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Solar market thrives on venture capital and new technologies

11 Jan 2008

The solar market has been growing at an annual growth rate of between 40 and 50% since 1990 and is a $12bn business today. OLE speaks to Steve Eglash about investment trends and emerging technologies.

Steve Eglash is CEO of Cyrium Technologies, a solar energy start-up developing high-efficiency solar cells for concentrator photovoltaic (PV) applications. Prior to joining Cyrium, Eglash was a consultant and adviser to the National Renewable Energy Laboratory and the US Department of Energy, and has also been a venture capitalist at Worldview Technology Partners. He agrees that the private equity entering the solar sector has been driven by a degree of hype, but doesn't believe that boom will be followed by bust this time.

Are next-generation technologies beginning to take market share from silicon solar cells?
Solar cells based on wafer silicon remain by far the most dominant technology. They account for 90% or more of the PV market, worth in excess of $10 bn (€6.8 bn) per year. Research is focused on increasing the efficiency of the cells and reducing the amount of silicon by using thinner substrates. This is important for two reasons. The silicon substrate is a big part of the total cost, so if you reduce the thickness you reduce the cost. The second reason is that there's a world shortage of polysilicon, which has driven up the price of silicon.

Today, for the first time, more silicon is being used in solar cells than in integrated circuits. Not on a dollar basis, since silicon wafers for integrated circuits are more expensive, but in tonnage terms, that is now true. And that situation will never be reversed. This has changed the complexion of the silicon raw material industry.

What are the active research areas for PV technologies?
One area is thin-film solar-cell technology. The idea is to move away from silicon substrates and use inexpensive substrates such as glass, or thin foils of aluminium, stainless steel, or even polymers. A few microns of PV material can be deposited as a thin-film directly on top. These thin-film technologies could potentially be much less expensive than wafer-based technologies, but the primary challenge is getting the conversion efficiencies up to competitive levels.

Another hot area is concentrator PVs (CPVs), which use multi-junction or triple-junction solar cells. These are the world's most efficient solar cells and are about twice as efficient as the best silicon cells, but they are relatively expensive. This has the potential to be the lowest cost technique for producing electricity, since most of what you need to use is relatively inexpensive material like glass, plastic and aluminium. CPVs might also be more scalable, making it easier to ramp up production.

The final area is third-generation technology. This is the most futuristic, using some novel materials and physics like organic semiconductors or dye-sensitized semiconductors where specific photoactive dyes are placed in the semiconductor.

Which factors will influence the success of these new technologies?
The bottom line is how many cents it costs to generate a kilowatt-hour of electricity over a 5, 10 or 20-year period, the so-called levelized cost of the energy. Cell efficiency goes into that calculation, but so do other things such as cost. Another factor is how much electricity a solar cell produces over a day or a year, or in hot and cold weather. You must take everything into account, including reliability, maintenance, lifetime and installation. Shockingly, the cost of installing a solar cell can be roughly equal to the cost of the solar cell itself.

Will venture capitalists continue to invest heavily in the PV market?
There is no doubt that venture capital (VC) investment in clean technology has rocketed. VC investment in solar energy totalled $160 m in 2005, more than doubled to $360 m in 2006, and the growth continued in 2007. On the other hand, there is a certain amount of hype driving investments in the market. We're seeing that with start-ups raising a lot of money at high valuations. Companies have raised more than $100 m, or in any case raised tens of millions at valuations in excess of $100 m.

The most thoughtful VC investors realize that they must become smarter investors. I'm sure that some decide that they're not smart enough to pick winners and losers, so they stay on the sidelines. However, some investors are confident of growth in clean technology and they cast their net as wide as they can and accept that they will be over-paying on some deals.

In my opinion, the rapid increase in investments and in the valuations of public and private companies comes from a combination of the fundamental opportunity with its long-term growth prospects and this market exuberance. It seems to me that it is possible to be smart and selective about where the best opportunities are.

Is there a danger of a boom–bust scenario in the PV industry?
One of the key things for individuals and investors is to think independently. If you try to chase a wave, you're almost always too late. The same was true with the optical communications boom of the late 1990s when plenty of people made money and many lost it.

Solar energy isn't going to crash the way that optical communications did – there is simply too much underlying demand. Look at the political and environmental support in countries like Germany, Japan, Italy, Spain and now the US. There are underlying and fundamental drivers that are much stronger and more persistent than in earlier booms. I'm not comfortable with any analogy to what happened in the dot-com and optical communications booms. This is different.

• This article originally appeared in the January 2008 issue of Optics & Laser Europe magazine.

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