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Panel I Opportunities and Challenges Facing PV Manufacturing in the United States Moderator: Kevin Hurst Office of Science and Technology Policy Executive Office of the President Mr. Hurst expressed his appreciation for the participation of three leaders from several leading PV manufacturers in the world—First Solar, SunPower, and Dow Corning—and his approval of solar power as a central element in the country’s renewable energy portfolio. He then described new policy directions of President Obama to try to advance PV and other forms of renewable energy. The FY2010 budget, he said, contained several energy policy priorities, beginning with a comprehensive approach to reduce the country’s dependence on petro- leum and its contributions to climate change, and to simultaneously increase the numbers of “green jobs” in the country. Second, the Administration proposed a greenhouse gas emissions cap-and-trade program that aimed to reduce emissions 80 percent by 2050. Third, the Administration planned to invest $150 billion over 10 years to develop and deploy clean energy technologies, starting in FY2012, making use of a portion of the revenues from the cap-and-trade auction. Mr. Hurst also said that the President had announced a goal to double the non-hydro contributions of renewable power generation by 2012. This goal, he said, was backed up by elements of the American Recovery and Reinvestment Act of 2009: • A grant program, in lieu of the tax credits, where beneficial; • Expansion of the DoE’s loan guarantee program; • Improvements to the investment tax credit and establishment of a new manufacturing product credit for solar, PV, and other renewable manufacturing. Noting the “incredible progress that’s been made in the solar PV industry,” including an increase in domestic PV production capacity by over 50 percent 44
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45 PANEL I in the past year, he stressed the importance of learning “how we can continue this pace of improvement.” Mr. Hurst cited several other provisions of the loan guarantee program of the Recovery Act, including an appropriation of $6 billion, which now covers credit subsidy costs. In addition, it provides a new aspect of loan guarantees specifically for renewable energy and electric power transmis - sion. Finally, DoE had announced the offer of a $535 million loan guarantee to Solyndra, Inc. to construct an industrial-scale PV plant in California. The DoE’s solar R&D program, he said, was a broad-based program embrac- ing the full spectrum of opportunities, including long-range R&D, pilot produc - tion and supply chain issues, manufacturing issues, and mechanisms to move PV systems into the field. Mr. Hurst concluded with a quote from a speech given by President Obama, given a day earlier at a wind turbine manufacturing site. He said, “America pioneered solar technology but we’ve fallen behind countries like Germany and Japan in generating, even though we have more sun than either country. I don’t accept that this is the way it has to be. When it comes to renewable energy, I don’t think we should be followers. I think it’s time for us to lead.” He concluded by noting that he looked forward to hearing from the speakers this morning to learn how we can work together to achieve the President’s vision. FIRST SOLAR, INC. Michael J. Ahearn First Solar Mr. Ahearn opened with the observation that “this is part of the awakening to the Obama administration’s change in attitude and momentum, and it’s most welcome by the industry.” He then offered a brief history of First Solar, which had grown rapidly since its founding in 1999. Eschewing standard crystalline silicon modules, First Solar adopted a lower-cost thin-film technique using cadmium-tel- luride solar cells. This proved to be a difficult process to master, and the company needed six years to reach steady-state production with its first manufacturing line. Since then, progress has accelerated. In 2005, the first year of production, the company manufactured 20 megawatts of solar panels. In 2008, it made just over 500 megawatts of solar panels, a 2500 percent increase in four years. This year production is expected to double to about a gigawatt. Mr. Ahearn noted that an important part of the First Solar story has been the lowering of manufacturing costs. At the beginning of this period, manufacturing costs were about even with the rest of the industry at $3 a watt produced. Over the next four years, however, the cost dropped by two-thirds, falling below a dollar a watt at the end of 2008. “That trajectory,” he said, “is continuing at a fairly steep rate.” He also stressed the economic development value of the industry. In the course of the manufacturing scale-up, First Solar invested over a billion dollars
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46 FUTURE OF PHOTOVOLTAICS MANUFACTURING and created more than 4,000 direct jobs. In terms of the broader value chain, he said, this figure represented tens of thousands of jobs. “So this is an example of a fairly significant success story,” he said. “I would also say that this is not unique in the solar industry. It is going on in a number of solar companies, some of whom are represented here. And it’s being driven by a confluence of technology, good execution, and good policy, emanating for the most part out of Europe.” He noted that work previously done in Europe and elsewhere had allowed his company to “skip a few steps” that would otherwise have slowed development and made it more expensive. Mr. Ahearn summarized his firm’s technological activities, which began with building a conveyor system that moves two-by-four-foot sheets of glass robotically through a continuous process that takes about 2.5 hours. The initial step is the deposition of a film of semiconductor material about the thickness of a human hair. “It’s difficult to get into commercial production with any kind of thin-film technology,” he said, “but once you’re in production at a steady state, there are dramatic cost and scale improvements because of the inherent nature of the materials.” One improvement lever is the potential for greater conversion efficiency—the efficiency at which sunlight is converted into useful electricity. Since First Solar began commercial production, its average conversion efficiency has grown from about 6 percent to about 11 percent. This was due to significant process and device improvements that are inherent to the materials. As more power is added to a panel, for example, there is no incremental cost in making the panel, so that the cost per watt drops significantly. To project future cost per watt by today’s situation, he said, is to ignore a very real technology trajectory. A second source of improvements is economies of scale. Although First Solar’s up-front cost is high, its incremental or marginal cost of producing a pho - tovoltaic panel is minimal, because the automated process requires little labor or material. At first, when production was low, the average cost of production was fairly high. As volume increased, the low incremental cost drove the unit cost down at a rapid rate. A third lever, Mr. Ahearn said, is that of productivity. Higher productivity results from the “so-called learning curve effect—cycles of learning that begin once you’re in a rhythm, once you’re doing the same things over and over. With learning, a factory is able to produce higher yields, more equipment up-time, and reduced bottlenecking, all of which lower the cost per watt. With increasing productivity extended into the supply chain and factory replication, the company has been able to accelerate the construction time and ramp-up time for a new factory from 12 months and 18 months respectively to beginning construction of a new factory every three months and a ramping-up cycle much shorter than 18 months. To do this, he said, required bringing along the whole supply chain: equipment suppliers, raw materials suppliers, engineer- ing procurement, and construction. “What our experience demonstrates,” he said,
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47 PANEL I “and what others have demonstrated in Europe, is that the private sector is capable of driving such capacity improvements over time.” First Solar had also entered into energy savings performance contracts 3 to build big utility plants in the United States. “We felt that this is the only way to hit the cost point,” said Mr. Ahearn. “It’s a much more difficult environment here. And what we’ve seen from relatively little experience to date is a rapid improvement in installation time, cycle time to build these plants, and very fast cost reduction.” The Key to Improving Efficiency Mr. Ahearn said that the key to real improvements in photovoltaic efficiency is the presence of a market of sufficient size. Despite a modest market opportu- nity in the United States so far, First Solar, and the industry generally, have been fortunate in being able to take advantage of significant markets in Europe, led by Germany. In 2004, when First Solar was achieving steady-state production, Germany adopted a set of programs that have allowed companies to scale 4 and demonstrate these kinds of results. The markets in the rest of the world, he said, are still small, such as markets for off-grid sites, remote villages, and other special needs. Japan, while pursuing solar power, is virtually closed to companies from other countries. The United States has less than 10 percent of global demand and “has not been a factor,” he said.5 The rapid progress in solar technologies in Europe was initially spurred by governments’ use of the feed-in tariff.6 This guarantees that anyone who generates solar power can sell that power at favorable rates to the national electrical grid without special permissions or relationships to the local utilities. Thus produc - ers are typically able to count on a market with predictable price points over a known number of years. Company managers and investors who build a factory and staff an organization know they will have time in the market to recoup that 3 An energy savings performance contract is a contract under which a contractor designs and con - structs an energy savings project and a federal agency pays the contractor over time from savings in utility bills. 4 Scalability, as a property of systems, is defined according to the specific requirements of the system that are deemed important. A system whose performance improves after adding hardware, proportion- ally to the capacity added, is said to be scalable. An algorithm, design, networking protocol, program, or other system is said to scale if it is suitably efficient and practical when applied to large situations. (Wikipedia, “Scalability,” accessed May 26, 2009.) 5 According to the industry report Solarbuzz, the United States was third in PV market demand in 2008 at 0.36 GW; demand in Spain was 2.46 GW and in Germany 1.86 GW. Total global demand was 5.95 GW. At the same time, U.S. polysilicon production accounted for 43 percent of the world’s supplies. . 6 A feed-in tariff is, in essence, a requirement by the government for a utility to pay above-market rates for green electricity.
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48 FUTURE OF PHOTOVOLTAICS MANUFACTURING investment and perhaps earn a profit. In addition, the markets in Europe tend to be fairly uniform, so a firm can make a standardized product and focus its efforts on scale and cost reduction.7 The main criticism of this approach is that feed-in tariffs are expensive and cannot be part of a sustainable model. However, Mr. Ahearn argued that the cost reduction trajectories he has experienced should allow such tariffs to be reduced quickly and steeply as productivity increases. He demonstrated from the First Solar internal roadmap how this might happen, noting that other solar companies had similar roadmaps. For the past four years, the company roadmap has pro- jected by 2012 a pricing capacity of 8 to 10 cents per kilowatt-hour. That assumes a turn-key installed system cost of between $2 and $2.75 per watt, depending on the irradiance and financing cost assumptions. “This is a real plan,” Mr. Ahearn said. “We’re two years into this and we’re more than 50 percent through the milestones. I know a number of solar companies that can tell you the same thing. These are detailed, bottom-up plans that are be - ing executed in the European market to real metrics.” He expressed confidence that if the market opportunity continued to exist, these trajectories toward pro - ductivity and efficiency would continue. Mr. Ahearn then turned to the situation in the United States. He said that the symposium presented a good opportunity to be “realistic and fairly candid about where we are.” Referring to the comment by the preceding speaker about a 50 percent increase in solar capacity, he reminded his audience that that increase had come “off a miniscule base.” The United States, he said, still had a “mini - mal” amount of solar manufacturing. Even those manufacturers who were based in the United States, including First Solar and SunPower, put the bulk of their manufacturing abroad. This was not by choice, he said, but the realities of a home market that was “fragmented and sporadic”—not the kind of market where a firm can scale the technology or run an efficient business. “There hasn’t been a lot of choice,” he said. He also noted that almost every state in the United States offers solar incentives of some type—such as a 30 percent income tax incentive—which appear to constitute significant support. And yet a tax incentive may not be suf- ficient in the absence of strong local and global demand. Lessons Learned from Europe Mr. Ahearn did express optimism that a stronger U.S. industry could emerge, despite the current lead held by Spanish and German manufacturers. The United States was still in an early stage, and he foresaw abundant opportunity for it to 7 At least 64 countries now have some type of policy to promote renewable power generation. Feed-in tariffs were adopted at the national level in at least five countries for the first time in 2008/ early 2009, including Kenya, the Philippines, Poland, South Africa, and Ukraine. Renewables Global Status Report 2009, .
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49 PANEL I move to a leadership position. He added that the timing would also help, because U.S. firms could benefit from the cost reductions and other lessons learned in Europe. On the demand side, the estimate he had developed based on the consensus of ten industry analysts suggested that Europe would hold 66 percent of the world market by the end of 2009, the United States 10 percent, Japan 7 percent, and the rest of the world 17 percent (he noted that the 10 percent figure for the United States seemed too high). On the supply side, the same analysts estimated that by year end Europe would have 30 percent of total manufacturing capacity, China 27 percent, Japan 12 percent, the rest of Asia 9 percent, the United States 9 percent, and the ROW 13 percent. In absolute terms, the estimated market by 2009 would be 5.6 gigawatts vs. existing and announced manufacturing capacity of 12.3 gigawatts. “The numbers can be debated,” he said, “but the basic mes- sage is right: There’s a lot more manufacturing capacity in the world than there is demand. Absent some change, that’s not going to correct itself.” Mr. Ahearn said that policies aimed at increasing manufacturing capacity would not drive a sustainable industry unless they strengthened market demand. “Market demand doesn’t increase by itself,” he said. “This takes subsidies. And existing markets in Europe cannot grow at an exponential rate or even a mean- ingful compound annual rate because the burden on ratepayers and taxpayers won’t sustain it. So you can’t ignore this capacity problem without thinking about demand.” He also pointed to China’s large global share of manufacturing capacity. “Polycrystalline silicon production has become commoditized,” he said. “Barri - ers to entry are low or nonexistent. Anybody in this room who wants to get into manufacturing of polycrystalline silicon can do that today. What that means is if you want to be competitive in this, you have to be in China or another low-cost country.” He pointed also to technology-driven solutions, such as high-efficiency monocrystalline silicon. Where to Site a Manufacturing Plant Mr. Ahearn noted that organic photovoltaic materials, such as flexible sub - strate, are “a different story. That’s where manufacturers like us have a choice in where we put the manufacturing.” There are two categories of sites for a manu- facturing facility, he said. One is in the country where markets already exist. This is done when a company wants to signal to local politicians that their substantial investment to create a market is recognized and that the host country will now get its payback in the form of investment and value added. A firm might also be drawn to such a country when it has a core set of human skills, technology, and resources, as is the case in Germany. The second kind of site is one with low labor costs and sufficient intellectual property protection. Such a low-cost environment is less important for a company
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50 FUTURE OF PHOTOVOLTAICS MANUFACTURING like First Solar, because manufacturing for its product is largely automated and labor costs are already low. The best opportunity for the United States, Mr. Ahearn said, is the first kind of site, with high technology and a market capable of attracting world-leading firms. He further suggested taking a page from the European experience, which had benefited from a “whole basket of solutions,” ranging from renewable energy to energy efficiency to carbon pricing. Mr. Ahearn turned to a broader view of the low-carbon energy market. In this new market, each candidate technology must move along a timeline of development. This timeline moves through a series of approximate states, as follows: (1) R&D, (2) commercialization, (3) scale-up, (4) sustainable market infrastructure, and (5) mass market penetration. He pointed to onshore wind and hydropower as technologies that have reached the scale-up stage after three decades of development, mostly under feed-in tariff programs, that have brought costs down by 80 percent. Drawbacks of a Least-Cost Solution Mr. Ahearn noted that Europe had made the significant decision to promote the sector of renewable energy as a whole. “What Europe does is essential,” he said, “European countries review the position of each technology along the devel- opment scale, and decide what needs to be done to move it to commercial scale.” If countries tried to do this through market forces alone, he said, the market would lead to the least-cost solution. If the policy goal is to scale up a number of alter- native technologies that might be needed for the best overall solution, least-cost is clearly not the best. “We’re going to have to get our hands a little dirtier here to get the right result.” Solar, he said, is on the early part of the development timeline, moving from R&D toward commercialization. It awaits a set of commercially viable tech- nologies, driven by fundamental R&D that manifests itself in existence proofs, Alpha products, and concept lines—outcomes that characterize technology with commercial potential. “Now we have to put together a cause-and-effect scenario, showing how this technology moves from lab scale to something that will be compelling in the marketplace.” Mr. Ahearn noted that the United States had done a pretty good job in de - veloping its solar technologies. He called the technologies that have come out of U.S. universities and labs “pretty impressive.” He said that NREL, the National Renewable Energy Laboratory in Colorado, had been instrumental in First Solar’s technology development through the thin-film partnership. He affirmed the key role for the federal government in funding basic science and development through universities, national labs, and consortia to maintain a flow of commercially vi - able technologies. Eventually, however, this flow needs more. “When those [technologies] become interesting and ready to put into operation,” he said, “you need to move to the next stage of commercialization where you have entrepreneurial activity
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51 PANEL I and risk capital. Those are the traditional strong suits of the United States. We’re really good at raising and putting venture capital to work, and we’ve got a great entrepreneurial base of talent. What’s needed to galvanize all that is a compelling market opportunity.” Mr. Ahearn added that during the last few years, several billion dollars in venture capital had flowed into hundreds of photovoltaic start-ups. Most of these new firms, he said, once in production, were planning to move their facilities to Europe to take advantage of incentives. This would constitute a signal to U.S. politicians about the need for local incentives. “This commercialization piece is where it becomes very important to create a U.S. market in a transparent way,” he said. “People need to see what’s possible if they risk capital.” He also urged that any incentives designed by governments should be non- selective. Trying to pick winning companies, or groups of companies, carries risks. The choice may be wrong and the money might be wasted. And in a new, high-technology field, it is likely that most efforts will not be successful. Instead, he suggested, support should be more generic to the point when the private sector can engage. Selection of individual companies can skew the market and signal that government sponsorship is available only for certain technologies. This would provide selective benefits to the exclusion of real market opportunity, and it would leave many companies on the sidelines that could otherwise participate with private sector money. Once the first manufacturing line is working and the product can be vetted, the need for capital grows quickly and the company needs access to the billions of dollars available only from the capital markets. The United States has well- formed capital markets, he said, with many companies with experience in com- mercializing technology products. Mr. Ahearn closed with a plea to let the markets do their work at this com- mercialization stage and to avoid selective subsidies. “This is an issue for the loan guarantee program,” he said. “We’re going to see a big logjam now because we have to work through a selective process of the DoE with no visibility. I think we’d be much better off if the government simply enabled all banks to make loans that the market would direct to the right place.” THE GLOBAL PV VALUE CHAIN Dick Swanson SunPower After thanking the Academies and organizers, Mr. Swanson said he would give a short overview of SunPower and review the value chain and its various costs. The company was formed in 1985 to develop technology developed at Stanford University. That early program was funded largely by the Electric Power Research Institute (EPRI) and the U.S. Department of Energy. The initial concept
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52 FUTURE OF PHOTOVOLTAICS MANUFACTURING was to produce concentrating systems: large reflecting dishes that focused light on high-performance solar cells, all situated in the desert. The market for concentrators did not form, however, and SunPower “sort of wandered in the woods a long time building specialty products, such as high-per- formance solar cells.” These culminated in a solar-powered airplane for NASA, which set an altitude record, but did not have broad commercial importance. The company’s development was hampered by high product costs. The fortunes of SunPower turned in 2000, however, when it merged with Cypress Semiconductor. Cypress agreed with SunPower’s vision of a large-scale enterprise, and injected much-needed manufacturing expertise into the com- pany. Indeed, photovoltaics is today primarily a manufacturing-oriented business, where successful companies are distinguished by operational excellence. SunPower opened its first manufacturing line in the Philippines. There the company decided to start moving downstream. In 2007 it merged with Pow - erLight, which was the world’s largest system integrator, and began installing power plants on the roofs of commercial buildings and in large fields. Today the company is global, with offices in the United States, Europe, Asia, and Aus - tralia, many of them with manufacturing plants. Revenues for 2008 were about $1.4 billion, placing the company ninth worldwide in photovoltaics in terms of megawatts produced. The company is now in all the main PV market sectors: the retrofit market, allowing people to put panels on existing roofs; new production homes, where PV are designed as part of the roof and are accepted more willingly by customers; commercial and public installations; and power plants, which had driven the original vision behind PV in the 1970s. Photovoltaic History in the United States Mr. Swanson reviewed photovoltaics history with respect to the United States. The United States was in a commanding leadership role until the 1980s when the “killer app” of direct residential rooftop installation was developed in Japan. This was followed in the 1990s by the European use of the feed-in tar- iffs, which drove the second great wave of expansion, leaving the United States behind. Mr. Swanson said that this shift in leadership was consistent with the message that manufacturing and the technology need to follow the markets. “The basic message of my presentation,” he said, “is that if we want to have manufac - turing in the United States, the United States has to be a market leader.” Mr. Swanson then showed photos of several kinds of SunPower installations: the Sunset Home, in Silicon Valley, CA, a 4-kW SunPower Solar Electric System; the 904 kW roof on the FedEx Express Oakland, CA hub; the U.S. DoE head - quarters SunPower Solar System in Washington, D.C.; and the 14MW system at Nellis Air Force Base, Las Vegas. He turned to the topic of the polysilicon value chain, which he noted is more complex than that of thin-film PV. The SunPower manufacturing process
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53 PANEL I starts with highly refined polysilicon, which is grown into large single crystals, or ingots. Those ingots are sliced into wafers, which are used as solar cells that are laminated behind panels and installed in a PV system. The systems are heavy and somewhat challenging to install, so that the cost of installation is traditionally about 50 percent of the system cost, requiring local manufacturing and labor. The actual ingot is about 20 percent of the cost and the manufacturing and conversion into panels about 30 percent. Mr. Swanson said that in preparing for this talk, he met with the company’s operations leaders to calculate the U.S. content in the current value chain. “We meticulously calculated it,” he said, “and the answer knocked my socks off.” Basically, he said, the U.S. content for a SunPower module, even though it is manufactured in the Philippines, is 70 percent. “It shows us that you really don’t want to focus on where the cell is made, because that is not where all the value is.” Part of the reason is that essentially all of the installation—at half the cost—is done in the United States. He did say that the U.S. number would have been 100 percent 20 years ago, and that stemming the shift toward non-U.S. sources will be challenging in the future. Beginning on the left-hand side of the value chain, SunPower buys its poly- silicon from Hemlock Semiconductor Corp. in Michigan. “This is hugely capital intensive,” he said. “And despite numerous startups in China and elsewhere try- ing to get into production, most of the polysilicon is still produced in the United States. Other major suppliers include REC, a Norwegian-owned plant located in Montana, and MEMC, a U.S.-owned plant in Pasadena, Texas. The only non-U.S. suppliers to SunPower are Wacker, in Germany; DCC, in Korea; and a new firm, M-Setek, in Japan. The next step is growing ingots, and SunPower buys its ingots from a joint venture with Woongjin Energy of Korea. This step is capital intensive, requiring only 25 to 50 people per MW of capacity. A single operator can look after 12 ingot-growing machines. Producing the wafer, on the other hand, is fairly labor intensive, requiring 75 to 100 people per MW of capacity. The plant locations for this step are in the Philippines and Japan. Much of the equipment, however, is produced by Applied Materials in the United States. Making solar cells is considerably more labor intensive, employing 300 to 600 people per MW. The manufacturing plant is in the Philippines (SunPower Manila) and a second plant is being built in Malaysia. Again, much of the equip - ment is built in the United States. Regional MODCOs SunPower hopes to reduce the labor cost of the solar panel stage by further au- tomation, which is now being developed. This is an exciting development for Sun- Power, Mr. Swanson said, because it will allow construction where local markets
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54 FUTURE OF PHOTOVOLTAICS MANUFACTURING exist and reduce the need to ship components from low-labor-cost countries to large-market countries. Today, for example, SunPower buys glass in the United States, ships it to China for module construction, then returns the modules—which account for 95 percent of the weight of the finished product—to Germany for instal- lation. In the future SunPower will use “regional MODCOs,” or module companies, located near the market that can respond quickly to customer changes in demand, avoid months of inventory tied up on ships, and use standardization to bring the costs down. System integration, the final link in the value chain, is also by its nature a local activity, he said, which uses steel and concrete and depends on a lot of la - bor—currently about 250 people per hundred MW. This number, like the others, can scale up or down depending on the kind of market expected. In any case, it takes traditional construction, electrical, engineering, management, and other skills to build PV power plants. In conclusion, Mr. Swanson described a straightforward advance that prom- ises to raise the efficiency of system installation. This is the use of local assem - bly sites that are standardized and predesigned. Panels are arrayed on a tracking structure, factory-like, and installed by the same technique at every site. This innovation will be accompanied by another that uses simple concrete founda - tion pads to replace the higher-cost tradition of drilling through the ground for concrete piers. Without the challenge of rock and other features of local geology, a crew can install a PV plant far more quickly. At end of last year the company was assembling 2 MW of capacity per day per crew, or three-quarters of a GW per year per crew. They were essentially building a large power plant in one year. UNLEASHING THE POWER OF THE SUN Eric Peeters Dow Corning Solar Solutions Dow Corning plays a very different role than First Solar or SunPower in PV activities, Mr. Peeters began. Dow Corning is one of the first joint ventures created in the United States, founded by Dow Chemical and Corning in 1943 to explore the potential of the silicon atom, which it still does today. And the silicon atom plays an essential role in the solar PV industry, either as a semiconductor material or a material used in other parts of the value chain. Dow Corning is a $5.5 billion company which employs about 10,000 people, divided almost equally among the United States, Europe, and Asia. The organization is heavily R&D-oriented, he said, which is rare in the chemical industry. It sees itself as becoming the “material house” to the PV solar industry, in three general ways:
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55 PANEL I • In 2006, Dow Corning launched the first commercially viable metallurgi- cal grade silicon feedstock produced using large-scale manufacturing. • In 2008 the company announced an investment in a facility to produce monosilane gas as a feedstock material for amorphous silicon thin-film panels. • There is a good fit between the silicons and the kinds of materials used in construction, electronics, and other industries that raise efficiency in the solar PV market. Mr. Peeters added that Dow Corning materials help lower cost and improve ef- ficiency, two of the primary manufacturing challenges. In 2007, the company invested $1 billion in Hemlock Semiconductor Corp., in Michigan, a joint venture for which it is majority owner and a leading provider of polycrystalline silicon and other silicon-based products. In 2008, it announced additional investments of up to $3 billion to expand production, which is very capital-intensive. One reason Dow Corning chose to make that investment in the United States is that the level of technology is high, trade secrecy must be pre- served, and it allows huge integration benefits with Dow Corning silicon plants. “That is helping us have a world-class cost structure here,” Peeters said. “It is very automated, almost like a chemical plant, so that labor cost is fairly low. Integrat - ing and recycling all the byproducts is important in polysilicon manufacturing. The company is also making investments in R&D application centers.” The Challenge of Reducing Costs The fundamental challenge for solar PV or any other alternative energy technology is to reduce the cost of the energy per kWh, Peeters said. While the industry needs some form of subsidy and government assistance to grow, he continued, “clearly in the future it has to be self-sustaining. This means the ability to provide energy at an affordable cost without subsidy.” What SunPower and First Solar and Dow Corning are really working on, Mr. Peeters said, is the technology roadmaps to reduce costs sufficiently so they can be competitive with anyone, anywhere. He noted that First Solar was hoping to achieve a cost of 10 cents per kWh or less. “I really believe that’s where this industry has to get to,” he said. Actually reducing the cost per kWh, he said, rested on four pillars: technol - ogy innovation, operational improvements, better raw material conversion, and improved durability. The first step of innovation refers not just to incremental improvements to the mainstream crystalline PV industry, but true technological change. While Dow Corning does have an important position in the polysilicon operation of Hemlock, he said, there is room for other technologies as well. “This is a big market that’s going to segment into different needs,” he said, “so innovation is needed. I expect
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56 FUTURE OF PHOTOVOLTAICS MANUFACTURING a virtually unlimited diversification of different technologies that will co-exist for quite a long period.” The second factor of central importance, Mr. Peeters said, is operational ex - cellence and economy of scale. This is not limited to the chemical and electronics levels in producing solar cells or modules, but requires • Increased throughput or yield through automation and process innovation; • Lowering of capital investment by means of process optimization and innovation; and • Reduced labor with better management. The third pillar, he said, is raw material conversion efficiency. “The reality is that the solar industry is young. In practical terms, this means that we have some fundamental inefficiencies. For example, when an ingot is sliced into wafers, the saw is as thick as the wafer, so about 50 percent of the material is lost. That is true throughout the value chain. The industry is improving, however: Half a decade ago, most manufacturers used about 10 to12 grams of polysilicon for 1 watt peak. Today, raw material usage has dropped to 7 or 8 grams for some firms, and a few are below 6. Finally, increasing the durability of solar panels brings the cost down. Al - though the industry reports its output in peak watts, this is basically a theoretical measure that is seen in the laboratory rather than on the rooftop. “What’s really important,” Mr. Peeters said, “is how many kilowatt-hours you can get out of the lifetime of the panel, and how do you improve that. One of the most important things is to ensure that the module lives longer.” Today the standard in the indus- try is that a module is guaranteed to maintain 80 percent of its rated power output for 20 or sometimes 25 years. He said that this would have to be raised to 90 to 95 percent of the power output for 30 and 40 years—again through innovation across the value chain. Partnering with the Academic World In addition to reducing costs, a successful PV industry will depend on basic improvements in manufacturing. This must begin by backing up manufacturing with ongoing R&D and innovation. Some of this will happen in industry, he said, but success will come primarily from the academic world, and from strong collaborations between academia and industry. Mr. Peeters noted the presence of a representative from the Interuniversity Microelectronics Centre (IMEC) at the symposium—“not just because I’m a Belgian, but IMEC is a really good example of how to do this successfully.” He said that while feed-in tariffs and other policy measures have helped make the solar market successful, the research institutes, such as IMEC, Fraunhofer, and a few others, have also fueled innovation and industry growth.
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57 PANEL I Improved manufacturing also benefits from firms working together. “I think we are doing that through natural market mechanisms,” he said, “but there is room for government to provide more infrastructure to promote that.” A solar panel essentially is a system, he said, with different components, so that improving the system means improving every element of the system. He praised efforts at cross- industry collaboration along the whole value chain as well. “If someone comes up with a great new glass technology, and then someone else comes up with a great new way to assemble that glass into a panel, the whole industry benefits.” Mr. Peeters said that the United States Department of Energy, as long as it remained “technology-agnostic,” could help stimulate some of that research so it goes in the right direction. “It’s important not to try to pick the winners when it’s too early,” he said, “but to stimulate all the different players. This industry will for a long time need some pretty creative solutions.” Investment is also needed to achieve world-class manufacturing standards with a high degree of automation. This is true especially for the United States, where labor costs are high. This must be accompanied by stringent quality stan - dards for fabrication and installation of the modules. Because the PV industry is so young, there are no real industry standards, and those standards in use are adopted from the electronics, semiconductor, or sometimes the construction in - dustry. “We have a lot of work to do to ensure that a homeowner installing solar panel on the roof gets the right quality,” he said, noting that some new companies entering the market, especially from overseas, have uneven quality. A fourth success factor for PV manufacturing is technical talent, which must be educated and developed to work throughout the value chain as well as in instal- lation. He warned that this could prove to be a bottleneck to solar development. In a new industry such as this one, installation is done by many different people, especially in residential settings, so achieving a consistent quality of work will require extensive work force development. The last, and most important factor, Mr. Peeters said, is demand. “It is going to be impossible to create a U.S.-based domestic industry if there is no domestic demand. This must be stimulated at every level, from residential to utility scale.” He said that there are no barriers to doing this, and pointed to Europe as an ex - ample. Belgium used a combination of tax incentives for investment at residential level with a system of green certificates and electricity meters that can run in both directions. The market there in 2008 was close to 50 MW. At the scale of the United States, this would mean a market of 1.5 to 2 GW in 12 months. When sunlight conditions are taken into account, the United States would actually do much better than that. Every state in the United States, he said, has more sunlight than Belgium. What can the government do? asked Mr. Peeters. Clearly, he said, the fed- eral government has a leading role in stimulating demand and “making America a 21st–century solar power.” Obvious federal policies to promote demand for solar include federal tax incentives, formulation of national renewable energy
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58 FUTURE OF PHOTOVOLTAICS MANUFACTURING standards, federal interconnection and net metering standards, and feed-in tariffs. “We have to get people to connect to the grid,” he said, “and make sure the grid works well.” In addition, increased federal funding for solar R&D is essential, he said, as is support for the education of “the people who are going to have those green jobs—a green-collar work force.” In short, he concluded, the task is to “establish the federal government as a green energy leader.” DISCUSSION Roger Little, founder of Spire Corporation, commented that “the United States is on the brink of becoming the fastest-growing producer of PV in the world,” with the help of the stimulus bill and state initiatives. He cited market projections that estimate about 5 GW of capacity in 3 years, which equals today’s global market. That market, he said, will be filled principally by today’s technol - ogy of crystalline silicon, which today has a manufacturing capacity of a few hundred MW. A likely consequence of an expanded U.S. market, he said, is the creation of “10,000 Chinese jobs,” noting that Spain’s recent market surge led to some 8,000 jobs in China. “Now is the time to have a buy-American clause in contracts,” he said, “so we get a chance to develop our domestic industry. We don’t mind if people come from Europe or from China to establish factories, but if we import the modules that are going to be required in 2012, we’re going to obliterate domestic manufacturing.” A participant from NIST addressed a remark to Mr. Ahearn, questioning the wisdom of having the government step back at the point of commercialization and letting the private sector take over. “From my own personal experience that doesn’t work very well,” said the participant from NIST. “My experience with VCs, as an entrepreneur who has started two companies, is that the VCs take technology they don’t understand and run it into the sand bar because of their need for quick turnaround. A lot of innovative technologies die on the vine be - cause the VCs get involved. So I think there’s room for both VCs and public in commercialization.” Mr. Ahearn said he disagreed. He said he had not had a successful result with a public investment, and that “if the market opportunity is clear, we ought to be thinking about what does it take for GE, or Dow, or SunPower, or First Solar—the big companies that are going to make a difference—to come in and build that capacity rapidly and invest in the value chain.” Mr. Ahearn said he did not favor government selection of specific companies for support; this takes too much time and effort, compared with the marketplace’s ability to move faster. Noting how rapidly China had moved to create capacity, he said that “we’re going to need something that can move quickly and smartly. And usually getting that to the market force level works best.”