Which Solar Technology Will Win?

The solar industry is reaching a turning point. We're well beyond the dream that solar power will be competitive with traditional electrical generation; solar is already cheaper than some peak generation sources. Give solar manufacturers and developers a few more years, and they'll leave more energy generation sources in the dust.

But questions still remain for the sector. There's no clear-cut technological winner in solar power as manufacturers take different paths to success. Below is a review of what the technologies are and their advantages and disadvantages.

Thin-film
So far, thin-film solar is the leader in the clubhouse. First Solar's (Nasdaq: FSLR  ) cadmium telluride (CdTe) panels cost just $0.75 per watt to make, easily passing every other form of solar power.

But there are pitfalls with thin-film panels. There is currently no technology available that gets efficiency anywhere near SunPower's (Nasdaq: SPWRA  ) industry-leading 20% efficiency. First Solar is currently at 11.6% panel efficiency and General Electric (NYSE: GE  ) says it can make panels 12.8% efficient on a large scale. This is important as costs fall because balance of system costs like land and inverters eat up more of a developer's capital. As more efficient panels become more cost effective, the cost advantage dries up.

GE also uses cadmium telluride, a nasty chemical, to make its panels and along with First Solar has slowly been increasing efficiency. With costs falling slowly but consistently for CdTe panels, this is the leader, but not the only thin-film option.

Copper indium gallium selenide, better known as CIGS, has been talked about as a more efficient thin-film chemistry, but up to now no one has been able to make it viable on a large scale. First Solar is said to have an underground CIGS research facility but has yet to launch a product based on the technology.

Sharp is using another nascent technology, amorphous silicon, to make some of its modules, but efficiencies are 9% or less. Without a major breakthrough, this technology is on its way out.

Advantage: Cost, emerging technologies

Disadvantage: Efficiency, toxicity, possible raw material shortages

Polysilicon
One of the biggest reasons solar power has grown so quickly is falling costs for polysilicon, a raw material in solar panels. That allowed relatively new entrants into the market like LDK Solar (NYSE: LDK  ) , JA Solar (Nasdaq: JASO  ) , and Jinko Solar (NYSE: JKS  ) to set up in China, leverage low labor costs, and compete with more established solar giants.

One of the older companies in China, Trina Solar (NYSE: TSL  ) , saw costs consistently fall until the third quarter of last year. But that's when it became readily apparent that non-silicon costs weren't falling as fast as the raw material and it would be more difficult to cut costs.

Analyst Satya Kumar from Credit Suisse thinks Trina can cut costs to $0.88 per watt next year and compete with thin-film partly due to a glut of polysilicon on the market. But cost trends tell me Kumar is a bit too optimistic. Last quarter, Trina's cost per watt was $1.16, of which $0.43 was for polysilicon and $0.73 was non-silicon costs. Those non-Si costs have fallen a whopping $0.03 in the last year. So unless that trend changes, Kumar is expecting poly to go for somewhere around $0.15 to $0.20 per watt next year.

Polysilicon cells can be made with efficiencies as high as 20%, and that's the major advantage over thin-film manufacturers. But if costs remain difficult to cut, there may need to be further innovations to take the next step.

Advantage: Efficiency

Disadvantage: Costs have become stagnant

Solar thermal
Solar thermal solar plants use mirrors to bounce solar rays to a thermal receiver, which heats water, oil, or another fluid, and eventually turns a power generator. eSolar and BrightSource Energy are two of the companies on the cutting edge of solar thermal power and are just beginning to build utility scale plants.

The advantage solar thermal has over traditional panels is the ability to heat an energy storage medium. Molten salt can be heated throughout the day when the sun is out and then dissipate the heat at night when most solar modules are useless. This allows solar thermal the ability to supply base load power.

Right now solar thermal is a wild card. The possibility of supplying base load power is intriguing, but the recent Ivanpah project cost $5.46/W to build, so costs need to come down in the future.

Advantage: Energy storage, base load power source, efficiency

Disadvantage: Cost

Foolish bottom line
As these technologies emerge, it's important to keep an eye on the progress. Long term, I think thin film will be the winner as CIGS or another chemistry becomes more mature. What technology do you like for the future of solar power?

Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 14, 2011, at 4:13 PM, Eysteinh wrote:

    One more advantage of solarpanals is space. I think termal and thin film also can work but in more bigger spaces. Solar panals from polysilicon is most effective and takes the least space so should be used for residental areas.

  • Report this Comment On June 14, 2011, at 11:37 PM, ChangItOrDrownIt wrote:

    Silicon (c-Si) PV is more energy efficient recycled than preparing an initial virgin crystal c-Si PV. Cd-Te based PV has seemingly proven safe in house fire temperatures where the cadmium is not released from its bond with Tellurium. Cd-Te is also recyclable. Is it cheaper to recycle Cd-Te and remanufacture than manufacture virgin Cd-Te PV? I do not know. I would like to hear it is.

    The problem with the manufacturing of Cd-Te is the creation of that supply chain direction for mass production of a cheap reliant PV production system, for our nation’s electricity. Unfortunately CIGS relies upon Indium & Tellurium; both elements being EXTREEMLY rare may limit a great expansion into CIGS and Cd-Te PV. The quantity of Tellurium available and used today for: PV, some steel foundry products, industrial, medical, photocopiers, copper alloys, and thermoelectric devices (converting heat into electricity and vice versa), presents a very real supply bottle neck problem. The price per kilo of tellurium is about $200 where gold is about $40,000 a kilo and tellurium might be just about as rare as gold. Until the usage of tellurium for First Solar, Tellurium was close to a worthless material, produced refining copper and other precious metals. The “slimes” were basically just waste and the tellurium refined out when the needs upon request. The price of Tellurium will take off one day. (Check out the VNP...1st solar buys all they produce and research will shows the world theater of mining cannot guarantee a quantity.) Today real professionals and governmental research are attempting to quantify the amount of available Tellurium for industry. Some stated estimates summate worldly production from 200 to 1000 tons and maybe more, but not a vast amount for great reliance. First Solar uses maybe 90 tons of Tellurium for a gigawatt.

    Another comfort for the consideration establishing America’s reliance on Cd-Te, Tellurium cannot be economically mined for just Tellurium. The expense is extreme due to rarity, or the amount of earth to remove and process for a bit of Te. Tellurium must be mined as an accompanying mineral! The mining and processing just for Tellurium is unreasonable! (Often gold and platinum mining/refining are side rewards from copper mining!)

    Human historical mining of copper is reducing the number of the rich veins. As that deposit 'richness' diminishes with human discovery and usage Tellurium diminishes at a faster pace. Tellurium accompaniment with copper is an exponential tag along mineral. Tellurium richness diminishes quicker than the accompanying vein of the ‘host’ copper mined metal. To conclude some mining professional experts will express there is only 35 to 80 more years of copper availability for mining and refinement. Since the richness of Tellurium reduces quicker than the copper vein, and the element is little known until the last century, the usability for a complete reliance on a PV type as Cd-Te, seems suspect to me. Although the lower cost for now is great, developing a supply chain for Cd-Te is a costly direction in our future IF we are intending to rely on 10% and more of our energy from solar.

    Please see:

    <http://scull.in/post/tellurium> and/or <http://www.resourceinvestor.com/News/2009/7/Pages/The-tellur... and/or <http://onlinelibrary.wiley.com/doi/10.1002/pip.703/pdf>

    Sincerely,

    ChangeItOrDrownIt

    I am long on LDK, STP, HOKU

  • Report this Comment On June 15, 2011, at 1:27 PM, Melaschasm wrote:

    Solar is 100% dependent upon government subsidies. I have seen more and more astronomers predict less sunspot activity in the coming decade. If that happens, a second decade of global cooling could be the last nail in the man made global warming coffin.

    Can solar reach cost parity before the subsidies dry up?

  • Report this Comment On June 18, 2011, at 4:20 PM, Razorg wrote:

    Solar should get to grid parity in less than 5 years.

    I believe governments will continue to phase out it's subsidies gradually until then, you know as it get's cheaper it doesn't need that much subsidy.

    Germany scraped a planned cut recently, so that's good news.

  • Report this Comment On June 21, 2011, at 7:26 PM, BillStacker wrote:

    @ChangItOrDrownIt - Wow. Thanks for enlightening me on Tellurium.

    @Melaschasm - You are correct for now the solar industry has been/is being boosted by government subsidies (but umm, so is oil) but are you maybe over-simplifying the solar thesis, thinking that it all has to do with global warming? There are clear benefits to solar will beyond reduced carbon emissions, which are just as, if not more important.

    From a broader environmental perspective, most other energy sources are 100s of time worse than solar. Nat gas fraking is destroying water supplies, mountain top removal is, for one, REMOVING MOUNTAIN TOPS, and for two, causing erosion.

    Reliance on oil means reliance on foreign oil, bring with it a host of political entanglements.

    ANY non-renewable resource you point to is going to get scarcer and scarcer by definition.

    I don't think we need to mention the risks of nuclear power. Next to all of those, solar (and other renewables) shines.

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