Mar 4, 2009

Good News for Solar Power

In my last post, I'd talked about how First Solar made a breakthrough with their photovoltaic cell fabrication process to reduce the cost of solar to under $1 per watt. 

My roommate, Zach, forwarded me an article about First Solar, which relates to my last post. The article, from CNet Green Tech, is about how First Solar acquired the rights to complete projects that a rival solar company called OptiSolar could no longer complete due to the economic recession. More details on the deal can be found here.

What's more interesting than the deal itself is the implications of these types of consolidations for the solar industry. There's a recent trend going on with solar power that brings both good news and bad news, but I think the positives for the industry outweight the negatives.

As this Economist article points out, the costs of manufacturing solar panels have been declining partly lately due to an excess supply of silicon. Since silicon producers catered less to the solar industry because of the uncertainty of the industry, the costs of acquiring silicon for solar panels was much higher. However, as solar power started becoming more popular, more and more sources of silicon opened up, leading to lower prices for silicon and lower costs for solar companies. These costs were further reduced due to better manufacturing techniques and increased solar cell power efficiency.

Since First Solar hit the $1 per watt mark manufacturing cost of their solar modules, other solar companies have been scrambling to reach that target. As these costs go down, more and more solar companies are able to offer their solar panels at lower prices, which is great news for consumers. The price of panels was probably one of the biggest hurdles for the adoption of the technology (that and the low energy efficiency of solar cells). However with cheaper prices, people can more easily adopt solar power as an alternative energy source, benefiting from its clean, virtually emission-free energy generation.

This does, however, pose problems for some solar companies. With decreasing costs, and with solar companies pushing to deliver panels at lower prices, companies unable to keep pace will either have to sell to rival companies or go out of business. These companies also face the additional challenge of increasing difficulty in funding from venture capital firms, who will most likely start to look to invest in companies that are in a stronger and better position to manufacture solar modules.

On the bright side, companies who are in a strong position, such as First Solar and Sharp among others, now have the opportunity to expand their business and grow by acquiring a greater share of the solar market. As the industry consolidates, these key players will be in a better position to manufacture solar power modules in large scales and potentially combine research from acquired rivals to discover new ways to make solar power cheaper and more efficient.


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