Thin-film solar technologies might make up a small portion of the world's solar panels today, but they made up almost half of the solar cells produced in the United States last year, Travis Bradford, president of the Prometheus Institute, said at Greentech Media's Solar Market Outlook this week.
According to Bradford, U.S. companies produced 92.5 megawatts of thin films, compared with a total of 201.6 megawatts of solar panels. Worldwide, thin films, which use little or no silicon, have grown from 4 percent of the solar market a few years ago to about 7 percent today, he said.
Thin films made up of amorphous silicon account for the largest chunk of the production, reaching 97.7 megawatts in 2006, while cadmium-telluride made up 68 megawatts and copper-indium-selenide and copper-indium-gallium-selenide made up only 4.9 megawatts, according to Bradford's presentation.
First Solar, which makes cadmium-telluride films, has quickly grown to be the largest supplier of solar cells by far, with 60 megawatts of production in 2006 and a 31 percent market share, Bradford said.
The company has been "a bright spot" in a rough year, what with falling panel prices and spot prices for solar-grade silicon rumored to have grown as high as $400 per kilogram, Bradford said.
First Solar shares (NSDQ:FSLR) have increased a whopping 17.9 percent so far this month, closing at $185.39 per share Wednesday, after the company announced a $1 billion sales deal, heftily beat third-quarter earnings expectations and said it was adding another 480 megawatts of annual capacity to its current 210 megawatts (see Thin-Film Solar Production to Leap Forward, Thin-Film Solar Gets Another Boost).
Even as some companies have announced decreasing margins, First Solar posted a third-quarter gross margin of 51.6 percent, up from 39.9 percent in the year-ago period, and said it expects to retain an operating margin of 25 percent and gross margins of 35 to 40 percent in the long term.
While glass packaging keeps the company from targeting new applications that require more flexible panels and could potentially keep First Solar from reaching the lowest prices in the future, it hasn't been an issue so far, Bradford said.
"First Solar says, 'We don't need long-term price declination; we can [get costs to] less than $1.25 per watt today,'" Bradford said, adding the company expects its costs will drop below $1 per watt by 2009.
If it achieves those costs, First Solar probably will be "within spitting distance" of 1 gigawatt by 2010 -- and with decent margins, considering it has contracts to supply its panels for $1.85 per watt, he said.
The company already has changed the game in the worldwide shortage of solar-grade silicon, Bradford said.
"You're hardly able to make a wafer for $1.85 a watt, much less a cell or a module," he said.
The company's performance may have encouraged other companies to pursue thin films more aggressively as well.
Sharp Corp. said it is building a 1-gigawatt thin-film plant in Japan, and Oerlikon and Applied Materials customers also have announced plans that amount to another 1 gigawatt of capacity, to name just a few examples (see Thin-Film Solar Production to Leap Forward, Thin-Film Solar Gets Another Boost).
The shorter lead times for building thin-film solar manufacturing capacity could be an advantage in the next few years, as the solar industry sees shrinking margins, Bradford predicts.
First Solar might take between nine and 15 months to build a new plant, compared with the three years or more that it takes to build polysilicon plants, he said.
That means thin-film companies can be more responsive to demand, a considerable advantage in a volatile market, he said.
However, not everyone holds the same view.
While advocates say thin films have the potential to produce panels for less, very few companies have reached mass production after decades of research.
First Solar could be a sign the problems that have kept predecessors from success, including difficulties manufacturing thin films cheaply at high volumes, are solvable. Or the company could be an exception to the rule.
"I agree First Solar's a phenomenal company; I just question who will be Second Solar," said Jeff Osborne, a managing director and analyst at Thomas Weisel Partners.
After all, even First Solar developed its technology over 10 years, explored three different technologies and changing its name four times during that period, he said.
Another problem?
"There are no investable assets in thin-film," Osborne said.
While First Solar investors clearly value thin-film technology highly now, Osborne wonders how much of that value is due to being "the only player of note in a niche market" and whether the higher value accorded to thin-film companies would drop if more of them went public.
"I question whether 80 players will get the funding to expand like that," he said. "I would venture to guess that half of them will fail."