Decision points for CIGS survival & success in a crowded PV industry
After many years of buildup, CIGS companies are finally approaching commercial readiness only to discover that the PV industry is at a significant crossroads. Many of these companies were founded during a time when conventional silicon PV costs were high and European subsidies were generous.
By Vincent Kapur
By now, the momentum of CIGS technology developers has been considerably buffeted by plummeting prices for c-Si modules in 2011 and the tightening of policy support for PV. This has been demonstrated by the high profile exit of Veeco and the Chapter 11 filing of Solyndra. The reality is that open season for CIGS entrants must be declared over and even the best-funded players must get on the fast track toward profitability in order to survive a shakeout.
Intense Competition among c-Si Manufacturers
The current market climate has been rough on crystalline silicon (c-Si) PV manufacturers as well. Revenues are growing with demand, but profit margins have been squeezed to unsustainably thin levels, even for the largest global PV module suppliers. Meanwhile, the emergence of a clear Tier 1 level of manufacturers has choked the access to demand for new entrants along with Tier 2’s and 3’s. Shoring up resources to break into the top tier requires financing in the range of multiple billions of dollars to achieve vertical integration. As such, US-based and VC-backed c-Si manufacturers have been squeezed, with the torch being passed to East Asia where large corporate entities are more tolerant of single-digit gross margins for the time being.
Significant Opportunity Remains Wide-Open for CIGS
The erosion of profits for even the largest c-Si players opens a potential window for thin-film CIGS companies to successfully enter and expand profitably in the market at a price point which will challenge the current market leaders. To exploit such an opportunity requires an all-encompassing focus on achieving ultra-competitive plant-wide costs per watt. This strategy seems deceptively obvious, but has not yet been fully embraced by the current CIGS players in the industry.
Let’s take a look at some typical decision points and examine their impact on competitiveness for CIGS companies:
Decision Point 1--CIGS Process Development
Status Quo: Improve Efficiency to Reduce US$/W
Efficiency figures grant bragging rights to PV technologists in research institutes and every CIGS company benefits greatly from the glow of the material’s reputation among thin films. However, the recipes for champion laboratory cells are simply too expensive to transfer to a manufacturing platform. High-vacuum methods, often the first choice for most CIGS R&D, have proven challenging to deploy at scale due to:
-High CAPEX (Capital Expenditure)
-Poor materials utilization
-Substantial downtime requirements
-High level of variability in deposition.
In my discussions with tool vendors and technologists throughout the industry, many have expressed the opinion that cost-reduction is not as important as efficiency improvement, with the assumption that more Watts per module yields lower US$/Watt. This argument is deceptive and has been tripped up as CIGS companies ramp to capacity. Although CAPEX per watt for an expensive process may benefit from economies of scale, materials waste, yield inconsistencies, and uptime inefficiencies will most likely be perpetuated. Ultimately, high-vacuum CIGS manufacturers have committed to hard-wiring additional costs into their operations, limiting their flexibility to achieve price competitiveness. Any subsequent attempts to reduce such costs run the risk of impacting baseline efficiencies.
With a Twist: Save US$/W Now to Reinvest in Efficiency Improvements
In order to achieve commercial viability, CIGS companies should focus on:
-Exercising tight control over their production process
-Achieving a price point which the market can support by eliminating excess costs
Companies that can successfully achieve these goals will benefit from additional cost breathing room to not only adjust to turbulence in the market, but also flexibly invest in performance improvements. In such a scenario, a manufacturer might actually be able to charge a premium price in the market for their improved products and safely avoid becoming locked in a cycle of continuous price-reduction.
High efficiency alone does not present a practical strategy for cost-competitive CIGS. Otherwise, the entire industry would switch focus to GaAs, which boasts higher performance but is limited by astronomical cost to deployment in concentrators or on spacecraft. Companies may enjoy successful market entry as well as positive trends in both revenue and profitability if they focus on reducing costs early and investing in performance improvements over the long term.
Decision Point 2--Market Competitiveness
Status Quo: Beat the Competition to the Market at All Costs
The PV market has become ruthlessly forward looking, and CIGS companies will experience few, if any, benefits of first-mover advantage because they already have to compete with established c-Si suppliers. As such, decisions focused on rapidly bringing product to market may end up punishing their long-term competitiveness among a crowded field.
In many cases, CIGS companies have absorbed high capital equipment costs with the intent to grab a foothold in the market. Such expensive shortcuts have been counter-productive, as cost disadvantages have inhibited rapid market acceptance for thin-film modules.
In addition, establishing early brand recognition is not quite the same thing as demonstrating bankability, particularly as PV modules have truly become commodities. Developers have clearly shown that they will not pay a premium for a specific brand. As a result, the market is fairly brand agnostic, as shown by the fact that Q-Cells, 2007’s PV market leader, faces a serious struggle to survive in the current market.
With a Twist: Prepare Ahead for Sustainable Market Position
The considerable opportunities in the PV industry are accompanied by significant instability. Management should concentrate on constructing a solid strategy for surviving in the market, rather than merely getting to market. CIGS companies must plan on taking deliberate, measured steps toward commercialization in order to secure a shot at a successful and sustainable market position. Consider the following reasons to avoid rushing into the market with unfavorable costs:
1. Intense competition and module oversupply will severely impact manufacturers with unfavorable cost structures. Focusing on eliminating extraneous costs before market entry will provide flexibility to adapt to rapid changes in market conditions.
2. The industry expects module OEM’s to account for sophisticated takeback and recycling operations. These activities have little bearing on the lab stage, but must be finely tuned once a company begins shipping product.
3. Raw metals, plastics, specialty adhesives, and custom foils will be subject to commodity pricing that may not decrease linearly according to preplanned roadmaps. Developing a frugal BOM is essential before committing to large volumes.
4. Manufacturing operations rely on process yields and machine uptime. Investing extra focus on securing these during pilot operations will undoubtedly spare hundreds of millions of dollars in full production. These issues have presented considerable roadblocks to early CIGS entrants.
Prepare to compete in the market beyond the ribbon-cutting ceremony. Despite several companies having reached this stage, many have much work ahead to secure profitable position in the market.
Decision Point 3--Value Chain Position
Status Quo: CIGS Can Be Used as a Substitute for Silicon
Several companies, particularly in the U.S., have elected to manufacture discrete CIGS cells rather than fully integrated modules. This strategy relies on the assumption that market acceptance will be facilitated by similarity with conventional wafer-based module manufacturing. However, even the largest vertically-integrated c-Si players are struggling to secure profitability. Manufacturers of discrete CIGS cells ultimately sacrifice profit margins to downstream module assembly, limiting their ability to sustain competitiveness.
In addition, module assembly for CIGS cells differs substantially from conventional wafer-based assembly. As a result, an entirely custom technology platform is required, turning an assumption of rapid market entry into substantial delays and increasing financial risk for scaling to volume production.
With a Twist: Secure Competitive Advantage & Avoid Weaknesses from the c-Si Business Model
The inherent benefits of thin-film PV lie in its condensed value chain, which is unencumbered by the necessity for Poly-Si production, crystal growing, and wafering. CIGS manufacturers will benefit greatly from integrating cell fabrication and module assembly. Resulting advantages include:
-Better control over costs and profit margins
-Reduced labor, energy & resource requirements
-Simplifies procurement & distribution network
-Facilitates productivity maximization
-Reserves larger profit margin for CIGS companies.
Although it has taken several years, the industry has fully recognized the divergence of thin-films from c-Si in terms of cost-structure, module construction, and global value chain. CIGS companies must play to the strengths of thin-films to create space for themselves in a market currently dominated by c-Si.
Decision Point 4--Tool Selection
Status Quo: Adapt Production Process to Existing Tools
Many entrants to the CIGS field have looked to adapt an existing manufacturing platform for use in thin-film PV fabs. While seemingly reasonable at first glance, this approach does not take into account the sophisticated process control required for CIGS production. In order to precisely manage thin-film depositions and interface quality within the device in high volumes, process tools must be selected which allow the minimum amount of variation from specs. Tools which have been repurposed will undoubtedly provide inexact solutions to the challenges of CIGS processing. Performing necessary modifications will consume time, labor, and resources.
When evaluating tools from the semiconductor and flat panel display industries, it is important to consider the value-added aspects of those products compared with PV, which must compete directly with conventional energy resources. PV manufacturing must be achieved in a cost range which differs by orders of magnitude on an area basis from the acceptable ranges for those industries. In terms of units per hour, PV processing more closely approximates the rates of automotive component manufacturing. As such, CIGS manufacturing must be built around a tool set which is tailored to thin-film PV.
With a Twist: Develop a Tool Set to Maximize Process Productivity
The delay of CIGS companies to reaching the market stems from the fact that many early entrants purchased tools prior to defining their fundamental production process. Technology developers may avoid the expenses and additional delays associated with retrofits and retooling by initiating design/build from a solid technological foundation. Consequently, the tools will provide the optimal platform for maintaining the process under control and delivering high-quality CIGS modules.
2nd generation suggests something original rather than something reused. CIGS-specific tooling is a requirement for the sector to fulfill its growth potential. Committing to process development in advance of capital equipment purchases ensures that the tool will deliver value over a sustained service life.
CIGS developers can look forward to significant market share in the future, provided that manufacturers switch focus toward sustainable growth over the long term. Companies can achieve market share by properly preparing market volatility and ramping from a cost-effective technology platform. Market opportunities are expanding as PV installations have provided increasingly competitive Levelized Cost of Energy (LCOE) compared with other sources. With plenty of opportunity for conversion efficiency improvements following initial market entry, CIGS manufacturers will play a large role in further accelerating the global rise of PV.
Vincent Kapur is an expert in emerging photovoltaic technologies and thin-film CIGS production. He presently works for International Solar Electric Technology (ISET, isetinc.com), where he has held positions in Production Operations Management, Business Development, Product Design, Applications Engineering, and Advanced Technology R&D. Kapur is also the founder of 2K Pacific Global LLC, which provides consulting services to startup companies looking to establish a position in ‘Blue Ocean’ market segments where photovoltaic technologies provide value-added power generation capability. Prior to entering the Solar Energy industry, Kapur worked in the Aerospace field performing stress analysis for military and commercial aircraft structures. Kapur received his B.S. in Aerospace Engineering from UC San Diego, U.S.A.
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