LDK Solar. REC. Q-Cells. SolarWorld. SunPower. Suntech. Yingli. These are just a handful of the solar giants that will hit the long-sought $1-a-watt industry target by 2012, predicts Photon Consulting in a study released this week.
If that happens, solar electricity will be as cheap as coal in many nations in just a few years' time. Kudos.
But hold up. Low-cost leader First Solar came out this week with the news that it already beat the $1-a-watt barrier last quarter, speeding way passed the competition and into the record books. In the fourth quarter of '08, it cost the company just 98 cents to manufacture a solar module.
Begs the question: If First Solar broke through the barrier, then why haven't the others? And more to the point, can the thin-film darling spur industry-wide competition and drive module prices down even faster?
Not likely. In this poor economy, experts predict near-term decline for the industry on average. In an IREC conference call yesterday, Mark Crowdis, founder of renewables consulting firm Think Energy, delivered this familiar forecast:
"I believe [the solar market] will be relatively flat over the next year and a half. I don't think that it's going to plummet, but I don't see growth."
Slower growth means that true cost breakthroughs could be few and far between for most solar firms. And the truth is, Arizona-based First Solar has long been in a league of its own when it comes to the race toward cheap solar.
What's its secret? Here are a few:
Thin Film. First Solar's panels use thin film technology, which is made from cadmium tellurium, not silicon. It's cheaper than silicon but less efficient and is used primarily in large solar farms, not on rooftops. Thin film makes up just a little over 20 percent of the solar market. But cheap is disruptive, and the technology is quickly stealing market share.
Germany. First Solar is the first to admit that generous government subsidies, especially in Germany, helped to support its ramp up of production capacity that in turn helped it cut costs. Said CEO Mike Ahearn:
"Without forward-looking government programs supporting solar electricity, we would not have been able to invest in the capacity expansion which gives us the scale to bring costs down."
Manufacturing explosion. First Solar increased its manufacturing capacity to more than 500 megawatts in 2008. That mammoth increase enabled the company to dramatically cut its manufacturing costs, culminating in its fourth-quarter record. In 2009, the company is planning to further double annual production to more than one gigawatt, the equivalent of an average-sized nuclear plant, which means more cost reductions are on their way.
Specifically, Ahearn said its costs could sink to 65 or 70 cents a watt by 2012. That would be a drop of more than 30 percent from the 98 cents a watt it saw last quarter. Skeptical? Don't be. Remember: In 2004, First Solar modules cost over $3 a watt, meaning that in just four years -- or the entire life of the company -- First Solar has cut its production costs by two-thirds.
Every technology sector needs a leader to set the pace. Right now in solar, at least in the buck-a-watt race, that's First Solar.
But you can bet it will soon have company -- and maybe even before 2012. That's because the whole industry's on the march to global grid parity -- the point at which unsubsidized solar is finally cost competitive with fossil fuels.
The $1 mark remains the magical metric. And competition to get there is fierce, even with the sector's economic hiccups.