The success of thin-film solar champion First Solar Inc. (FSLR), which claims to have the lowest manufacturing costs -- and largest production volume -- in the industry, has spawned a whole herd of new thin-film solar startups. But many of these thin-film solar babies are unlikely to survive the next two years, Photon Consulting analyst Ryan Boas said at a solar conference in San Francisco this week.If he's right, thin-film solar investors can expect to see some losses this year and next as a group of venture-backed startups start to fail. The period could represent a closing window of opportunity for some thin-film technologies, which offer the potential to dramatically reduce solar costs through the use of different materials and production processes, as prices for conventional solar panels continue to fall and new companies find it increasingly more difficult to raise money. And that could ultimately delay – or prevent – some promising technologies from reaching the market.

The problem is not a lack of potential. At Photon's Photovoltaic Technology Show, Boas said he expects overall thin-film solar production to grow from an estimated 2.3 gigawatts last year to 3.3 gigawatts in 2010, 3.6 gigawatts in 2011, and 4.9 gigawatts in 2012. He also expects First Solar to remain the world's largest panel manufacturer in 2012, with an estimated 2.8 gigawatts of production. Another research firm, iSuppli Corp., has projected that thin-film technologies will account for a whopping 31% of the global solar market in 2013, up from 14 percent in 2008. "Thin film will play a role that's much larger than many give it credit for over the next two to three years," Stephen O'Rourke, an analyst at Deutsche Bank Securities, said at the show.

'Massive' Balance Sheets Needed

In spite of the expected growth, Boas predicts that many thin-film startups won't be able to raise the hundreds of millions of dollars they need to reach commercial-scale production. In the current risk-averse economic climate, small companies without the needed "massive" balance sheets will have a tough time ramping up to a significant scale, and many won't be able to continue to compete, he said.

That's already happened with at least one notable startup, Hayward, Calif.-based OptiSolar Technology, which last year laid off 500 employees, shut its factories, sold its project pipeline to First Solar, and sold its other assets to Canadian solar company ePod Solar Inc.

The closure sent a shock wave through the solar industry, as the company had raised more than $300 million in funding -- making it one of the highest-funded solar startups -- and had 1.3 gigawatts worth of utility projects in the works.

But now, nearly all thin-film companies are losing money, Boas said, and many are revising or delaying their expansion plans while they seek capital. Overall, he estimates thin-film companies will face $1.5 billion to $2 billion in operating losses this year. The ensuing shootout will thin the herd of 240 thin-film companies, (up from 193 companies that Photon Consulting tracked in December 2008) by 2011, he said. Most likely to suffer are companies that haven't yet reached volume production and have higher costs, lower efficiencies, or the perception of higher risk, Boas said.

Acquisitions Coming

Meanwhile, stronger players stand to gain market share as their weaker competition dies off. Companies that can reach 1 gigawatt of production capacity, total costs of less than $1 per watt and prices of $1.10 per watt by 2012, and that have strong balance sheets, should survive -- and some will become second First Solars, Boas said. Some startups may also get acquired by large, well-funded companies, which could drive major expansions for thin-film solar, he added.

In other words, you can expect to see big winners, as well as losers, when the dust settles. "We're not sure who's going to survive and who's going to go down, but we expect both to happen," Boas said. "In the next two to three years, we're going to see a dramatic change in the landscape."


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tom0571@msn.com

I rarely comment here, because so many others have already said it all and in far wittier language which should tell you that you do, indeed, have an http://www.ejaisolar.com/ audience. But check your email.

November 21 2010 at 1:27 AM Report abuse rate up rate down Reply