European Solar Power Sector Analysis: Vertical Integration and Progress towards Grid Parity

Since 2007, new solar photovoltaic (PV) capacity has come on-stream at a faster percentage rate than any other power source. This is due largely to governments offering both supportive renewable energy policy environments and generous subsidies to solar power developments. Using data collected from over 100 solar companies, the report identifies the drivers in the solar PV industry’s value chain; most notably, improvements in power conversion efficiency and the reduction of total cost of ownership. This report provides a structural overview of the European solar PV sector, illustrating the interrelation of key technological and commercial factors. An analysis of the market for solar power in Europe and the incentive schemes offered by European governments is also presented.

Achieving grid parity and competitive pricing is essential for success of Solar PV market

Obtaining consumer grid parity and improving the cost competitiveness of large solar power plants are the most ambitious industry goals in the solar PV sector. Through analysis of the forces contributing to improvements in solar PV system efficiencies—the value chain, the current state of government incentives, the relationship between external and internal industries—a picture emerges of both the current state of the sector and its likely future.

In 2008, solar cell manufacturers struggled to meet demand

From 2007 to early 2008, demand for solar PV systems was so high that solar cell manufacturers struggled to increase manufacturing capacity at a fast enough rate to meet demand. Total global installed solar PV capacity grew by 25 per cent during 2008 to 11,500 MW, from 9,200 MW at the end of 2007, which was in turn a 50 per cent increase from 2006 levels. This growth was made possible by a flood of new capital into the sector.

Effects of global financial recession on Europe

More recently, the European solar PV sector has been badly affected by the global financial crisis and recession. Demand for solar PV systems fell dramatically from mid-2008, and as a result, it is anticipated that the price of silicon and solar modules will fall between 30 per cent and 40 per cent in 2009. The drop-off in demand for solar PV systems and shortage of available finance has also lead to a 44 per cent fall in investment in the clean energy sector in the first quarter of 2009 from the fourth quarter of 2008.

Table of Contents
List of Tables
List of Figures
List of Abbreviations

Chapter 1: Introduction

Chapter 2: The Solar PV Sector Overview
2.1. Solar Power Technologies
2.1.1. Solar PV Power
2.1.1.1. Solar PV Market
2.1.1.2. Solar PV Investment
2.1.1.3. Solar Merger and Acquisition Activity in 2008
2.1.2. Concentrated Solar-thermal Power (CSP) Technology
2.2. Incentives for Solar PV Power Development in the EU
2.2.1. Feed-in Tariff (FIT)
2.2.2. Premium
2.2.3. Tradable Green Certificates (TGC)
2.2.4. Solar PV Incentives in Europe
2.2.4.1. Germany
2.2.4.2. France
2.2.4.3. Spain
2.2.4.4. Portugal
2.2.4.5. Italy
2.2.4.6. Czech Republic
2.2.4.7. Greece
2.2.4.8. Belgium

Chapter 3: Solar PV Industry Analysis
3.1. Solar PV Value Chain Overview
3.1.1. Crystalline Silicon
3.1.1.1. Global Silicon Output
3.1.2. Ingots and Wafers
3.1.3. Solar Cells
3.1.3.1. Global Solar Cell Output
3.1.3.2. Thin-Film Technology
3.1.4. Solar Modules
3.1.5. Project Development, System Integration and Balance of System Production
3.2. Solar PV Value-Added Production Costs
3.3. Industry Goals
3.3.1. Consumer Grid Parity
3.3.1.1. Solar Irradiation
3.3.1.2. Electricity Prices
3.3.2. Progress towards Consumer Grid Parity
3.3.3. Commercial Solar Power Price Competitiveness
3.3.3.1. Major Project Developers
3.4. Power Conversion Efficiency
3.4.1. Research & Development Investment
3.4.2. Crystalline Silicon Conversion Efficiencies
3.4.3. Thin-Film Power Conversion Efficiencies
3.4.4. Advanced Thin-Film Power Conversion Efficiencies
3.4.5. Solar Trackers
3.4.6. Balance of System Efficiency
ii | List of Tables
3.5. Total Cost Reduction
3.5.1. Vertical Integration
3.5.1.1. Benefits of Vertical Integration in the Solar PV Sector
3.5.1.2. Risks of Vertical Integration in the Solar PV Sector
3.5.2. Analysis of Strategic Approaches to Vertical Integration
3.5.2.1. Methodology
3.5.2.2. Results
3.5.2.2.1. Strategic Approach 1 – Specialists
3.5.2.2.2. Specialist Company Profiles
3.5.2.2.3. Strategic Approach 2 – Specialist Integration
3.5.2.2.4. Specialist-Integrated Company Profiles
3.5.2.2.5. Strategic Approach 3 – Partial Integration
3.5.2.2.6. Top 12 Partially-Integrated Company Profiles
3.5.2.2.7. Strategic Approach 4 – Full Value Chain Integration
3.5.2.2.8. Fully-Integrated Company Profiles
3.5.3 The Effects of the Financial Crisis, Global Recession and Plunge in Commodity
Prices

Chapter 4: Conclusion

Appendix 1: Power Conversion Efficiencies Achieved by a Sample of Solar PV Companies
Appendix 2: List of Sampled Solar PV Companies
Appendix 3: Specialist Company Sample
Appendix 4: Specialist-Integrator Company Sample
Appendix 5: Partial-Integrator Company Sample
Appendix 6: Full Integrator Company Sample

Glossary

List of Tables
Chapter 2: The Solar PV Sector Overview
Table 2.1: Total installed generating capacity of solar PV in selected countries of the EU in 2006 - 2008 (MW)
Table 2.2: Mergers and acquisitions in the European solar power market in 2008
Table 2.3: Comparison of trough and central receiver/tower systems
Table 2.4: Concentrated solar power plants in operation in Europe
Table 2.5: Feed-in tariffs in Germany for solar PV for 2009, 2010 and 2011 (EUR/MWh)
Table 2.6: Feed-in tariff rates in France for solar PV in 2009
Table 2.7: Feed-in tariff rates in Spain for solar PV for installations commissioned from 29 September 2009
Table 2.8: Feed-in tariff rates in Portugal for installations commissioned in 2009
Table 2.9: Feed-in tariff rates in Italy for systems installed before December 20
(EUR/MWh)
Table 2.10: FIT rates and fixed premiums in the Czech Republic for projects commissioned after 1 January 2009
Table 2.11: Greek FIT rates for new solar PV installations in 2009 (EUR/MWh)
Table 2.12: The application of technology banding in Wallonia with the minimum
purchase price
Chapter 3: Solar PV Industry Analysis
Table 3.1: Global polysilicon wafer market share in 2006
Table 3.2: Domestic electricity prices (excluding taxes) in the EU from 2004 to 2008 (EUR/kWh)
Table 3.3: Comparison of the levelised electricity generation cost of selected technologies (EUR/MWh)

List of Figures
Table 3.4: Profile of a sample of major international solar project developers
Table 3.5: Research and development expenditure for a sample of integrated solar
PV firms (EUR)
Table 3.6: Public budgets for the solar PV sector research and development in selected countries in 2007
Table 3.7: Number of companies active in each segment of the value chain
Table 3.8: Percentage of companies sampled adopting each strategic integration
approach
Table 3.9: Operating revenue and operating profit from different vertical integration strategies
Table 3.10: Results from annual financial statements of specialist companies
Table 3.11: Balance of specialist companies sampled
Table 3.12 Balance of specialist integrated companies sampled
Table 3.13: Balance of partially integrated companies sampled

List of Figures

Chapter 2: The Solar PV Sector Overview
Figure 2.1: Diagrammatic representation of the solar PV industry
Figure 2.2: Financing continuum for a typical renewable energy technology
Figure 2.3: Global new third-party investment in renewable energy by
technology in 2008 (USD billions): Total USD 121 billion
Figure 2.4: Growth in global VC and PE renewable energy investment by selected technology
Chapter 3: Solar PV Industry Analysis
Figure 3.1: The solar PV value chain
Figure 3.2: Global polysilicon production capacity by country in 2007 (tonnes)
Figure 3.3: Global polysilicon production capacity by company in 2007 (tonnes)
Figure 3.4: Solar cell production by country/region in 2008 (GW)
Figure 3.5: Top 10 solar PV cell manufacturers in 2007
Figure 3.6: Value-added production costs for Chinese crystalline solar PV modules
Figure 3.7: Value-added production costs for European crystalline solar PV modules
Figure 3.8: Value-added production costs for a crystalline silicon solar PV module producer
Figure 3.9: Approximate value-added production costs for crystalline silicon
solar PV systems
Figure 3.10: Relationship between retail electricity price and levelised generation cost of solar power
Figure 3.11: Comparison of yearly irradiation incident on optimally inclined photovoltaic systems in a sample of European countries
Figure 3.12: Consumer electricity prices in a sample of European countries in 20 (EUR/kWh, excluding taxes)
Figure 3.13: Solar irradiation and domestic cost of electricity in Europe in 2008
Figure 3.14: Levelised generation cost of solar power relative to solar irradiation and consumer electricity prices in a sample of European countries
Figure 3.15: Progress towards consumer grid parity in Europe by 2020
Figure 3.16: Cost breakdown for crystalline silicon ground-based PV systems
Figure 3.17: Relationship between government incentives, research and development funding and power conversion/production efficiency improvement
Figure 3.18: Sample of solar cell and module power conversion efficiencies
Figure 3.19: Total cost of ownership breakdown over 20 year system lifespan
Figure 3.20: Relationship between government incentives and total cost of ownership of solar power systems

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