- The general notion is that Chinese solar panels are lower quality. A comparison of 12 companies reveals other wise.
- Multiple R&D initiatives in the Chinese industry will lead to further efficiency increases and cost reductions.
- The upcoming CapEx up-cycle in the solar industry could result in substantial cost improvements given the newer equipment tools available today.
The myth that the title refers to is the general notion that if it's Chinese, it's lower quality. Although that notion might, in the past, have turned out to be accurate in many cases, the Chinese solar industry now produces solar panels that are of a quality that is very comparable to those produced by Western companies.
At first, we will examine the efficiency of solar panels produced by different manufacturers, then we will discuss the meaning of solar panel efficiency, and finally we'll do some thinking about the future of R&D in the Chinese solar industry.
Industry Efficiency Comparisons
First Solar (NASDAQ:FSLR) (CdTe Thin Film Modules)
Trina Solar (NYSE:TSL)
Yingli Green Energy (NYSE:YGE)
REC Solar (REC)
JA Solar (NASDAQ:JASO)
China Sunenergy (NASDAQ:CSUN)
Hanwah SolarOne (NASDAQ:HSOL)
The table above sums up the efficiencies from 12 solar manufacturers.
What Is Efficiency?
The efficiency of solar modules is measured in percentages. That percentage means how much of the sunlight energy that the solar module is exposed to, actually converts to usable electricity. Think of a 16% efficiency solar module getting an input of sunlight that carries an energy of X. That module output will be 16% × X of electricity.
Efficiency figures usually represent a figure measured in a lab test under a set of conditions called standard test conditions ((NYSE:STC)). Those conditions include a solar irradiation of 1000 W/M^2 and a module temperature of 25C. These are lab conditions, which could be very different from field conditions.
This is why, when you read my models regarding electricity production by solar module, you should know I use a relative low figure of sunlight hours. That is because, most of the time, a 300-watt module does not output 300 watts. So, calculating how much KWh that module produces depends on taking into account how much electricity is really coming out of the module, on average per year.
For example, for many projects in mid-western China, I use around four hours of sunlight, which means that a 300-watt module is generating 1.2 KWh per day. The four-hour figure compensates on efficiency losses due to field conditions (higher temperature, lower irradiation) and more.
Why does efficiency matter? The biggest reason is cost. If you can produce solar modules of higher efficiencies, less material will be required to output the same amount of electricity. That translates to cost reductions. Solar modules are quoted on a per watt basis. So if a manufacturer can produce that wattage using less materials/smaller modules/etc., he can reduce its cost per watt.
From the buyer's point of view, the meaning of higher efficiencies is the need for fewer modules in the field/on top of a roof. That has all sorts of cost advantages as the area required to deploy the system shrinks. Using an extreme example, if you want to power your house using solar modules, for every doubling of efficiency, you'll need half the area on your roof.
Global Technology Roadmap
The global development roadmap released by the National Renewable Energy Laboratories (NREL) shows a very solid trend in efficiencies. Before you fall out of your chair, just understand that efficiencies of cells in a laboratory are not comparable to real-world, field conditions.
This roadmap shows us different solar technologies and their respective efficiencies achieved in a lab. The purple lines represent multi-junction technology. That means that a solar module produces electricity utilizing more of the sunlight spectrum.
Sunlight has a broad light spectrum and by utilizing several p-n junctions, at different depths inside the cell, and different materials, more of the sunlight spectrum is turned into electricity; each p-n junction 'catches' a different part of the spectrum. The highest efficiency that a triple junction cell has achieved is 44%.
Although these kinds of cells are very costly to make, they have been used in space applications as satellites for decades. One of the most exciting developments in this area comes from the research labs of Soitec, which developed a module based on their triple-junction technology plus concentrated PV technology, which achieve an efficiency of +30%.
As we look forward to the next couple of years, we should pay a lot of attention to the development of the multi-junction technology into the mainstream solar market.
The myth has been that Chinese panels are lower quality and thus provide lower efficiencies than the European and American modules. In the case SunPower this is the case. SunPower is very well known for its high-efficiency modules. The company is focused on creating the highest efficiency module possible, while not focusing on massive capacity.
As we learn from the comparison above, the Chinese modules fluctuate around 16%−17% in efficiency. REC Solar, a European manufacturer, stands at 16.1%. SolarWorld, a German manufacturer that operates in the U.S, stands at 15.5%. Even Sharp reaches just 15.3%. Clearly, we can reach the conclusion that the Chinese don't lose on the efficiency side.
These facts show that the Chinese didn't just decide to tackle the global solar markets with cheap and low quality products back in the early 2000s. The Chinese companies invested in R&D sufficiently to bring the efficiency of their modules to a comparable level with international companies (excluding SunPower).
Let's examine what's going on with the R&D side of Chinese companies.
In April, Trina Solar announced its high-efficiency cells (Honey Ultra Module) reached 24.4% in lab conditions. Trina is utilizing IBC technology.
In May, Yingli Green Energy announced that the company is cooperating with an under-the-radar Italian company called Formula E. on a pilot production line to manufacture Metal-Wrap-Through (MWT) modules. These new types of modules increase efficiency by reducing the amount of metal on the top of a solar cell (those silver lines you see on the top of a cell).
JA Solar announced the release of a high-efficiency module using black silicon. JA Solar reported that its best cells utilizing the new technology reach more than 20% efficiency.
JinkoSolar also reported a new line of modules called Eagle +. This line of modules is expected to reach a record peak output of electricity for Jinko. Although the efficiency figure was not released, I expect these modules to get to the 18% neighborhood efficiency-wise.
We can stop here. It's clear that the Chinese industry is engaged in ongoing R&D improvements already surpassing a few Western companies and getting closer and closer to SunPower's figures.
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Many in the investing world like to point fingers at the Chinese solar industry and blame them for making poor-quality products. Judging by efficiency, we have seen that almost all of the leading solar module manufacturers in China are producing modules with the same/higher quality than most Western companies.
One exception of that is SunPower, the brilliant R&D team of which uses the most advanced and innovative technologies to make the most efficient modules in the world utilizing their MAXEON technology. That said, SunPower's focus on technology comes instead of a focus on capacity. SunPower's plans include just 1.7 GW of production capacity by 2016.
A quick check for new R&D initiatives by Chinese companies has shown us that work is in progress to reach SunPower-level efficiencies in the near future. I expect that with the upcoming CapEx cycle in the solar industry, new equipment will enable mass manufacturing of higher-efficiency modules, contributing to lower costs and better margins. Those lines of equipment are already available from top equipment suppliers like GT Technologies.
Last week GT announced a sale of next-generation HiCz furnaces, which produce n-type silicon ingots. The sale was made to a relatively unknown producer in Qatar, which reported it expects to reach cells of 22% efficiency with the new equipment. So the path for higher efficiencies is already here.
If there's one thing we can be sure of, efficiency is not going to be an issue for Chinese solar manufacturers going forward.
This article was first published on SolarStockIdeas.com
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