Friends, this is the concluding part of my conversation with Dr. Robert N. Castellano, president of The Information Network, based in New Tripoli, USA.
The question of adding new, additional solar capacity will always arise. Is it the certain that no new additional capacity will be brought on board in 2009?
Dr. Castellano noted: “Actually I said 2010. Solar manufacturers are already losing money this year and the capacity utilization is 27.9 percent. Also, the days of inventory are currently 122, up from 71 days in 2008. If they continue to add new capacity, things will only worsen, exasperating the recession.”
What lessons for India?
Turning our attention to India, which has lately been witnessing a lot of talks of building new capacity. According to Dr. Castellano, now is a good time to talk, as a plant will take at least a year to get into full production. By that time, prices should be stabilized and increase.
What then are the lessons to learn from all of this for the Indian solar PV industry?
He added: “What has to be weighed is the cost of making the solar panels in India versus buying the outside the country. It can take several years for a plant to be profitable. If the venture was established from money from India’s government through subsidies, it can lessen the impact of potential losses, while the plants ramp and selling prices move up to a level where production becomes profitable.”
I hope this valuable piece of advice is noted by the existing players or those looking to entering the solar photovoltaics segment in India.
Bring solar production cost per watt down
Dr. Castellano had mentioned about First Solar bringing production costs down to $0.93 per watt. How many of the others are capable of matching or bettering this?
He said, for that matter, Oerlikon, expects that its lines will deliver a cost of $0.70 cents per watt by the end of 2010 and has achieved an initial conversion efficiency of 11 percent, which comes out to about 9.5 percent of stabilized efficiency.
How can manufacturers differentiate their solar products?
Another query has been, how should solar manufacturers differentiate their products and how can they do it cheaply?
Certainly, there are new avenues of manufacturing, such as CdTe from First Solar, CIGS from half a dozen manufacturers, multi-junction cells from companies such as Uni-Solar, and building integrated photovoltaics (BIPV) from an increasing number of manufacturers, advised Dr. Castellano.
He said: “These technologies differentiate the companies’ products, but the proportion of wattage manufactured, while growing, is small compared to the majority of solar panels sold using traditional methods of production, i.e., a thin film on a glass substrate.
“Long life and low cost of ownership are of paramount importance if solar is to grow, particularly, if there is to be a large acceptance at the residential level. Manufacturing can introduce defects in solar cells that can result in low electron mobility (EM), electron traps and photo-degradation from UV light. These issues affect the efficiency and lifetime of solar cells and the importance of measuring electron mobility at the wafer and cell stage.
“The lifetime of minority carriers has been widely identified to be the key material parameter determining the conversion efficiency of pn-junctions in silicon solar cells. Defects in the crystal lattice reduce the charge carrier lifetime and thus limit the performance of the solar cells. Another major efficiency loss is due to impurities in the cell. These can be foreign atoms or molecules in the crystal lattice (including the dopant atoms), and provide sites where electrons and holes can recombine, thereby reducing the number of charged particles available to create an electrical current.
“Lehighton Electronics (Lehighton, PA) is an example of a company that has developed a variety of tools to test and measure solar wafers. One tool can measure sheet resistance and resistivity to see if there is any subsurface damage. Another system can measure minority carrier lifetimes, while a third model can find traps in solar wafers.” Read more…
Last week, I was very fortunate enough to be able to get into a conversation with Dr. Robert N. Castellano, president of The Information Network, based in New Tripoli, USA. It all started with a column, which he writes regularly in “The Street.” One of the recent colums of Dr. Castellano touched upon –- What could make solar hot again?
How to rectify the solar cell oversupply?
He said: “The problem will rectify itself when demand catches up with supply, which will take several years. Until then, suppliers are faced with lower prices and margins. I was the first to point out on March 5 2008, in my blog on Seeking Alpha in an article entitled “Contradictions in the Solar Industry” that “The solar industry is faced with a huge oversupply of solar panels planned for production in 2008, but no one seems to notice… or care. Shares in many solar companies such as Evergreen Solar), First Solar SunPower, and Suntech Power have surged with the booming solar market.”
Six reasons for cloudy solar skies
1. With oil at $60 a barrel, who cares about alternative energy? It is a short sighted view, but with the credit market crunch, who can get a loan to build solar plants anyway?”
Have companies been overlooking inventory problems?
Dr. Castellano said: “The solar companies were benefiting from the low price of polysilicon as a result of excess inventory in that sector. They were renegotiating contract prices with the poly suppliers and dropping prices. With money in place, they continued to build capacity well into 2009. All the factors discussed above took everyone by surprise (witness the stock market crash) and the recession has lasted much longer than initially forecast.
Where does this place a-Si solar cell makers?
“The issue is the economics in a solar farm where they are installed. The installation price is the same as a polycrystalline panel. Since the efficiency is lower and it takes more panels to reach the same wattage as polycrystalline, it also takes more hook-ups and frames during installation.
“If the panels move, there is another factor in the motors to move them. However, the production cost is lower than the polycrystalline panels. Oerlikon, expects its lines will deliver a cost of 70 cents per watt by the end of 2010 and has achieved an initial conversion efficiency of 11 percent, which comes out to about 9.5 percent of stabilized efficiency.”
Crystalline vs. thin film capacity
Dr. Castellano said: “Until last year, Germany had been the world’s largest solar market thanks to its feed-in tariffs, which require utilities to buy all the solar energy produced at premium, government-set prices. As a result, analysts now expect Germany, which doesn’t have an annual cap like the one in Spain, to become the biggest market again in 2009.Germany installed 1.35 gigawatts of solar energy systems in 2008, and it could add another 1.5 gigawatts in 2009.
“Spain took the lead last year, but the government has since reduced the subsidies and capped the amount of energy that could be sold under the subsidy program. The financial market crisis has made it difficult for developers to line up financing for solar power projects. Spain, which added a few gigawatts of solar in 2008 alone, now has a 500-megawatt cap for 2009. All of these forces have led to an oversupply of silicon panels.
“As governments — Germany and Spain were a driving force – in the solar industry’s run-up, they were a factor in the downturn. Once the recession is over and liquidity returns, they will mitigate the overcapacity, particularly as prices are so low and there is pent-up demand for new installations.”
Impact of Q4 on overall prices and industry
Dr. Castellano said that silicon used to sell for more than $300 per kilogram on the spot market and $150 per kilogram for long-term contracts a few years ago. Silicon prices have since fallen significantly over the past year. In fact, the long-term contract price has dropped about 50 percent, close to the spot market price of $67 per kilogram, or about $0.50 per watt.
“Polysilicon panels are selling at $2.25 to $2.50 per watt from $4.17 in Q2 2008. We expect prices to decline further throughout the remainder of the year,” he noted.
Yes, looks like it!
First, on August 31, the India Semiconductor Association and the UK-TI would be signing an MoU. The next day, September 1, there is a presentation by Ministry of New and Renewable Energy and key officials on the government of India’s policies to the industry!
Next, on September 4, the DIT Secretary R. Chandrasekhar and the Additional Secretary, will be interacting with semiconductor companies in Bangalore.
Further on, September 16 is the day when the Union Minister for New and Renewable Energy, Dr Farooq Abdullah, will be interacting with a small group of industry leaders at a solar PV conclave in Hyderabad!
That’s quite a lot, within a span of 15-odd days! Must say, this augurs well for the Indian semicon and solar/photovoltaics industry.
Interestingly, a lot of the big events are focusing on solar. So, my hunch is that the Indian solar industry may have some serious announcements to make in the coming weeks. Should that happen, I hope to bring those to you, time permitting.
TI bids for Qimonda’s tools
Oh, by the way, there’s news all over the Internet about Texas Instruments (TI) placing a bid of $172.5 million for Qimonda’s 300mm production tools from its closed DRAM fab. While this highlights TI’s focus on building the world’s first 300mm analog fab, I can’t stop wondering, what would have happened had an Indian investor really bought Qimonda!
Thanks to Jon Cassell and Debra Jaramilla, I was able to get in a conversation with Stefan de Haan, senior analyst, iSuppli Corp., regarding the global solar PV industry. Recently, iSuppli had provided guidance on how “Half of all solar panels made this year won’t be installed in 2009!”
Correcting solar cell manufacturing oversupply
Previously committed capacity expansions have caused solar cell manufacturing oversupply. Why and how can this be corrected?
According to Stefan de Hann, the cell suppliers are already reacting, i.e., cutting back on production and delaying expansion plans. Nevertheless, a consolidation will take place, since prices won’t recover. Production cost is the key to be among the survivors. However, 2009 will see the peak of the cell/module oversupply. From 2010 on, the situation will ease slowly.
If that were the case, weren’t the companies doing enough to check all of this during the downturn of Q4-08?
de Haan added that at the end of last year (record year 2008!), everybody still expected continuous strong demand. “It took most companies longer to realize that their enormous growth expectations were not realistic. We were the first to predict the current scenario already in summer 2008, but the nearly all the companies I talked to at the PVSEC in September 2008 didn’t share this view at all.”
So, therefore, they probably weren’t checking their market carefully enough, after all!
Failure of a-Si thin film solar cell makers?
Is all of this setting the stage for the failure of multiple cell manufacturers, particularly those pursuing a-Si thin film solar cells?
According to the iSuppli analyst, those suppliers relying on standard a-Si thin film lines [AMAT/Oerlikon] will definitely face problems for several quarters. “Collapsing polysilicon prices incease the pressure on these manufacturers. There will be not only excess crystalline cell production, but also excess a-Si production,” he added.
There is also a huge amount of solar cell manufacturing capacity in crystalline silicon solar cell, rather than thin film. When will this start changing and why?
de Haan advised that both crystalline and thin film production (and installation) will continue to grow for the next years. Due to lower production costs, thin film will increase its market share gradually. In iSuppli’s current projection, it sees a thin film market share of 35-40 percent in 2013, up from 15 percent in 2008.
Lessons for India?
With consolidation likely to happen in the global solar cell manufacturing industry to control or combat oversupply, where would it all leave the the talk of building new capacity in India? As we know, back home in India, various companies are betting big on this sector.
In this regard, what are the lessons to learn for the Indian solar PV industry? Bear in mind that India is a “wild card” as far as solar demand is concerned.
According to de Haan, Companies hope for huge investments in the coming years and want to be prepared. However, in the current oversupply situation, the comparatively new Indian cell and module manufacturers will suffer from dropping prices.
He advised: “For them it is important to stay flexible with regard to polysilicon and wafer purchase. These prices won’t recover either, no need for long-term commitments. Most importantly, they need to develop their domestic market. If I was an Indian module manufacturer, I would integrate downstream and enter the installation business.”
The Union Budget 2009, detailed today by Honourable Pranab Mukherjee, Minister of Finance, Government of India, really has nothing much to speak about for the Indian technology sector, or what many would like to call as the Indian IT industry, barring the setting up of the Unique Identification Authority of India (UIDAI).
Some of the budget highlights include:
* Customs duty of 5 percent to be imposed on set-top boxes for TV broadcasting.
* Customs duty on LCD panels for manufacture of LCD TVs to be reduced from 10 percent to 5 percent.
* Full exemption from 4 percent special CVD on parts for manufacture of mobile phones and accessories to be reintroduced for one year.
None of these proposals will significantly boost manufacturing in the country. There is also a great need to boost home-grown companies!
Among the good points, the minister said that he will urge his colleagues in Central and State Governments to remove policy, regulatory and institutional bottlenecks for speedy implementation of infrastructure projects. The infrastructure projects include telecommunications, power generation, etc. This is some good news!
The IT industry has pointed out that it is facing difficulties in the assessment of software which involves transfer of the right to use after the levy of service tax on IT software service. To resolve the matter, the minister has proposed to exempt the value attributable to the transfer of the right to use packaged software from excise duty and CVD. Perhaps, this is some good news as well.
The minister also noted that the setting up of the Unique Identification Authority of India (UIDAI) is a major step in improving governance with regard to delivery of public services. The first set of unique identity numbers will be rolled out in 12 to 18 months. Rs. 120 crore has been provided for this project. This is also good news.
One other point to note is the feduction in respect of export profits available under sections 10A and 10B of the Income-tax Act. The deduction under these sections would not be available beyond the financial year 2009-2010. To tide over the slowdown in exports, the minister has proposed to extend the sun-set clauses for these tax holidays by one more year, i.e., for the financial year 2010-11.
Semicon, solar seem neglected this time!
The budget has missed out in helping develop the semiconductor and solar/PV industries. These sectors require the full backing of the government. Even local telecom manufacturing seems to have been bypassed. Nor is there any mention of how foreign direct investment (FDI), can be enhanced in these critical sectors.
Especially, solar photovoltaics holds a lot of promise. A couple of months ago, SEMI India, in its paper on solar PV in India, had highlighted the need for more action from the government of India, a more closer industry-government collaboration, as well as the need for financial institutions to pay more attention to the solar/PV segment in India.
I also didn’t see any proposal in the budget that would help strengthen India’s semiconductor ecosystem. How can India become an even more attractive destination for foreign investors? There are companies, especially some Indian technocrats, who would probably like to return to India and set up semiconductor product companies. Would the VC community finance semicon start-ups? What would excite these folks?
Recently, BV Naidu, chairman, India Semiconductor Association, (ISA), mentioned in a discussion, that it would be appropriate if the Government of India could provide seed and start-up capital for new ventures and set up a focused venture fund of about Rs 200 crores.
According to him, the technology development board could administer these funds and the fund may provide up to 80 percent of the approved project cost with equity balance being brought in by entrepreneur. The Government can also subsidize the acquisition of EDA tools by start-ups and other SMEs in this sector.
None of these points have been addressed in today’s union budget!
Someone recently questioned me whether India will ever have a fab. Frankly, I don’t know! Having a good, strong local semiconductor industry does require a huge support from the government.
This could’ve been a much more braver and bolder budget. Perhaps, future budgets will address points given a miss in this edition.
Solar/photovoltaics (PV) holds tremendous potential and promise for India, a fact not hidden from anyone. To further highlight its importance, SEMI India unveiled its first paper on Solar PV in India yesterday afternoon.
More action from Indian government needed
The meet called for more action from the government of India, a more closer industry-government collaboration, as well as the need for financial institutions to pay more attention to the solar/PV segment in India.
The photo here shows from left to right: Dr. Madhusudan V. Atre, President, Applied Materials India; Dr. J. Gururaja, Renewable Energy Action Forum & Executive President, SEMI India; K. Subramanya, CEO, Tata BP Solar; and Sathya Prasad, president, SEMI India.
Touching on the rationale for this SEMI paper on solar/PV’s landscape in India, Dr. J. Gururaja, Renewable Energy Action Forum and Executive President, SEMI India, said it was meant to project the solar/PV industry’s perspective: where we are and what needs to be done! This is a first account report and will be followed by many other such reports.
He said: “Solar in general, and PV in particular, can address the challenges that we face today. Solar/PV has a special attraction. It converts solar to electricity without involving any moving parts.”
He added that although the industry has been looking at the potential, the markets have not been expanding as expected. “We need to see what can be done and achieved. This report is a stock-taking exercise,” he pointed out.
Case for solar/PV in India
Sathya Prasad, president of SEMI India, touched upon the case for PV in India. These include:
* The existing power deficit situation in many parts of the country.
* India’s brisk economic growth implies rising energy needs.
* Overdependence on coal for electricity generation — limited coal reserves and CO2 emissions.
* Overdependence on oil and natural gas imports — it accounts for 7 percent of GDP and consequent energy security concerns.
According to him, India is abundantly endowed with solar radiation. So far, so good!
Key PV opportunities for India
According to SEMI’s paper, the key PV opportunities for India lie in off-grid applications and grid-connected PV. The off-grid applications include:
* Basic lighting and electrification of rural homes.
* Irrigation pump sets.
* Power back-up for cellular base station towers — approximately, there will be 2.9 lakh base station towers by the end of 2009.
* Urban applications — such as street lighting, etc.
The opportunities in grid-connected PV exist in:
* The current grid connected PV generation capacity is very small.
* Existing power deficit and huge projected future need.
* The cost point of PV has been declining continuously with technology improvements and scale.
Benefits of PV in India
The benefits of PV in India extend well beyond addressing energy needs. For instance, renewable energy technologies create more jobs than any fossil fuel based technologies. It also creates jobs across the value chain — from R&D to manufacturing, installation and maintenance. Sathya Prasad highlighted MNRE’s point that about 100,000 jobs could be created out of PV.
PV also has the capability of transforming lives. About 450 million Indians today manage with kerosene/other fuels for very basic lighting despite its significant health and safety risks. In this context, special mention needs to be made of the Aryavarta Grameen Bank’s home electrification program.
Challenges for PV in India
Evidently, a bunch of opportunities are awaiting India in the solar/PV space. However, several challenges need to be overcome as well. These would be:
* Need for closer industry-government co-operation.
* Need for standards.
* Need for collaborative, goals driven R&D.
* Training and human resources development
* Need for financing infrastructure and models.
So, what are the recommendations of this paper on solar/PV landscape in India, and further call to action? These are:
* Need to evolve a common government-industry vision to make India a world leader in PV.
* Develop financing infrastructure and models that will motivate large-scale PV adoption and investments.
* Expand development of PV in off-grid applications.
* Accelerate grid-connected PV generation on a large scale.
Call for low carbon growth strategy
“Low carbon growth path is universal now. To make that happen, there needs to be a political will,” advised K. Subramanya, CEO, Tata BP Solar, and chairman SEMI India PV Advisory Committee, while presenting his perspective on the solar/PV industry in India.
There has been little action on part of the government of India. “This needs to be implemented on the ground. We need policy and lifestyle innovation,” he added. Subramanya cautioned that, “Too much of analysis will result in paralysis.” According to him, separate budgets are required for a low carbon growth strategy. “Solar has tremendous potential. Even its learning curve is brilliant,” Subramanya noted.
He added that if the European Union (EU) can make a low carbon journey so smoothly, then why not India? For instance, in Karnataka state alone, the demand is said to be 6700MW and a 10-11 percent peak shortage. We have 20-odd lakh Bhagya Jyoti and Kutir Jyoti units, and around 7,870-odd street lights. If a majority of these can be replaced by solar, it could lead to tremendous savings! This could be at least 57MW for a state like Karnataka. Apparently, all of this would require an investment of Rs. 52 crores and a payback time of two years.
“Why can’t we develop a low-carbon growth path for every state in India? Imagine, what it can do for the other states,” Subramanya highlighted. “If the power sector does not do well, it will hit the country’s GDP!” Quite rightly so!!
Subramanya cited another example of solar water heaters in Karnataka. There are 32 lakh homes, of which about 5 lakh homes have solar water heaters. If more houses were to adopt these, it would result in a saving of 4,000MW of electricity! The Tata BP Solar CEO also called upon financial institutions to have a closer look at solar. Even the tariffs structure for solar/PV in India is not favorable enough.
He also touched upon US President Barack Obama’s energy plan and the actions taken, since his coming to power, and drew a parallel with India’s national action plan, which includes a solar mssion. This was released last June, but hardly any action has happened on the ground. So, there needs be changes on this front as well.
Four key aspects for solar/PV in India
Dr. Madhusudan V. Atre, president, Applied Materials India and vice chairman SEMI India PV Advisory Committee, highlighted four major aspects while presenting his perspective on the solar/PV industry. These are:
* See the advantage SEMI India brings to India. It can help bring costs down, due to the involvement of the PV Group.
* A point Dr. Atre had highlighted to me about a year back — that solar/PV is a great way to trigger manufacturing in India. He said that the solar/PV ecosystem will be a very important step in setting up a semiconductor manufacturing ecosystem in the country.
* What wireless did to telecom — perhaps, solar/PV has a similar aim! It can get rid of transmission lines and actually take power to the people!
* The Indian government-academia-industry would need to work hand-in-hand.
I was really happy to see a comment on my blog post: “What India now offers to the global semicon industry,” left by Tom Morrow, author of the SEMISpice blog, and Vice President of Global Expositions and Marketing, SEMI. Thanks for visiting and commenting, Tom.
You said: Your description of India’s Special Incentives Package Schemes for setting up and operating semiconductor fabrication as a “debacle” is off the mark. Is it really wise for the country to join an already crowded semiconductor manufacturing ecosystem when it can apply its scarce resources to join 30-50 year boom in solar, something the country desperately needs for both domestic and export development?”
“The move to solar is the right one. India had nine manufacturers of solar cells and about twice as many module makers. Most of these proposals have been in response to the Government’s announcement of a Special Incentives Package Scheme under the 2007 Semiconductor Policy.
“About 70 percent of India’s solar cell and PV module production has been exported. This is likely to change in the near future as government policy provides the push for PV deployment and following the recent release of guidelines for grid connected solar generation. Several states in India, including Andhra Pradesh, Gujarat, Karnataka, Punjab, Rajasthan and West Bengal have also announced their own solar policies, plans and incentive packages in recent months.
“ISA and SEMI has recognized the great opportunities in solar and have taken supportive leadership positions. While both organizations would love to see a domestic semi fab industry emerge in India, given the overcapcity in the industry today, the transition to solar has been swift, thoughtful, and right on the mark.”
First up, Tom, I did not formulate SIPS or the Indian semicon policy! I too thought India would soon build a wafer IC fab! Several delegations have visited India, in the past, with companies hoping to work with these so-called wafer IC fabs in India. I am merely a small time blogger, offering my opinions. And I love my country, no less than any other Indian!
Perhaps, you should see some of the press these ‘so-called fabs’ received! All the talk of a wafer IC fab only died down with SemIndia late last year!
If folks read my posts carefully, I’ve discussed how India has been doing fine before the semicon policy and post the policy, fab or no fab! Some knowledgeable experts have even said that fabless India shines brightly! It has shone before, and continues to do so!
Neither do I have anything against solar and the solar industry! It is a great way to trigger off manufacturing in India. Did I say otherwise?
I work closely with ISA, in fact, was present, when ISA was born, back in October 2004, and also know Sathya Prasad at SEMI India quite well. It’s a great initiative that’s going on in solar in this country. So, yes, the move to solar is a very correct one!
Still on wafer IC fabs, one expert even goes on to say that India could look at skipping the current node of technology and make an entry into the one that will be prevalent after few years.
However, my focus is essentially on semiconductor manufacturing! As many industry experts never fail to say at conferences, India needs to move up the semicon value chain! We need more semicon product start-ups!! And, that’s not happening fast enough!
Perhaps, we can just discard all of these ideas and go on being a leading player in design services (which, we already are), a much easier option.
I would still go with what Malcolm Penn of Future Horizons’ says, that India needs to re-think its semiconductor strategy! It cannot survive on chip design alone!
Even the recently held ISA Vision Summit had a session: “Indian design influence: Ideas to volume”! Speakers discussed how India should seize opportunities, especially in this downturn, and that, it is time for the Indian semiconductor industry to step up, put the right innovations in place and grow.
I am very interested in hosting an event in India on this topic — Time for India to step up: Put right innovations in place and grow! However, as I said, I am merely a small time blogger, trying to make a living. I hope I can find some support to host such an event at least once in India.
I am simply delighted that my post has drawn the interest of such a senior person at SEMI. Thank you, sir!