PVC Industry - Current State and Future Trends

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1 EUROPEAN COMMISSION JOINT RESEARCH CENTER DIRECTORATE-GENERAL Institute for Energy Energy Systems Evaluation Unit Petten, 3 May 2007 Subject: Report on the Hearing of the Photovoltaic European Technology Platform Participants: European Commission: SCHMITZ B. (Chair), MOLINA G., EVANS G., PETEVES S., TZIMAS E., MENNA P., PATHIRANA S., OSTROM R., JARVILETHO P. AGE: BALLEY R., HOFF T. PV Technology Platform Panel: PEREZAGUA E., SCHELLEKENS E., NIELSON L., PIETRUSZKO S., DESPOTOU E., NEMAC F., JONGERDEN G., WOLFJEGGER C., FRISANI A. Venue & Date: Square de Meeus 8, SDME 10F, Brussels, March 23, 2007 (9-12:30) 1. Photovoltaic systems: current state of the sector and anticipated developments The total installed capacity of photovoltaic (PV) systems in the EU in 2005 was 2 GW p, which represents approximately 0.3% of the total EU electrical capacity (706 GW in 2004). The electricity generated by PV systems that year was approximately 1.5 TWh. Annual installations in the EU reached 792 MW p during 2005 with approximately 760 MW p in Germany, due to strong financial support in the form of feed-in tariffs. To put these figures in a global perspective, the cumulative PV capacity installed worldwide in 2005 was 5 GW p that increased to 7 GW p in 2006; and the annual global production of PV modules was approximately 2.5 GW in 2006 showing an annual growth rate of 40%, on average since From these figures it is apparent that Europe, and more specifically Germany, has a pivotal position in the sector, sharing with Japan and the USA, mainly California, 80% of the global market. The global business value of the sector is estimated to be 12.5 billion. Current PV systems are based predominantly on crystalline silicon technology that is well matured for a wide range of applications. Today the average turn-key system price is 5/W p and the efficiency of commercial flat-plate modules and of commercial concentrator modules is up to 15% and 25%, respectively. The typical system energy pay-back time depends on the location of the installation. In Southern Europe this is approximately 2 years and increases at higher latitudes. Finally, the average generation cost of electricity today is about 30 c/kwh, ranging between 20 and 45 c/kwh depending on the location. 1/5

2 Currently, there is a strong effort underway to expand PV markets in Southern Europe, and more specifically in the Mediterranean countries where PV systems are more efficient due to the solar radiation characteristics. The difference however in the solar radiation between southern and northern Europe is of the order of 2. Hence, it is expected that gradually, the PV market should start becoming competitive with consumer electricity prices in Southern Europe and expanding northwards. Deployment will take advantage of cost reductions resulting from, among other factors to be detailed below, learning effects from the increased installed capacity in southern Europe. In addition to learning effects and the scale up of production, innovation will contribute to reducing costs and making this technology more cost competitive. As an example, the industry managed to reduce the thickness of silicon wafers used in PV systems by almost 30% during the past decade, with concomitant reductions in silicon usage and hence costs, adapting to the limited silicon availability in the market. Moreover, significant improvements in the energy efficiency of methods that are used to produce the silicon wafers are anticipated in the short to medium term that are going to have a positive impact in the production cost of the PV systems. Overall, the cost of a typical turn-key system is expected to be halved to 2.5/W p in 2015, to 1/W in 2030 and to 0.5/W in the longer term. Simultaneously, module efficiencies will also increase. Flat-panel module efficiencies will reach 20% in 2015, 25% in 2030 and up to 40% in the long term, while concentrator module efficiencies will reach 30%, 40% and 60% in 2015, 2030 and in the long term respectively. As a consequence, the cost of electricity is expected to be competitive with the price of retail electricity in 2015, reaching 15c/kWh, and be competitive with wholesale electricity (6 c/kwh) in Ultimately, the long term objective of the sector is to generate electricity at 3 c/kwh and reduce the system energy payback time to 1 year in 2015, 6 months in 2030 and 3 months in the long term in southern Europe. Obviously, the corresponding figures for Northern Europe will be longer. Crystalline silicon-based systems are expected to remain the dominant PV technology in the short term. They are based on the most mature technology and they currently demonstrate the highest efficiencies amongst flat panels. In the medium term, however, thin films are expected to capture the PV market becoming integral parts of all new buildings. Thin film technology has a high potential to be a low cost solution. Despite an efficiency lower than that of silicon wafer-based modules, thin-film modules have the advantage to be very well integrated in buildings, they can easily be placed for instance in facades and they are aesthetically acceptable in large surfaces. Only in the long term, new and emerging ideas will come to the market, such as high concentration devices, that are better suited for large grid-connected multi-mw systems. In the long term, compact concentrating PV systems may be integrated in buildings. Overall however, the view of the Platform is that these technologies should not be prioritised as they will all contribute to the achievement of the targets of the PV sector. According to the panel experts, 80% of capacity in 2010 will be based on crystalline silicon, 17% in thin films and 3% in other technologies. In 2030 it is expected that these three technology groups will have equal shares in the installed PV capacity. On the question if there are any specific issues that need to be resolved to enable the rapid deployment of thin films in buildings, the experts responded that there are 2/5

3 no technological bottlenecks for building integration. The difficulty in starting to integrate thin films arises from the lack of interaction between architects/civil engineers and PV designers. Furthermore, construction and building codes need to be changed and the awareness of constructors and house designers in PV systems needs to be raised. Finally, the issue of the limited lifetime of thin films needs to be addressed. The limited availability of silicon feedstock has slowed down the production of modules and the penetration of the technology in the recent years. According to the experts however, the issue of silicon availability is resolved as new production units are putting in place. The shortage of silicon has been a consequence of the lack of development of new silicon purification facilities in the past years as well as to high rates of market growth. It is notable that just 5 companies produced 85% of the silicon needs worldwide in 2005, 4 of which are heavily involved in the microelectronics sector. Silicon purification companies were reluctant to invest in new production capacity, required for meeting the needs of the PV sector, before they were convinced on the continuity of growth of silicon demand in the PV sector. As of 2004, the PV industry became an important silicon consumer. Nowadays there are 15 plants worldwide that purify silicon, 5 of them situated in the EU (FR, SP, D-2-, CZ). These plants rely on new processes that consume 40% less electricity for the purification of silicon. Furthermore, a few more companies will be able to provide the market with purified silicon with the purity requirements for PV systems in the next 1-2 years, based on more advanced purification processes. It was also noted that although the purity of silicon used in the past has been deteriorating, the efficiency of the modules has not been reduced, highlighting the adaptability of the sector to new silicon grades and the recent technological improvements in PV technology. In conclusion, the secure supply of silicon and R&D advances that have been triggered by the need to overcome the reduced silicon availability during the last years, combined with the industrial research activity complemented by national and European research programmes are expected to have a significant impact on the cost of PV systems at the end of this decade. 2. Technology penetration targets and the expected impact on energy policy goals The ultimate goal of the PV sector is to become competitive with all sources of electricity in the short term. The vision of the PV sector is to capture 1-2% of the electricity demand in 2020, 5% in 2030 and more than 20% in Furthermore, all new buildings will be integrated with PV systems from 2030 onwards. According to the Platform experts, photovoltaic systems can have a major social and environmental impact and economic benefits. A key advantage of PV systems is that electricity generation can be decentralised, with PV systems installed next to the existing grid or as stand-alone where there is a need for electricity. The following advantages were mentioned during the hearing: Environmental: Electricity generation is emissions-free. Calculations made by the Platform indicate that for each GWh of electricity generated from PV systems, approximately 400 tonnes of CO 2 are can be avoided. 3/5

4 Economical: In principle, electricity generation from PV systems offers significant economic advantages. The generation of electricity is predictable (± 15%) and reaches its daily maximum during the same period of the day when demand is peaking. The platform experts showed that in Japan and in California, PV systems are now almost cost competitive with mainstream power generation technologies for the generation of peaking electricity. Social: The development of a PV market requires large PV system manufacturers, high technology OEM companies, consultant firms, installers and other engineers. Overall, 50 highly specialised jobs are created for each new MW of production capacity, which is an additional benefit to the environmental and economic benefits mentioned above. Moreover, PV systems appear to be a good solution for nonelectrified areas in the developing world. 3. Interactions with other competing or synergetic technologies and community policies and initiatives Platform experts see that PV systems are not in competition with other RES systems. As mentioned above, the ultimate goal of the community that supports PV systems is to make the technology competitive with all sources of electricity in the short term and then allow all technologies to compete for their fair share in electricity generation. Looking at the global dimension, Europe should maintain its key position as the front runner of PV technology, despite the arrival of new competitors from Asia In the top- 10 PV system manufacturers there are 4 European companies. The annual turnover of the European PV industry is billion euros. It was noted however that in 2005, EU was a net importer of PV systems. The aim of the PV community is to expand the European PV market by offering the right financial and legal incentives, which in turn will further promote the production of PV systems to meet the European demand. The PV community however believes that the future of the sector relies to a great extent also on exports to developing nations. Exports are essential for Europe to keep the leadership in the sector as this will allow the build-up of the necessary critical mass in production capacity that will bring production costs down. Initial investment in the sector is the key enabling point, while structural funds can help overcome the initial barriers. To this end, the Technology Platform has formed a dedicated Working Group to look into the possibilities for exporting PV systems. Concerning the mapping of national initiatives, the Platform mirror group is mandated to produce a coherent plan of R&D needs in the near future. Finally, in the area of collaboration in research and development with countries outside the EU, it was stated that such interactions have been limited. 4. The role of innovation The penetration targets mentioned in Section 2 and the resulting benefits cannot be reached with a BAU scenario. The Platform experts identified the development of a healthy and growing market as the most essential ingredient for the development of PV technologies as this will stimulate competition which in turn will trigger further innovation. Furthermore, it was stressed that to ensure a short and middle term 4/5

5 development market pull mechanisms are very important. To this end, the maintenance of feed-in tariffs was deemed essential for the survival of the sector as this will allow the industry to grow. At the same time R&D push tools are essential in order to accelerate technology developments and reduce costs. In terms of research efforts, the industrial sector focuses on actions that can allow the achievement of the efficiency figures and the reduction of system costs mentioned above (see Section 1), that are necessary for the viability of the sector. These measures include the development of advanced manufacturing systems, short/medium term research for product optimisation, mainly on crystalline-silicon systems, and building integration. It is stressed however that industrial research is focused on short term priorities. On the other hand industry involvement in long term research, in areas such as material development (solders, glass, laminates) and thin film integration is not very important. A number of more specific techno-economic barriers to the expansion of the sector were identified in the hearing, that included the lack of skilled professionals, the usage of precious raw materials e.g. silver, the need to develop methods for recycling, the introduction of new materials, building and infrastructure integration, regulatory and administrative barriers, such as access to grid and shorting of long waiting times for connection, and finally, lack of public awareness including construction experts. The panel of ETP experts was however unable to provide a list of priority research issues for the short term during the hearing. Nevertheless, it was stressed that the PV community can collaborate very effectively to jointly address pre-competitive techno economic barriers to the further deployment of PV systems. 5. Platform recommendations for Actions to be considered in the SET-Plan The hearing resulted that only one large scale initiative at the European level is not able to resolve all technology related issues. Important research topics have been formulated and submitted to the hearing committee. It was stressed however that it is imperative for Europe to maintain the growth of the European PV market and spread it throughout Europe and in the developing world. In terms of research and development, the Platform suggested the availability of additional funds for FP7 and national projects to support the strategic research agenda that was fully endorsed by all members of the platform. The need for a more coherent research programme across Europe was also stressed, as the fragmentation of research efforts will have detrimental effects on the sector. Finally, the Platform suggested that one single topic that may deserve to be a large scale project is silicon purification with the aim to reduce costs from 40/kg nowadays to 10-20/kg 5/5