Professional Documents
Culture Documents
0
1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E
Solar cell production
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CO2 emissions resulting from a solar cell system’s manufacture exceeds the reduction
of emissions it achieves via electricity generation, moreover, then it is
environmentally harmful in terms of global warming. The lifespan energy
profitability and overall CO2 emissions are measured in energy payback time (EPT)
and lifetime CO2 emission units.
EPT is a measure of how many years of operation is required to generate the energy
used in the manufacturing stage, and if this value is smaller than the lifespan of the
system it is profitable in terms of energy. Lifetime CO2 emission units are a measure
of CO2 emissions per 1kWh of electricity generation over the entire lifespan of the
system, and the CO2 emission efficiency of solar cell systems can be compared with
other forms of electricity generation using this value.
We estimate that the EPT for household solar cell systems is approximately 1–1.5
years in Japan and 1–3 years in Europe, which are both very low values compared to
the expected lifespan for solar cell systems of 20 years. Stated differently, solar cell
systems can recoup the energy required for their manufacture in one to three years
after their installation, and thereafter they add value by becoming net energy
producers and enabling lower consumption of fossil fuels.
We estimate that household solar cell systems result in 53g of greenhouse gas
emissions (CO2 equivalent) per 1kWh of electricity generation, with the majority of
this produced during their manufacture. We estimate that commercial power sources
result in 360–378g of greenhouse gas emissions (CO2 equivalent) per 1kWh, and that
thermal electricity generation on average results in 690g, which is more than 10x the
volume of solar cell systems. We thus estimate that the CO2 emission reduction
impact of solar cell systems is 307–637g per 1kWh of electricity generation.
oil-fired thermal
LNG-fired thermal
LNG-fired thermal
power(combined)
nuclear power
geothermal power
wind power
solar power
small-and-
waterpower
power
power
power
Source: Sangyo-times.
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According to the European Commission’s “PV Status Report 2006”, the countries
that have made key changes in government policies for solar energy are:
Germany: The German feed-in law was introduced in 1999 and renewed in August
2004, resulting in a dramatic increase in PV installations. In its latest figures, the
German Solar Industry Association reported systems with total of 600MW installed
capacity in 2005.
Other EU countries: Italy has passed new feed-in laws in 2005. According to the “PV
status report 2006”, 50MW to 80MW capacity will be installed in 2006 with an
upper cap of 500MW for 2012. France introduced its feed-in laws in 2006. Spain’s
current cap is 150MW, which is likely to be revised up.
US: The 2005 Energy Bill, aimed at increasing the demand for photovoltaics, was
passed by the Senate on July 29, 2005 and was signed by President Bush on August
8, 2005. The main support mechanisms of the bill are: (1) increase in the permanent
10% business energy credit for solar power to 30% for a two-year period. The credit
reverts to the permanent 10% level after two years. (2) Establishment of a 30%
residential energy credit for solar for two years. For residential systems, the tax credit
is capped at US$2,000. In addition, California has the “Million Roof Initiative”
(SB1) for solar energy. The California Solar Initiative (CSI) adopted SB1 in January
2006. It secured a US$3.35 billion long-term solar rebate plan for California to
deploy 3,000MW of solar power systems on residential, commercial and government
buildings throughout the state. In June 2006, SB1 was passed by the California
Assembly.
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Japan: In June 2004, the Japanese Ministry of Economics, Trade and Industry
(METI) announced the “Vision for New Energy Business”. This strategy report aims
at developing an independent and sustainable new energy business with powerful
support measures for PV. Further, in a June 2005 symposium on “Photovoltaic
Generating Systems” titled Beginning of the era of GW PV market”, the director of
the New and Renewable Energy division of METI announced that the mid- to long-
term strategy aims to reduce oil dependency by 40% by 2030. Japan Photovoltaic
vision paper predicts that Japanese domestic market consumption will increase to
1,200MW and exports will increase to 1,000 MW by 2010.
This optimistic projection assumes that shipments of solar cell modules will expand
at a CAGR of 46.7% from 2007 to reach 8,600MW in 2010. Even if the module price
falls to $1.79 per watt by 2010, it would still result in a market scale of $15.51 billion
in 2010, representing growth of 120% from the market in 2006.
We believe that changes in the supply/demand balance for polysilicon from 2H 2008
will boost the supply of solar cell modules, and cause their prices to fall. If the price
of solar cell modules falls substantially, earnings at companies involved in solar cell
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Figure 124: Solar cell module market demand by region Figure 125: Global solar cell module market demand
MW MW
2,000 10,000
8,000
1,500
6,000
1,000
4,000
500 2,000
0 0
CY2000 2001 2002 2003 2004 2005 2006 CY2000 2002 2004 2006 2008E 2010E
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Others 9%
40%
Motech (TW)
Deutsche
5%
Cell/SHELL (DE)
3%
Ky ocera (JP)
4%
SunPow er (PH)
E-Ton (TW)
4%
4% First Solar (US)
Gintech (TW) 4%
4%
3,000
2,500
2,000
1,500
1,000
500
0
CY2000 CY2001 CY2002 CY2003 CY2004 CY2005 CY2006
US Japan Europe ROW
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Conversion efficiency (%) = (electrical energy output ÷ solar energy input) x 100
The module conversion efficiency value of solar cells systems currently under mass-
production is usually in the range of 10–19%. The module conversion efficiency
value varies according to the type of solar cell, with normal values of 15–20% for
monocrystalline silicon solar cells, 12–18% for polycrystalline silicon cells, and 8–
12% for amorphous silicon cells.
Solar cells can be broadly divided into silicon cells and thin-film, with 93.2% of
2006 production volume being made up of silicon cells.
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Monocrystalline silicon
Semiconductors are also made from monocrystalline silicon wafers, and the
respective manufacturing methods are the same in many respects. Very pure
monocrystalline silicon wafers are expensive, but the purity requirements are lower
for solar cell applications than for semiconductor applications, and lower-priced solar
grade (SoG) silicon can therefore be used.
Polycrystalline silicon
Polycrystalline silicon is currently used in the mainstream type of solar cell, owing to
lower production costs than monocrystalline silicon. Polysilicon solar cells use
wafers sliced from ingots cast using silicon melted in a crucible. These ingots are not
formed from a single crystal, unlike monocrystalline silicon which is slowly built up
by revolving a seed crystal. The ingots can also be cast in a square shape, instead of
the cylinders of monocrystalline silicon.
The top company in the global polysilicon market is Hemlock Semiconductor (US),
where we estimate a production capacity of roughly 10,000t/year as of end-2006. We
then estimate that Wacker Chemie (Germany) holds the second rank with an annual
capacity of approximately 6,500t, followed by Tokuyama in third with 5,300t, and
REC (Norway) in fourth with 5,250t. We estimate that the overall industry has an
annual production capacity of around 37,000t.
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8.1% 27.0%
MEMC
12.7%
REC
14.2% Wacker
17.5%
Tokuyama
14%
Turning to the demand side, demand for semiconductor wafers appears to be around
23,000t for 2006, and demand for polysilicon used in solar cells around 17,000t,
making a total of around 40,000t. This demand figure is higher than the production
capacity figure we estimate above, but we surmise that part of the 23,000t of
polysilicon shipped for use in semiconductor wafers becomes scrap, which is then
reused for solar cell applications.
Solar cell makers were very keen to secure polysilicon supplies during 2006, to the
extent that a scramble for polysilicon ensued at times. The polysilicon makers have
responded with aggressive and sustained capital investment. We expect the world’s
biggest maker, Hemlock, to expand its production from 10,000t/year at present to
36,000t/year in 2010. We also expect Wacker Chemie to raise its production from
6,500t/year at present to 10,000t/year by end-2007. Table 142 displays the bullish
plans to expand production capacity at the other leading makers. We estimate that
these efforts will increase the aggregate production capacity for polysilicon at the
leading makers from 37,000t/year in 2006 by 150% or so to 92,000t/year in 2010.
Although they are not represented in Table 142, several companies have already
declared their intention to enter the polysilicon market. If they all proceed as planned
this could boost aggregate production capacity by several tens of thousands of tons
by 2010, but we regard this as an uncertain prospect. The following estimates of the
supply/demand balance of polysilicon are based solely on the production capacity
values shown in Table 142. We therefore recommend bearing in mind that new
entrants could boost the supply capacity of polysilicon beyond our estimates.
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The higher prices fetched by polysilicon used for semiconductor wafers usually
result in prioritization of supply for this application, with the remainder being
supplied for solar cell applications. However, some of the polysilicon shipped for use
in semiconductor wafers becomes scrap, which is then reused for solar cell
applications. We estimate that demand for silicon used in semiconductor wafers will
expand at an annual rate of 10% from the base of 23,000t/year in 2006. As such, we
also estimate that the production volume of polysilicon available for solar cell
applications will reach around 62,000t/year in 2010, including the polysilicon scrap
recycled from semiconductor applications. Moreover, we expect the production
volume of thin-film solar cells to gradually expand from 2007, further boosting the
overall supply capacity in raw materials.
Table 144: Polysilicon production forecasts for solar cell (excluding thin film)
Tons
2006 2007E 2008E 2009E 2010E
Poly Silicon Production Volume 36,950 43,488 55,172 66,125 92,150
Consumption for Silicon Wafer 23,000 25,300 27,830 30,613 33,674
Production Volume for Solar 13,950 18,188 27,342 35,512 58,476
Poly Silicon Recycled from Wafer 2,300 2,530 2,783 3,061 3,367
Total for Solar (ton) 16,250 20,718 30,125 38,573 61,843
Source: JPMorgan estimates.
When combining the supply volume of polysilicon for solar cells and thin-film solar
cells, and converting into a cell basis allowing for energy conversion efficiency rates,
we estimate a supply capacity in 2010 equivalent to 8,100MW. The assumption we
used for conversion efficiency is that the average conversion efficiency value of
11g/W in 2006 will improve by 0.5g/W each year.
Based on the foregoing, our projections of the polysilicon supply/demand balance for
solar cell applications up to 2010 are illustrated in Figure 130. Given also the
possibility that market entrants further boost supply capacity by 2010, we see a
theoretical possibility of the supply of polysilicon for solar cell applications
exceeding demand by 2010.
Nevertheless, the leading makers of solar cells have responded to the current severe
shortage of polysilicon by forming long-term agreements with the leading
polysilicon makers, and these contracts look likely to last the next five years or so, or
until around 2012. As such, even if the supply capacity of silicon for solar cells
exceeds demand, we believe that effects would not emerge until the expiry of the
major suppliers’ long-term contracts around 2012.
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Furthermore, we think that the new entrants to the polysilicon market lacking long-
term supply contracts face the risk of business volatility increasing. The long-term
contracts formed between the leading polysilicon makers and solar cell makers
would insulate them from the affect of price fluctuations if supply/demand conditions
loosen. However, these contracts would at the same time amplify the effect of looser
supply/demand on the spot market inhabited by the newer polysilicon makers.
Figure 130: Supply demand balance simulation of poly silicon for solar cell
Ton
Table 145: Supply demand balance simulation of poly silicon for solar cell
2006 2007E 2008E 2009E 2010E
Poly Silicon Supply (ton) 16,250 20,718 30,125 38,573 61,843
Poly Silicon Supply (Cell Eqv.) (MW) 1,477 1,973 3,013 4,060 6,871
Translation Efficiency(g/MW) 11 10.5 10 9.5 9
Solar Module Production Volume (MW) 1,211.40 1,618.00 2,470.30 3,329.50 5,634.60
Cell-Module Yield 82% 82% 82% 82% 82%
Thin Film Production Volume MW) 196 463 1,115 1,894 2,496
Total Supply (MW) 1,407 2,081 3,585 5,223 8,131
Solar Module Demand MW)
Downside 1,870 2,302 2,900 3,540 4,302
Base Case 1,870 2,446 3,341 4,631 6,458
Upside 1,870 2,705 3,898 5,694 8,664
(Total Supply - Base Case) -463 -365 244 593 1,673
Source: JPMorgan estimates.
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Wafer producers expect another 10% price hike in wafers in 2006, while the
cell/module producers’ face severe pricing pressure from explosive competition from
new entrants and limited government support.
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3,000
2,500
2,000
1,500
1,000
500
0
CY2006 2007E 2008E 2009E 2010E
CdTe CIGS a-Si Emerging
Source: PV news.
Among the various types of thin-film solar cell, amorphous silicon (a-Si) cells are
relatively established in track record and technology. The amorphous silicon film is
deposited on the substrate as a result of breaking down raw material monosilane gas
in plasma with a diluent gas. The thickness of the light absorption layer is only a few
micrometers, meaning that a cell requires only around one hundredth of the silicon
raw material used by a polysilicon solar cell. This is the biggest advantage of a thin-
film solar cell. The efficiency rate for energy conversion is only around 10% because
it is only sensitive to the spectrum of light between ultraviolet and visible light,
resulting in a substantial transmission loss for the sun’s rays. Experiments are being
conducted to improve the conversion efficiency of thin-film solar cells by using two
or even three light absorption layers. The production processes involved in making
amorphous silicon solar cells are plasma-enhanced chemical vapor deposition (PE-
CVD), laser cutting, sputtering, edge polishing, soldering, sealing and finishing. In
particular, the equipment required for PE-CVD is expensive, and this is hampering
development.
Among the various types of thin-film solar cells, we believe that CIS/CIGS cells
exhibit the best prospects in addition to amorphous silicon cells. CIS/CIGS solar
cells employ light absorption layers made of compound semiconductors based on
copper (Cu), indium (In) and selenide (Se). In addition to these three core elements,
gallium (Ga) or sulfur (S) is also added to the light absorption layer to control the
band gap. CIS/CIGS solar cells have a higher light absorption coefficient than
silicon–based cells, so that a thickness of around 2µm provides sufficient light
absorption. CIS/CIGS cells thus do not rely upon the availability of silicon, and only
need small volumes of raw materials. We believe there is ample scope for cost
reduction, given the simple structure and manufacturing processes, and the
possibility of integrated production from raw materials to the finished product.
Furthermore, the conversion efficiency of CIS/CIGS cells is high compared to other
types of thin-film solar cell. Some observers have voiced concerns over supplies of
indium being insufficient, but only around 8–10 tons of indium are required to
manufacture 1GW of CIS/CIGS solar cells, and we therefore do not expect problems
unless the production volume of CIS/CIGS cells expands very rapidly.
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System &
Polysilicon Ingot Wafer Cell Module
Installation
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Tokyo Rope Mfg.(5981, Wire for cutting silicon ), Kiswire (Korea, Wire for cutting silicon ), Shinko Wire (5660, Wire for cutting
silicon ), Toyo Advanced Technologies(unlisted, Wire saw), Meyer Burger (Swiss, Wire saw), Nippei Toyama (6130, Wafer
production equipment, wire saw), Toyama Kikai(unlisted, Automated cell wiring and alignment machine), Union-Materials (unlisted,
Spherical silicon production technology), Tokki(9813, Organic thin-film solar cell production equipment),
Toyo Tanso (5310, Crucible), Tokai Carbon (5301, Crucible), Ibiden (4062,Crucible), Noritake (5331, Silicon fusing furnace ),
Nippon Techno-Carbon (unlisted, Crucible), SGL (DE, Crucible), LCL (unlisted,Crucible), Ferrotec (6890, Single-crystal Si lifting
system), Fujipream (4237, spherical Si), NPC (6255, Cell, Cell Tester), ShibauraMechatronics (6590, Thin-film system), Fujimi
Incorporated (5384, Wafer polishing).
Materials for cell and module Asahi Glass (5201, Cover glass, TCO circuit board ), Sumitomo Metal Mining (5713, ITO sputtering targets ), ThreeBond
(unlisted,Sealants), Dai Nippon Printing (7912, Filler sheet for solar cell module), Mitsui Chemicals Fabro (unlisted, EVA sheet for
encapsulating material), Bridgestone (5108, Glue film), Du Pont (unlisted, PVF film), Hitachi Metals(5486, Electrode clad material).
Peripheral equipment manufacture Daihen (6622, Inverter), Laplace System (unlisted, Energy production measurement system), GS Yuasa (6674, Electrical storage
device).
Solar cell(silicon wafer) Sharp (6753), Q-Cells (DE), Kyocera (6971), Suntech (China), Sanyo Elec (6764), Mitsubishi Electric (6503), Motech
(Taiwan),Schott Solar (DE), BP Solar (UK), Deutsche Cell/SHELL (DE), SunPower (US), Isofoton (ES), First Solar (US), CEEG
Nanjing(China), ERSOL (DE), Photowatt (FR), USSC (US), Shell Solar (US), Hitachi (6501).
Solar cell (spherical Si) Clean Venture 21 (unlisted), Fujipream (4237), Kyocera (6971), Kyosemi (unlisted).
Solar cell (a-Si) Kaneka (4118), Mitsubishi Heavy Industries (7011), Sharp (6753), TDK (6762), Fuji Electric Systems (unlisted), Energy Conversion
Devices (US), Shenzhen Topray (China), ERSOL (DE), Schott Solar (DE).
Solar cell (CdTe) First Solar (US), Antec (DE).
Solar cell (CIS/CIGS) Wurth (DE), HelioVolt (US), Miasole (US), NanoSolar (US), Global Solar (DE), Showa Shell Sekiyu (5002), Honda Motor (7267).
Source: JPMorgan.
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Tokuyama
MEMC
Wacker
REC
PV Crystalox Solar
SolarWorld
Schott Solar
SUMCO
Sharp
Kyocera
BP Solar
Mitsubishi Electric
Sanyo
Q-Cells
Motech
SunPower
Suntech
Solon
Conergy
Sekisui Chem
Source: Companies, JPMorgan.
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Taiw an
11%
Europe
73%
Solar cell
98%
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Evergreen Solar
Company Description: Evergreen Solar Inc. develops, manufactures, and markets solar power Country: United States
cells, panels, and systems that provide environmentally clean electric power throughout the world. Ticker: ESLR
The company’s solar power products draw electricity from solar cells, which are semiconductor Analyst: Christopher Blansett
devices that convert the sun's energy into electricity. Rating: Neutral
Price (LC): 13.7
Mkt Cap (US$MM): 1,325
Founded: 1994, Listed: 2000 Fiscal Year End: December
Key Management: Richard M Feldt, Michael El-Hillow, Terry Bailey, Jack I Hanoka, Mark a Farber No. of Employees: 330
Key Customers
Key Suppliers NA
NA Evergreen Solar
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USA
11%
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SunPower Corporation
Company Description: SunPower Corporation designs and manufactures silicon solar cells. The Country: United States
cells generate electricity from sunlight. Ticker: SPWR
Analyst: Christopher Blansett
Rating: Overweight
Price (LC): 117.4
Mkt Cap (US$MM): 9,503
Founded: 2002, Listed: 2005 Fiscal Year End: December
Key Management: Thurman J Rodgers, Thomas H Werner, Richard Swanson, Emmanuel T Hernandez, No. of Employees: 1,752
Panemangalore Pai, Brad Davis
United States
Germany 32%
49%
Asia
Solar Cell
Others 7% 100%
12%
Key Customers
Key Suppliers NA
NA SunPower Corporation
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Japan
1%
South Africa PV modules
China
0% 79%
22%
Key Customers
Key Suppliers Conergy AG Atersa
Deutsche Solar AG LDK
Suntech IBC Solar AG SolarWorld AG
MEMC Shanghai Comtec Ibesolar Energia S.A
REC Sunlight Group
Hoku Materials
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698
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com
699
Bhavin Shah Asia Pacific Equity Research
(852) 2800-8538 07 January 2008
bhavin.a.shah@jpmorgan.com
Asia Pacific Asia Pacific Asia Pacific Asia Pacific Asia Pacific Asia Pacific
Sector Sales/ Japan Shoji Sato Taiwan Alvin Kwock India Pan Asia Bhavin Shah Japan Yoshiharu Izumi Pan Asia Bhavin Shah
Specialists Yoshiharu Izumi Gokul Hariharan Manoj Singla Shoji Sato
EMEA - John McPate Masashi Hayami Anthony Huang South Korea JJ Park Taiwan Kevin Chang
Luke Dyas Kevin Chang Sungrok Hwang
US- Peter J McGough South Korea JJ Park Sung Namgoong HK/China Charles Guo
Matthew D Lota Sungrok Hwang HK/China Charles Guo
Asia - Lee Meyer Sung Namgoong Taiwan Roland Shu Japan Yoshiharu Izumi
Japan Yoshiharu Izumi Cynthia Chou Akira Kishimoto
Taiwan Gokul Hariharan Akira Kishimoto Alvin Kwock Shoji Sato
Carrie Liu Shoji Sato Gokul Hariharan Naomi Miwa
Anthony Huang
Liang-Chun Lin South Korea JJ Park
David Liu