Tuesday, May 14, 2013

Solar Savings

During the first quarter 2013 earnings conference call for crystal growth equipment supplier GT Advanced Technologies (GTAT:  Nasdaq), CEO Tom Gutierrez made the comment that the future of the solar photovoltaic sector is dependent upon cost reduction.  Strong climate incentives ensure demand, but solar cell producers will not achieve profitability until production costs are brought down.  The comment sent me on a quest for the cheapest photovoltaic technology.

It seems so far PV suppliers have focused on product efficiencies.  Better solar cells command higher unit prices and therefore provide better coverage of fixed costs.  U.S.-based solar cell producer First Solar, Inc. (FSLR:  Nasdaq) recently announced its claim to the world record in solar conversion efficiency.  Its thin-film cadminum-telluride (CdTe) photovoltaic module achieved a record 18.7% total efficiency in tests confirmed by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL).  First Solar beat its own 14.4% conversion efficiency record set in early 2012 for the same thin-film cell type. 

This advance along with savvy materials sourcing and better manufacturing throughput, helped achieve lower costs per unit.  In 2012, First Solar reported total average manufacturing costs were $0.73 per watt compared to $0.75 in 2011 and $0.87 in 2009.  The problem is that price competition (some of it allegedly unfair) has robbed First Solar and others from turning lower unit cost reductions into higher profit margins.

Our economy has a history of turning to new technology to solve problems.  Organic solar cells is not exactly a new technology, but it could be an alternative to conventional inorganic cells.  An organic solar cell uses conductive organic polymers or small organic molecules to absorb sun light generate electricity by the photovoltaic effect.

Unlike the solar cell production processes involving crystalline substrates, organic solar cell production is at ambient temperatures.  This gives organic solar cells an immediate cost advantage.  Even though production costs are quite low organic photovoltaic technology has not been taken seriously in the past because it has failed to generate competitive power conversation efficiencies.  A couple of organic PV producers have made some advances.

Based in the U.K. Eight19 is developing flexible ‘printed plastic’ solar cells based on organic semiconductor materials.  Eight19 relies on already-proven ink printing and coating processing technologies and equipment to produce its printed plastic solar cells.  The company is targeting consumer and off-grid applications where highly flexible and low-weight solar modules are required.  Recent advances have solar conversion rates in the 8% to 10% range.  Coupled with dramatically lower production costs and application advantages, the leaders at Eight19 believe their planned product can be competitive.

Eight19 is a private company which leaves minority investors on the outside with our noses pressed against the window pane.  The company also raised money through the sale of a division involved with sales of an ‘off-the-grid’ solar product.  That probably means Eight19 will not be visiting the capital markets and engaging institutional or private equity investors either.

That does not mean investors will not see or hear from Eight19.  With most of the risk assumed by earlier stage investors, I believe Eight19 could be a tempting acquisition target.   Another solar cell company is a possibility but a more like suitor could come from the building industry which is keenly interested in finding novel, low-cost solar options.

 

Next post will discuss another promising solar company.

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.  Eight19 has been included in the Solar Group of The Atomics Index sponsored by Crystal Equity Research.

 

1 comment:

Cost Of Solar Las Vegas said...

Solar panels save you money. Once you reach break-even point on your investment, the power that you pay for is essentially free thereafter. The extra money that is saved can go toward other expenses such as retirement funds, traveling, presents, education, wining and dining, gas, and adventure.