The Solar Revolution: Part 3

by: Jonathan Fishman

If you haven't read part 1 or 2, please go ahead.

In this last part of "The Solar Revolution," I will share my predictions for the solar industry for the next 3 decades. Let's start.

Future Technologies

To understand how my predictions could materialize, we need to understand the technologies that enable further cost reduction. I won't go through all of the solar innovation companies around the globe, as there are hundreds. Instead I'll draw lines that will enable you to get a clue about how solar panel costs can be further reduced.

Before we get into each technology in specifics, where did the recent cost reduction came from? A useful GTM research report can help us understand.

Source: GTM Research

It is clear that polysilicon has been the main target for cost reduction over the past 3 years. Prices of polysilicon plunged, and manufacturers were able to reduce polysilicon grams per watt from more than 6 grams per watt, to SunPower's (NASDAQ:SPWR) recent announcement of 4.2 grams per watt. SunPower now makes polysilicon wafers as thin as 135 microns. Where will cost reduction in the future come from?

Source: GTM Research

Technological advances will drive cost reductions in the near future. Let's examine what exciting new technologies are out there these days.

Manufacturing Cost Opportunities


Silicon is currently the lead target when thinking of cost reduction. Most of the silicon cost reduction comes from reducing the thickness of silicon wafers. GT Technology (GTAT) is working on a machine called Hyperion. The Hyperion is an Ion Implanter, a machine capable of producing silicon wafers at a thickness of down to 5-20 microns. The entire manufacturing process needs to be transformed to support these ultra-thin wafers. If no technological limit had been present, 50 microns would have been the optimal wafer thickness, efficiency-wise.

Source: Crystal Solar website, from "Limiting Efficiency of Silicon Solar Cells," Tiedje et al. IEEE Trans. Electron Devices, Vol. ED-31, No. 5, May 19

Anti-reflective coating

Recently, Natcore Technology announced that its black silicon process could reduce the reflectivity of solar cells from today's ~6% to under 1.5%. This will enable the transformation of today's texture etching to black silicon etching and improve the light absorption of solar cells. Natcore claims this process can reduce production costs by 23.5%

Crystal Solar

Crystal Solar is a start-up that recently announced that it plans to bring its epi thin-silicon technology to market by 2014. Crystal Solar claims that their process can reduce costs to well below 50 cents per watt. The epi thin-silicon process suggests possibilities for re-inventing the way manufacturers make solar cells by transforming the manufacturing process itself. As the solar industry isn't ready to handle wafers that are 50 micron thick, Crystal Solar claims it has developed equipment for handling and packaging the ultra-thin cells as well.


As the cost of labor in China is constantly on the rise, more automated factories can bring labor costs down.

Source: GTM Research

Electricity Storage

Electricity storage is one of the big problems the solar industry faces. First, let's take a look at current methods of storing energy.

  1. Compressed Air: A method of using renewable energy to compress air whenever there is excess energy generation. When there is a demand for that energy, the compressed air is heated and flows into a turbine, where electricity is generated.
  2. Liquid Air: A method of compressing and cooling air to liquefy it (air at extremely low temperatures). When energy is needed, the liquid air is expanded to spin a turbine, thus producing electricity.
  3. Batteries: A method of storing energy in the form of electrochemical cells, which generate energy from chemical reactions, used as batteries.
  4. Flywheel: A method of storing energy as kinetic energy through a device that holds a disc in a very low-friction environment. The disc spins faster when energy is pumped into the device. When energy flows out of the device, the disc spins slower. This suits applications that need very brief bursts of energy.
  5. Hydrogen: A method of using electricity to electrolyze water, which this process turns into hydrogen and oxygen. The gas is stored in separate tanks, and then the hydrogen is used to produce electricity by various methods (fuel cells, turbine, combustion, others).
  6. Electric Vehicle: A method of using the fleet of electric cars, as they already have built-in batteries, as grid-level storage. When energy is needed, the car battery pumps electricity back to the grid; when energy is no longer needed, the battery is charged. This is called "Vehicle-to-Grid" storage.
  7. Pumped Water: A method of using the excess electricity to pump water uphill and then, when demand is present, using gravity to get the water downhill and use it for hydroelectric generation. This is the most common and low cost way of storing energy today.


Lux Research predicts that solar energy systems with an integrated storage will rise to $2.8B by 2018, up from less than $200M this year. What future technologies can drive that growth?

  • Liquid metal battery (NASDAQ:LMB) technology such as that developed by Ambri. This LMB has the potential of delivering a cost of $100/KWh.
  • Hydrogen technology combined with revolutionary fuel cells such as the Energy Server offered by Bloom Energy.

Because the need for new energy storage devices, utility scale and residential scale alike, is rising, I expect that costs will go down gradually until you will be able to purchase an energy storage device for your home just like any other appliance. It is unclear yet what technology will dominate this area.

My Predictions

Intro and Assumptions

My predictions are based upon thorough, country-by-country research. I researched each country's solar development plans up to 2020, and took into account the emerging solar markets. My predictions going up to 2050 assume a slower rate of price and cost reductions compared to Swanson's Law. I expect that in the 2020-2030 decade, price per watt will decrease at a rate of 20% for each tripling of installed capacity. In the 2030-2040 decade, I expect that the rate will decrease to 17%, and in the 2040-2050 decade the rate will decrease to less than 10%. More than that, I made the assumption that the market will be healthier after the 2015 timeframe and price will be set such that normal industry gross margins of 30%-35% will be sustained as the industry grows more mature. I think the commercial efficiency of panels will peak at just over 30% in 2050, unless new breakthroughs in the efficiency front will be introduced. All quantities are in GW. After a few years, depreciation becomes more relevant as modules are retired after 20-25 years.


We are almost 4 years into the second decade of the twenty-first century. This decade started with extreme over-supply in the industry. By year-end 2013, the worst is behind us.










Current Year Installations









Cumulative Installed Capacity




































I predict that residential solar will start picking up as we get closer to the end of this decade. As energy storage solutions evolve, economical solutions for residential, commercial, and industrial purposes will begin to be enabled. With a good energy storage solution, consumers will be able to enjoy a system payback of 3-4 years and then enjoy 20 more years of renewable energy independence.

I expect that solar companies will use the profits they rake in to start a de-leveraging process that will take a few years into the 2016-2017 timeframe. After de-leveraging we might see signs for consolidation in the industry. Up to 2015, the price increase is due to the ban of capacity expansions being imposed by the Chinese government, which will limit the tier-1 supply.

Source: EPIA 2013 report


By 2030, I predict that the attractiveness of stand-alone solar systems will be very high. Those are systems that can store enough energy to enable consumers to be almost 100% dependent on renewable energy. The value proposition for such a product will be substantial and consumers' demand will increase rapidly. Somewhere around the beginning of the third decade of the twenty-first century, the world will cross the 1TW cumulative installed capacity mark.



Current Year Installations


Cumulative Installed Capacity








Similar to what happened in the HDD industry, by the end of the fourth decade, the solar industry will be ripe for massive consolidation. I predict most new houses built in this decade will include a built-in solar system. Some countries might enforce laws that require home builders to build 100% renewable energy-dependent houses. The system cost could be added to mortgages.

2040 and 2050

By the end of the fifth decade, I predict that almost a third of the world's energy consumption will be solar sourced. In some countries, the share of solar will be larger than 50%. Energy storage will become commoditized.




Current Year Installations



Cumulative Installed Capacity












In 2050, I predict that the installed capacity will be 167 times greater than the 2013 number. Annual GW deliveries will be 115 times greater than the expected amount of 40GW for 2013.

More Notes:

  • Of course, my predictions are just a general line of thought; every investor should do his or her own thinking.
  • I believe that going forward, after a few more short-term ups and downs, the industry will maintain gross margins of a reasonable 30%-35%.
  • Electricity storage breakthroughs are necessary for my predictions to materialize. I have confidence that after several more years of research, storage solutions will be more cost-efficient.
  • I believe that after the solar market will have gone through subsidy "rehab," an economically sound market will form. Consolidation will take form as the industry matures.

Source: Harvard Business School

  • I believe the actions of CDB should be monitored closely as it still controls the Chinese part of the industry through financing decisions. If the bank decides to cut financing to a certain company in the coming years, it will have a substantial effect on that company's solvency.
  • More risks: Any long-term projections should be followed and updated constantly, as facts tend to change.


To conclude this 3-part article, I want to say that, in my view, thorough research is the key for smart investing. Any investor should take a look at the "big picture" when thinking about a market or an industry. The solar industry is just coming out of a massive crisis; it's not over yet but the future looks very bright. When you know the big picture, you understand what factors affect the industry and, thus, the companies working in it. I believe that the solar industry is still very young, and just now the financial side of the industry is starting to make sense. Going forward, given the facts that we know today, and carefully predicting the way this market develops, I think that if you do your due diligence and pick this industry's winners, you're in for a hell of a ride.

Disclosure: I am long YGE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.