Cloudy future for cash-soaked solar technology
Big Asian manufacturers are scooping up next-generation solar technology from the United States on the cheap.
But they face a long slog to turn these start-ups into serious competitors for the Chinese panel makers that dominate the market.
"If their expectation is that they are going to come off the blocks selling large volumes for a profit, I'm not sure that's going to be the case," says Ralph Romero, the head of the photovoltaic solar bankability practice at the engineering and construction firm Black & Veatch in Kansas.
"If the expectation is, 'I'm going to invest in the technology and be able to develop it into a next-generation product', then that's a different story."
Last month, China's Hanergy Holding Group became the latest Asian manufacturer to make a bet on a US maker of solar panels that use Cigs (copper, indium, gallium, selenide technology), when it agreed to buy the Silicon Valley start-up Miasole for US$30 million (Dh110.1m).
Other recent Cigs deals include the South Korean conglomerate SK Group's stake in HelioVolt in Texas, the Chinese-Singaporean joint venture TFG Radiant Group's interest in Colorado's Ascent Solar Technologies and Taiwan Semiconductor Manufacturing's stake in Stion in California, which also received a strategic investment from the South Korean solar equipment maker Avaco.
Many of the acquirers say they will invest further in developing the companies' technologies to increase manufacturing, with some planning to build large factories in Asia. But industry experts say that it will take years and tens of millions of dollars for the new players in Cigs to build plants, tweak manufacturing processes and get new technologies to the market at competitive prices.
The best hope for Cigs, some believe, is in speciality products that can command a premium price. Cigs materials can be integrated with glass, tiles or shingles, for instance.
"There is a differentiated intellectual property and it's going to take execution to make it work commercially," says Pavel Molchanov, an analyst at Raymond James, of the Asian buyers of Cigs companies.
"But they figure it's a very small investment."
Despite some Cigs players having raised large sums of money from private investors - Miasole, for instance, has raised about $500m since 2006 - many have yet to demonstrate they can replicate the complex process of combining all four Cigs materials on a large scale.
Stion, HelioVolt, Ascent and Miasole are producing solar panels in the United States but at very small volumes. TFG plans to set up factories using Ascent's technology in Asia and Stion plans to open a plant in Korea with Avaco.
Sources say HelioVolt will consider opening a commercial plant once certain targets are achieved.
The amount Hanergy agreed to pay for Miasole would generate a return of pennies on the dollar for investors such as Kleiner Perkins Caulfield & Byers and VantagePoint Capital Partners. Hanergy, Kleiner Perkins and VantagePoint would not comment.
Over the past decade, US venture capitalists poured hundreds of millions of dollars into Cigs. The idea was that they would be cheaper to make than traditional panels, which were made from high-priced polysilicon. But a few years later the price of polysilicon has fallen from nearly $500 per kg to less than $20 as large amounts of manufacturing were added in China, dragging down the cost of traditional panels and undermining Cigs' promise of becoming the cheapest solar technology. Cigs is also less efficient than silicon at transforming sunlight into electricity.
Cigs makers have said they could get their costs down to between 50 and 60 US cents a watt, according to Mr Molchanov. Now, however, he says the costs of some traditional panel manufacturers will be below 60 cents by the end of this year.
"What are the advantages of Cigs? The answer to that question is not obvious," says Mr Romero. "I don't see any reason to anticipate that the cost of silicon would go back to the levels where it once made sense to look at alternatives."
With little to show for their big bets on Cigs, many venture investors have shied away from industries that need expensive factories and returned to their bread-and-butter business of funding capital-efficient software or internet firms.
Venture capital investment in the Cigs industry has dropped from a peak of $953m in 2008 to $95m so far this year, according to GTM Research. US Cigs players once considered hot IPO prospects have languished in venture capital portfolios. Some, such as Solyndra, are bankrupt. Others, such as AQT Solar, are up for sale.
The research firm NanoMarkets calculates there were about 40 Cigs makers early this year, with 12 in North America, 13 in Asia and the rest in Europe. Within five years, NanoMarkets expects there to be no more than five in North America, as many as six in Europe and up to 10 in Asia, which has rapidly become the global leader in solar manufacturing. Perhaps the biggest thing Hanergy and other acquirers can offer is clout in the marketplace.
Not only will they be able to guarantee the 25-year warranty on Cigs panels, which have far less of a track record than rival solar technologies, but they can leverage their balance sheets to help to secure financing.
"If you couple Cigs with a big balance sheet, they have the potential to be very successful technologies," says Martin Lagod, a co-founder of Firelake Capital, which invested in Miasole and its rival Nanosolar.
Cases in point is the number one Cigs maker Solar Frontier, which is owned by the energy company Showa Shell Sekiyu KK and has rapidly increased production in Japan, and Dow Chemical's solar shingles, which became available in parts of Colorado, California and Texas this year and use technology from the Cigs player Global Solar Energy of Tucson, Arizona.
"You really can buy it, and it's Dow," said the NanoMarkets analyst Lawrence Gasman. "It's not like this is just a couple of guys who are trying to be the next Apple."
Updated: November 19, 2012 04:00 AM