Solar Cell Production Jumps 50 Percent in 2007

The Earth Policy Institute recently released is “Eco-Economy
Indicators” for the solar energy market in 2007. Below are some of
their key findings.

Production of photovoltaics (PV) jumped to 3,800 megawatts worldwide
in 2007, up an estimated 50 percent over 2006. At the end of the
year, according to preliminary data, cumulative global production
stood at 12,400 megawatts, enough to power 2.4 million U.S. homes.
Growing by an impressive average of 48 percent each year since 2002,
PV production has been doubling every two years, making it the
world’s fastest-growing energy source.

Photovoltaics, which directly convert sunlight into electricity,
include both traditional, polysilicon-based solar cell technologies
and new thin-film technologies. Thin-film manufacturing involves
depositing extremely thin layers of photosensitive materials on
glass, metal, or plastics. While the most common material currently
used is amorphous silicon, the newest technologies use non-silicon-
based materials such as cadmium telluride.

A key force driving the advancement of thin-film technologies is a
polysilicon shortage that began in April 2004. In 2006, for the
first time, more than half of polysilicon production went into PVs
instead of computer chips. While thin films are not as efficient at
converting sunlight to electricity, they currently cost less and
their physical flexibility makes them more versatile than
traditional solar cells. Led by the United States, thin film grew
from 4 percent of the market in 2003 to 7 percent in 2006.
Polysilicon supply is expected to match demand by 2010, but not
before thin film grabs 20 percent of the market.

The top five PV-producing countries are Japan, China, Germany,
Taiwan, and the United States. (See data.) Recent growth in China is
most astonishing: after almost tripling its PV production in 2006,
it is believed to have more than doubled output in 2007. With more
than 400 PV companies, China’s market share has exploded from 1 
percent in 2003 to over 18 percent today. Having eclipsed Germany in
2007 to take the number two spot, China is now on track to become
the number one PV producer in 2008. The United States, which gave
the world the solar cell, has dropped from third to fifth place as a
solar cell manufacturer since 2005, overtaken by China in 2006 and
Taiwan in 2007.

Strong domestic production is not always a good indicator of
domestic installations, however. For example, despite China’s
impressive production, PV prices are still too high for the average
Chinese consumer. China only installed 25 megawatts of PV in 2006,
exporting more than 90 percent of its PV production, mainly to
Germany and Spain. But large PV projects are expected to increase
domestic installations. China is planning a 100-megawatt solar PV
farm in Dunhuang City in the northwestern province of Gansu, which
would have five times the capacity of the largest PV power plant in
the world today.

Despite its skies being cloudy two thirds of the time, Germany has
been the leading market for PV installations since it overtook Japan
in 2004. In 2006, Germany, adding 1,050 megawatts, became the first
country to install more than one gigawatt in a single year. Driven
by a feed-in tariff that guarantees the price a utility must pay
homeowners or private firms for PV-generated electricity, annual
installations in Germany alone have exceeded those in all other
countries combined since 2004. There are now more than 300,000 
buildings with PV systems in Germany, over triple the initial goal
of the 100,000 Roofs Program launched in 1998. Growth is set to
remain strong, as a feed-in tariff of 49¢ per kilowatt-hour will
remain in place through 2009.

Japan, the United States, and Spain round out the top four markets
with 350, 141, and 70 megawatts installed in 2006, respectively.
(See data.) Thanks to a residential PV incentive program, Japan now
has over 250,000 homes with PV systems. But the country is currently
experiencing a decrease in the growth rate of PV installations
resulting from the phase-out of the incentive program in 2005 and a
limited domestic PV supply due to the polysilicon shortage.

In contrast, the growth in installations in the United States
increased from 20 percent in 2005 to 31 percent in 2006, primarily
driven by California and New Jersey. The California Solar Initiative
was launched in January 2006 as part of the state’s Million Solar
Roofs program to provide more than $3 billion in incentives for
solar power. The goal is to generate 3,000 megawatts of new solar
power statewide by 2017. New Jersey’s Clean Energy Rebate Program,
which began in 2001, offers a rebate of up to $3.50 per watt for
residential PV systems, contributing to a more than tripling of
installations between 2005 and 2006. Other states, such as Maryland,
have passed renewable portfolio standards that mandate a certain
percent of electricity generation from solar PV. For Maryland, the
goal of producing 2 percent of electricity from the sun by 2022 is
expected to lead to 1,500 megawatts of PV installations in the state.

Initial estimates for the United States as a whole indicate that PV
incentives, including a tax credit of up to $2,000 available under
the U.S. Energy Policy Act of 2005 to offset PV system costs, helped
to achieve an incredible 83-percent growth in installations in 2007.

Spain tripled its PV installations in 2006 to 70 megawatts. A
building code that went into force in March 2007 requires all new
nonresidential buildings to generate a portion of their electricity
with PV. Spain also initiated a feed-in tariff in 2004 that
guarantees that renewable energy will be bought by utilities at
three times the market value for 25 years. In September 2007, a 20-
megawatt PV power plant, currently the largest in the world, came
online in the Spanish town of Beneixama and is producing enough
electricity to supply 12,000 homes. By the end of 2008, cumulative
PV installations in Spain are expected to exceed 800 megawatts,
twice its original 2010 goal.

Of the world’s PV manufacturers in 2007, Sharp (Japan), Q-Cells
(Germany), and Suntech (China) claimed the top three positions. (See
data.) But after holding the top spot for more than six years,
Sharp, hampered by limited access to polysilicon, is likely to post
only a 4-percent growth in production in 2007, well below the 50 
percent industry average. However, Sharp’s annual thin-film
production capacity is on track to increase from 15 megawatts today
to 1,000 megawatts per year in 2010.

Suntech, a relatively new firm started in 2001, was the
fourth-largest PV manufacturer in 2006, and eclipsed Kyocera in 2007 
to take third place. In the first half of 2007, Suntech produced
almost as much PV as it did in all of 2006.

Capitalizing on the polysilicon supply crunch, First Solar in the
United States moved into the top 15 global manufacturers in 2006 by
producing 60 megawatts of cadmium telluride thin-film PV, triple its
production in 2005. In the first half of 2007, First Solar leapt
onto the top 10 list, moving up five spots to number eight and
continuing its reign as the fastest-growing PV manufacturing company
in the world.

The average price for a PV module, excluding installation and other
system costs, has dropped from almost $100 per watt in 1975 to less
than $4 per watt at the end of 2006. With expanding polysilicon
supplies, average PV prices are projected to drop to $2 per watt in
2010. For thin-film PV alone, production costs are expected to reach
$1 per watt in 2010, at which point solar PV will become competitive
with coal-fired electricity. With concerns about rising oil prices
and climate change spawning political momentum for renewable energy,
solar electricity is poised to take a prominent position in the
global energy economy.

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