Dynamics of the Photovoltaic Value Chain

published: 2011-11-17 15:51 | editor: | category: Knowledge

According to a report by the International Energy Agency (IEA), 67.5% of the worldwide electricity consumption comes from fossil fuels — coal (41%), natural gas (21%), and oil (5.5%). Nuclear energy provides 13.5% and hydro 15.9%. Wind 2.5% and solar energy provides less than one percent of the world’s electricity needs.

High oil prices, political instability, and environmental concerns have converged to provide a major push for the development of solar and other renewable energy resources. Photovoltaic (PV) systems employ semiconducting materials to convert sunlight into electricity.  

In the beginning of early 2000s, countries like Germany, Spain and Italy made major commitments to harness the power of solar energy. The year 2010 represented a breakout year for the solar industry as it grew at an unprecedented pace over 2009 — with over 15,000 megawatts of installation capacity added. That sent global installed capacity skyrocketing to nearly 40,000 MW. Most of the installations took place in European Union countries.

At the end of 2010, Germany had over 17 gigawatts (GW) of installed capacity, Spain 3.78 GW and Italy 3.49 GW. As these companies have cut back on subsidies and capped the annual installed capacity, the U.S. and China seem poised to overtake the EU as the fastest-growing regions for PV annual installed capacity.


Source: IEA

With the global electricity needs expected to grow 75 percent between 2007and 2030, more nations push their agenda to develop clean energy sources, and the demand increase for solar energy, even traditional companies have relied on fossil fuel and nuclear energy view solar energy as a viable investment going forward.

Solar energy may have a decided advantage over other renewable sources. It's an inexhaustible supply of energy, easily distributed near end-users. It can effortlessly bypass problems with power transmission losses and bottlenecks in the system due to insufficient grid capacity. Aided by government subsidies and incentives, and significant technological advancements over the past five years have made solar an attractive energy source for residential, commercial, and government installations.

The flexibility of photovoltaic systems when it comes to size and site make it the most attractive of renewable energy alternatives. Furthermore, solar energy systems have decreased in price more than one-third in five years. The drop in the price of PV system continue to plummet.

The photovoltaic industry value chain centers around two types of technologies — polycrystalline silicon and thin-film. Ninety percent of the solar photovoltaic systems incorporate crystalline silicon- based technology.

Crystalline Silicon Value Chain

Polysilicon

Polycrystalline silicon manufacturing involves the costliest and most intricate process in the photovoltaic value chain. Polysilicon forms the primary raw material required for manufacturing solar cells. It’s made from silica, the second most plentiful element on the Earth, with oxygen being the most abundant.

Manufacturers process quartz sand into metallurgical-grade silicon. The next step in the process purifies the material into solar-grade feedstock to prepare the material for wafer production process.

In the mid 2000s, the industry underwent a significant supply shortage — competing with the semiconductor industry for available supply. That supply bottleneck sent prices from per kilogram to over $500 per kg, in 2008. However, the increased capacity of existing manufacturers, and new market entrants between 2008 and 2009 tipped the market to an oversupply status, which continues to this day. Polysilicon experienced some shortages in 2010. Earlier this year, spot prices reached $100 in March, since that time, prices have been in a downward trend — spiraling below $40/kg in October 2011.

Eight companies dominate the polysilicon market, producing nearly 70 percent of the output. The following charts show the primary producers, production capacity and expansion plans. The most prevalent method for polysilicon production method is the Siemens process.

The capital investment required  to open a polysilicon plant, and the time from conception to production, makes it difficult for new companies to enter the market.

Ingots

The manufacturing process for single crystal ingots consist of two methods: monocrystalline (c-Si) and multicrystalline (mc-Si). The most common process for creating single crystal ingots—the Czochralski method dips a seed crystal, about 150 millimeters in diameter and mounted on a rod, into a quartz crucible, which contains molten silicon. By simultaneously pulling upward and rotating the rod, it forms a single crystal ingot, with a cylindrical shape. Monocrystalline ingots produce wafers with a regular, perfectly- arrayed crystal composition.

The manufacturing process for multicrystalline ingots consists of molten silicon casted in a multicrystalline furnace. The process results in a block-shaped ingot, which must then go through a gradual cooling process. Instead of a single crystal, multiple, smaller crystals form the structural make-up of ingot blocks.

Crystal growing and casting require significant energy usage at extremely high temperatures during processes. It is common for manufacturers to locate their facilities close to wafer and solar cell manufacturers.

Solar Wafers

Wafers function as the substrate for semiconductors and solar cells. Preparation of the wafer may include cleaning, doping, etching, and deposition, which requires a wide variety of materials. Wafer manufacturers cut ingots into wafer, which typically have a 150 mm diameter and thickness of 200 microns, with a wire or diamond ID saw.

The process requires removing saw marks and other defects from the surface of the wafers. The Wafers undergo a final cleaning and polishing prior to the quality assurance inspection.

GCL Poly produces more solar wafers than any other company followed by LDK. Many companies have moved to vertical integration of their operations. Polysilicon manufacturing firms, including MEMC, Siltronic (Wacker Chemie) and SUMCO (Mitsubishi and Sumitomo) control 50% of the wafer market.

Other players include Solar, Renesola, Renewable Energy Corporation (REC), SolarWorld, Comtec Solar, GreenEnergy Technology, Nexolon, and Sino American Silicon (SAS).

Solar Cells

Crystalline silicon cells — monocystalline (c-Si) and multicrystalline (mc-Si) make up 90% of the market for solar modules. Made from razor-thin silicon wafers, each type of cell undergoes a phosphorus diffusion process, which creates a semiconductor junction on the top surface of the wafer.

Contacts, added to the front and rear of the wafer, make the cell a conductor. The contact on the front surface has a design pattern that makes it more conducive to maximum exposure to the sun’s rays, while reducing electrical loss. According to EnergyTrend, current multicrystalline cells have a factory efficiency rating of 16.2 to 17.2 percent while monocystalline cells have an efficiency of 18 to 19.2 percent.

Some of the major players in the crystalline silicon segment include Sharp, SolarPower, Kyocera, BP Solar, Q-Cells, Mitsubishi, SolarWorld, Panasonic (Sanyo), Schott Solar and Isofoton.

Solar Modules

Most crystalline silicon panel assembly takes place in solar cell manufacturing plants. Panel manufacturing also take place in smaller plants, located near end-markets, because of the bulky heavy nature of module components like the glass front sheet, and aluminum frame.

Solar module fabrication entails soldering cells together to create a string of cells to generate the necessary wattage. The next step involves laminating the cells between special glass on top and a polymeric backing sheet on bottom.
Anodized aluminum frames permit mounting on poles, rooftops, or ground-mounting systems. Modules have efficiency ratings ranging from 13 to 19 percent. The largest crystalline solar panel manufacturers include Kyocera, Sharp, Yingli, Sanyo, Schuco, Solon, Schott, Conergy, REC, Solarworld, Canadian Solar and ET Solar.

Thin Film Value Chain

The three primary thin film technologies consist of Cadmium Telluride (CdTe), Amorphous-Silicon (A-Si), and Copper indium gallium selenide (CIGS). CdTe uses a crystalline compound — a compilation of byproducts from three different production processes. Cadmium comes from the production of zinc. Tellurium derives from lead and copper processes. A-Si charging material refers to the non-crystalline form of silicon and requires only 1 to 2 percent of the silicon used to manufacture standard solar panels.

During the silicon shortages several years ago, many market insiders expected thin film technology to command a larger share of the PV market. However, a combination of added polysilicon production capacity, and plunging prices of other PV components have made it difficult for thin film to seriously penetrate the market to gain a larger share.  

In 2010, CdTe made up about six percent of the solar panel market. Thin film leader First Solar uses CdTe technology. CIGS manufacturers include Nanosolar and Miasole. Amorphous silicon’s low efficiency and cost composition makes it difficult for manufacturers relying on this technology to compete with crystalline silicon, CdTe, and CIGS.

Production Output – Crystalline and Thin Film Technologies
Source: EPIA – Global Market Outlook for Photovoltaic Until 2014

PV Installations

Photovoltaic systems assembly and installations, represent the culmination of the solar components manufacturing. Typically, an engineer evaluates the site and the needs of the end-user and designs a system with the aid of a software program. After determining the size and array structure, the installer constructs the solar system on a rooftop, building walls, or mount on a pole or the ground.

Various electrical components assimilate with modules and other components of the system, which includes DC/AC inverters, charge controllers, batteries disconnects and wiring, to provide solar-generated electricity.

Operations & Maintenance

Upon the complete installation of a photovoltaic system, many homeowners or commercial clients elect to sign maintenance agreements with solar companies to ensure the system’s optimal performance. Some solar companies with the Solar Service Provider business model, offer turnkey solar power systems and enter into Power Purchase Agreement (PPA). The firm owns, installs, maintains, and repairs the equipment over the life of the contract. In return, customers buy the electricity generated from the system for a pre-determined price.

O & M may require semi-annual/annual system inspections, array cleaning, electrical checks/ maintenance, and inverter maintenance. Systems that are more complex may require regular monitoring and system analysis.

Recycling

With many of PV components installed in the beginning of the 1990s approaching the end of their useful life cycle, many solar industry manufactures have made the recycling of the various components apart of their strategic plan. This includes dismounting obsolete systems, and recovering materials, such as aluminum, glass and silicon for reuse in the manufacturing process. The variety of materials that make up PV systems requires distinct approaches for dismantling and reclaiming the components.

Recyclable PV Materials

Source: Dustin Mulvaney- University of California, Berkeley

Conclusion
As the solar industry move into a period of consolidation larger well-capitalized players, continue the trend of vertical integration — scaling up and/or down the chain to gain better control over ever-smaller profit margins.

REC has transformed its business model to operate along the entire spectrum of the value chain. Other companies, such as SunTech, SolarWorld and Kyocera have set their sights on the silicon, solar cell modules, and system segments. BP and First Solar have made inroads into system development.

It seems “specialization” has become a perilous path for many companies.

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