals

such as CdTe, GaAs are in a good position to exploit this

opportunity. Glass manufacturers are also in a good

position to exploit this opportunity. Equipment firms

that have traditionally supplied printing machinery or

manufacturing equipment to the semiconductor and

display industry see the burgeoning thin film industry as

a potentially lucrative market, especially as their

hardware can often be easily adapted to manufacture

thin film cells and panels. At the same time, these

equipment manufacturers are not finding it that easy to

enter the TFPV space because module manufacturers

are choosing to design and build proprietary equipment

rather than buy it in.4

4 http://social.thinfilmtoday.com/industry-insight/tfpv-manufacturing-equipment-proprietary-or-shelf

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Scale of investment

This industry experiences a diverse mix of big-hitters

(Sharp), start-up companies and universities. A rule of

thumb guide to the capital investment in building a

solar cell plant is US$1-1.25 million/MW for crystalline

silicon and US$ 2 million/MW or more for thin films.

The minimum economical size for a solar cell factory is

about 20 MW.

High R&D or commodity

manufacturing?

Opportunities exist for R&D and innovation in this

exciting sector. Prominent segments where significant

innovation possibilities exist are: efficiency, new thin

film materials, design and process.

Bottlenecks/threats/barriers

For development and small-scale production, there are

few barriers, as companies like Aja International

specialise in providing small-scale sputtering

equipment. However, when scale becomes important,

access to capital might become a barrier.

This is a very dynamic segment with lots of startup

companies, some venture-funded. There are also a

number of companies that also produce crystalline

technologies. Those companies tend to be in the

amorphous silicon thin-film segment. The organic

photovoltaics segment is mostly covered by research

institutes rather than private companies.

Competition

The production volume has increased steadily as

165MW in 2007 and 357 MW in 2008. The share of thin

films is expected to increase significantly and expected

to reach about 25% of total in 2013. (EPIA data).

Market size

Supply and demand

The thin film solar cell production reached a

consolidated figure of 1.68 GW in 2009 out of the total

3.58 GW capacity available, indicating that there is

some amount of surplus capacity. However, the

demand supply gap could look very different in future

with enhanced offtake of thin film world over.

Indian scenario

There are only a few Indian companies such as Moser

Baer and HHV Solar that make thin film solar cells. A

few others such as Kirloskar are also exploring this field.

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2.3.3 Concentrating Solar PV

In concentrating PV (CPV), concentrators use optics to concentrate sunlight onto a small area of solar cells, thus allowing for a decrease in cell size. Because a CPV module needs less cell material than a traditional PV module, it is cost effective to use higher quality cells to increase efficiency. However, the technology makes up a very small portion of the solar industry.

CPV system manufacturers assemble the solar cells, concentrator unit and heat sink to form a module. Where applicable, companies will either integrate a tracking device or offer it as a separate product for free-standing module installations.

Type of entrepreneurs /

investors who can benefit

CPV is currently quite R&D driven, with a number of

innovations taking place in this area. The types of

entrepreneurs who will find this domain suitable are

those who have scientific R&D backgrounds and have

access to funds for significant R&D investments.

Scale of investment

Medium-high, as significant research is involved and

manufacturers of solar CPV systems will need scale for

their products.

High R&D or commodity

manufacturing

High R&D. There is no dominant design as yet. And, it

may never converge to just one, as different

applications may dictate different concentration ratios.

As of now, there is a high degree of product

differentiation.

Being R&D driven, entrepreneurs run the risk of their

competitors coming up with a superior technology that

could become the market standard.

The timeframes for the maturity for CPV technology is

not clear, making it difficult for entrepreneurs to plan

their projects accordingly.

Bottlenecks/threats/barriers

As a rather recent technology (being commercialized),

there are new entrants, many of whom are venture-

funded. Some of the prominent ones are: Amonix

(California), SolFocu (California), GreenVolts (San

Francisco), Concentrix Solar (Germany) etc.

Competition

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Market size

The CPV market is estimated to reach $266.0 million in

2014 from about $63.9 million in 2009

Indian scenario

There are only a few Indian companies like Square

Engineering that produce concentrated solar PV

systems

Other notes

This is a promising technology. However, as a

newcomer, it will need to demonstrate that it delivers

significant improvements over other established PV

technologies.

2.4 Solar Module Production

Polysilicon Wafers Cells Modules

Solar PV module manufacturing involves assembling the cells into a module to form an electric circuit. This is the last manufacturing step before it is distributed to wholesalers.

Type of entrepreneurs /

investors who can benefit

Cell manufacturers, who are keen on forward integration,

or those making solar products or providing turnkey

solutions for solar power plants. Companies which have

expertise or interest in product assembly.

Scale of investment

A module plant can be viable as small as 10 MW/year,

with investment of about $0.1-0.2 million per MW.

High R&D or commodity

manufacturing?

Commodity production.

Bottlenecks/threats/barriers

Low barriers to entry. Capital requirements and energy

requirements for modules are much less than for the

other processes.

Competition

There are a large number of panel manufacturers. Many

of the leading module manufacturers are also cell

manufacturers. Worldwide, Q-Cells, Sharp Solar and

Suntech Power Corporation are the top three solar

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module manufacturers. In India, there are about 35 PV

module producers, and this number is expected to

increase significantly in the near future with the increase

of module off-take in India and worldwide.

Market size, supply and

demand

Initial estimates suggest that the worldwide photovoltaic

installations in 2010 were about 17.5 GW – this is an

almost 140% growth over the installations that happened

in 2009, which was 7.2 GW. This pace of growth is

expected to continue for the near future. In India, solar

module production during 2009-10 was about 326 MWp

and in 2010-11 it is estimated to be about 444 MWp.

Currently, the existing capacities and supplies are in tune

with the demand. With the Chinese companies going for

large scale expansions of their module production

capacities, there could be an oversupply in the market in

the near future, though the demand-supply equation

could become more balanced over the subsequent years.

Indian scenario

There are about 35 companies in India that

produce crystalline solar modules.

With a large number of module manufacturers,

overcapacity and few distinguishing features, this industry

is set for more consolidation. Most companies in this

segment are forward integrated into turnkey solutions,

wholesale or have partnerships with distributors.

Other notes

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3. Summary and Inferences Within the solar PV value chain, opportunities exist for Indian entrepreneurs at each of the four distinct stages – polysilicon, wafers, cells and modules. Owing to the significant differences in characteristics of each with regard to scale of investment, R&D orientation, and types of core skill sets required, it can be expected each of these segments will be attractive to different types of Indian companies and entrepreneurs.

The Indian economy is on the ascendance, and Indian companies large and small are keen on contributing significantly to the solar energy segment. With a large domestic market expected for solar PV modules from the government thrust following the launch of the National Solar Mission, it is expected that in a few years from now, every segment of the solar PV value chain will have Indian companies providing significant value addition.

It can be said with a good amount of confidence that it is well within the capabilities of the Indian companies to participate in each segment and build a powerful solar PV ecosystem that brings about significant cost reduction and ensures that India is self-reliant in solar PV.

4. About EAI

EAI is a boutique research and consulting firm in renewable energy technologies. Our expertise ranges from Solar

PV and Wind Energy to Algae fuels and Jatropha biodiesel. Our work has been sought after by some of the largest

corporate and multilateral organizations in the world such as The Bill and Melinda Gates Foundation, Reliance

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Our range of services include –

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Research and Publications

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To hear more on how we can help your organization procure power, write to us at consult@eai.in.

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