This review describes the worldwide growth in the market for photovoltaic (PV) solar cells, used to generate electricity. Besides a description of the growth and potential for solar energy, we focus on the production process for solar panels and a number of large players in this well-performing market. In the near future, EnergyPortal will build on this by launching an investment section that contains company specific information for those who consider investing in renewable energy markets themselves.
Growth and potential of the solar energy market
Solar energy is a niche market in many respects. At the very best, solar energy accounts for several tenths of a percent of the total electricity generation. In the Netherlands, for instance, the total electricity generated by PV systems was about 0.04 TWh in 2004. This is a negligible fraction of the total generation of about 98 TWh, equal to about 0.04%. To check these statistics for other countries, we refer you to our country profiles that will be available soon.
The story is quite different when you turn to growth rates. Solar energy is quoted time and again as the most rapidly growing alternative energy source. SolarBuzz reports that the global newly installed capacity in 2004 (927 megawatt) exceeded the new capacity in 2003 (574 megawatt) by no less than 62%. By contrast, the annual demand for solar panels in 1985 was a mere 25 megawatt. At the end of 2004, the world had an installed PV capacity of 3700 megawatt (or 3.7 gigawatt).This may sound as a clear success story, but one has to keep in mind that solar energy accounts for some 0.01% of global primary energy consumption. Solar is coming, but has a long way to go.
Growth and potential of the solar energy market
31_centralised_solar_plant
The story is quite different when you turn to growth rates. Solar energy is quoted time and again as the most rapidly growing alternative energy source. SolarBuzz reports that the global newly installed capacity in 2004 (927 megawatt) exceeded the new capacity in 2003 (574 megawatt) by no less than 62%. By contrast, the annual demand for solar panels in 1985 was a mere 25 megawatt. At the end of 2004, the world had an installed PV capacity of 3700 megawatt (or 3.7 gigawatt).This may sound as a clear success story, but one has to keep in mind that solar energy accounts for some 0.01% of global primary energy consumption. Solar is coming, but has a long way to go.
Solar energy, although these days still expensive and small-scale, has a bright future if one is to believe industry experts. Engineers and academics often argue that solar energy has the potential to become the most widespread alternative source of energy. There are a number of reasons that back this statement. First of all, the surface of the earth that is suitable for generating solar power greatly exceed that for wind energy. Second, solar PV is particularly suitable for local appliance in developing rural areas with no access to the electricity grid. In India, for example, there are several pilot projects to assess the practical feasibility of this concept. Third, the production profile of solar cells is more predictable than the erratic output profile of a wind farm. Last, but perhaps most important, is the potential for technology improvements that can result in higher conversion efficiencies of solar cells. This will lead to further cost reductions, which are undoubtedly needed for large-scale deployment of solar energy. These arguments suggest that in the long run solar energy may overtake wind energy and possibly hydropower as the most widely applied renewable source of energy.
Wind energy, although experiencing slightly lower growth rates than solar, is far more substantial in terms of electricity generated. 2004 saw the installation of new wind turbines with a total capacity of 7976 megawatt, which means a 20% growth compared to the year before. The globally installed wind capacity at the end of 2004 equaled 47,317 megawatts, or over ten times the globally installed solar capacity.
31_solar_installations
It is most important to bear in mind that the growth of solar energy in the above-mentioned countries is not a coincidence. All three countries (in the United States, mainly California and some states in the Northeast) have large subsidies for individuals or companies purchasing solar panels for their rooftops. Without these incentives, solar panels are uneconomic in almost all circumstances. The state of California for example has adopted a $3 billion subsidy scheme - the California Solar Initiative - which pays $2.80 per installed watt out of a total installation price of about $8 per watt.
Although solar energy contributes to global energy consumption in a limited way, the solar PV industry had a total turnover of $6.5 billion in 2004, and this amount has been steadily increasing in the last few years. It is expected that both turnover and annual installed capacity will triple by 2010. A limiting factor could be the constrained production capacity of solar cells. A key raw material for producing solar cells, silicon, is currently in short supply on the market and very expensive as a result. In spite of that, solar energy is already now an attractive market for investors. Before going into the characteristics of the industry in more detail, it helps to build an understanding of the various parts of the production process of solar panels.
The production process of solar panels
The process starts with the manufacturing of solar cells. Over 95 percent of the cells are produced from the semiconductor silicon. A relatively new development is the introduction of thin film technology, currently more expensive but more promising in the long run. There are three variants of silicon cells: the monocrystalline silicon cell, the polycrystalline silicon cell and the amorphous silicon cell. Although the first variant has reached the highest laboratory efficiency of 24 percent, the second category is the most cost-efficient and for that reason also most produced. The crystallised silicon is first cut into parts of approximately 10 by 10 centimeters, which are called wafers. Afterwards, the wafers are further processed and transformed into solar cells. In the nest stage the solar cells are connected to each other to form a solar module, which has a higher voltage and capacity.
The completed solar modules, or solar panels, are either sold to end consumers directly or through distributors. The distribution market mainly consists of a large number of small distribution and installation companies. They retrofit the solar panels to individual's rooftops, and install an inverter to convert the direct into alternating current to make the output compatible with the power grid. This enables households to sell back some electricity that they generate to the network, which is often an implied subsidy for solar panel owners.
Important players in the solar energy market
The market for solar energy consists of companies that are active in one of the parts of the value chain (wafers, cells, modules, installations), but there are also larger integrated companies that captures several parts or event the entite value chain. A striking fact is that a large part of solar cell manufacturing is done by large multinationals who do not specifically focus on solar energy. Three companies account for about one half of the total annual production: Sharp, Kyocera and BP Solar. Shell used to have a sizeable solar operation, but in 2006 it sold its silicon-based production to the German company SolarWorld as part of a strategy to focus more on next generation solar energy.
In contrast, there exist quite a few publicly listed companies that operate (almost) exclusively in the solar energy market. By far, most solar companies are German, although the United States and China also have a number of solar energy firms. Where do these companies stand in the value chain? We now look at three of the largest ones in more detail.
31_solar_waver
Conergy, formerly known as Dankoff Solar Products, produces and distributes solar energy driven water pumps, electric solar energy components, among which cells and batteries. Conergy has a strong focus on marketing of its products in the industrial and residential sector in Europe. The company was about to be acquired by the Canadian firm ARISE Technologies, but the deal was cancelled because ARISE could not raise the necessary capital. Conergy has over 750 employees and has its headquarters in Hamburg. The company has a number of regional offices in Europe, the United States and Australia. The market capitalization reached about $1 billion, but has recently decreased.
Motech Industries consists of a number of divisions, most of which are active in solar energy. The company is headquartered in Taiwan. Motech Solar, founded in 1999, produces solar cells and distributes its products to module manufacturers across the globe. The production capacity equaled 120 megawatt in 2005. Motech Power main involvement is the marketing and installation of solar energy systems in Taiwan.
Other well-known companies in the solar PV industry are Daystar Technologies (United States), Evergreen Solar (United States), Q-Cells (Germany), Solon (Germany) and Sunways (Germany). The PPVX index has an excellent summary of the publicly listed companies in the solar sector. Investing in solar energy can be very rewarding for individual investors, but the risk is very high. Historically, returns have been very high, but mid-2006 a correction in the solar stock prices caused large losses for investors in this sector. The high risk - high return profile is explained by the nature of the industry: the value is mostly an option value for a possible future large-scale roll-out of solar energy, and in many cases the value of companies are driven largely by politics (subsidies). EnergyPortal intends to launch an investment sector in the future for those individuals who are interested to invest in renewable energy stocks.
Sources
Information about the growth of the solar energy market:
Information about the growth of the solar energy market:
http://www.solarbuzz.com/Marketbuzz2005-intro.htm
http://www.earth-policy.org/Indicators/indicator12.htm
Facts about solar PV:
http://www.solarbuzz.com/FastFactsIndustry.htm
http://www.ewea.org/documents/0304-Global%20Wind%20Energy%20Markets%20-%20FINAL.pdf
The PPVX has information about solar stocks:
