Suntech Power (NYSE: STP ) announced Wednesday that it will begin building a new thin-film research and development and manufacturing facility in Shanghai. The plant is expected to begin operations in 2008 and produce 50 megawatts at peak capacity by 2009. This is the type of news that should have long-term investors jumping with joy.
Today, thin-film photovoltaic modules represent only a fraction of the total solar cells sold throughout the world. This is in large part because they have a low solar conversion rate -- about 6%, as compared with 15% to 18% for crystalline silicon solar cells.
The advantages of thin-film solar cells do not stop with conversion efficiency, however. They are also much cheaper to manufacture because significantly less silicon is used to produce them. Suntech, in fact, claims its new thin-film modules will use less than 2% of the silicon required to manufacture equivalent crystalline photovoltaic, or PV, products.
Secondly, because thin-film cells are lighter, more durable and flexible, and easier to install, they have different applications. For instance, the thin-film cells' ability to cover the roofs of buildings presents one huge opportunity. In those cases, they make up for what they lack in conversion efficiency by covering a lot of space.
For the longer term, many solar analysts believe the thin-film cells will be used in widespread applications in the creation of solar farms. This is especially true as the technology improves. To this end, Suntech has indicated it believes it can increase the efficiency of the cells to a 9% conversion rate in the foreseeable future.
Suntech Power isn't alone in this field. United Solar Ovonics, a subsidiary of Energy Conversion Devices (Nasdaq: ENER ) , is manufacturing 28 megawatts of thin-film power and plans to increase that to 300 megawatts by 2010, and a number of start-ups are also aggressively moving into the space.
From my perspective, however, there is plenty of room for more than one company in this burgeoning subsector of the solar industry -- especially in China. There, because of the growing need for clean energy sources, I can see the demand for this technology going through the roof. By building a plant in Shanghai, Suntech should be able to serve this market, and I'm confident the move will pay dividends for long-term investors.
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Fool contributor Jack Uldrich likes Suntech Power's new, slim look, which is why he owns stock in the company. The Fool has a strict disclosure policy.