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Is Solar Thin Film Profitable? Not So Much

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Thin film solar startups have made good progress lining up money and expanding their factories in order to compete with much larger rivals. But as Paula Mints, director of energy at Navigant Consulting, pointed out during a webinar Wednesday, many of these companies aren’t making good profits, if they are making any profits at all. For this year and likely next, First Solar (s FSLR) remains the lone towering profitable figure in the thin film solar world.

“Other thin film companies are struggling whether they are willing to say so,” or not, Mints said during the webinar hosted by the advocacy group, The Vote Solar Initiative. “Are they making money? Yes. Are they making money on a lower margin? Yes.”

Thin film solar refers to solar panels made with little or no crystalline silicon, and they only make up a fraction of the solar market today. Most of the solar panels made today use crystalline silicon to convert sunlight into electricity. First Solar uses cadmium and tellurium and many companies are developing similar recipes. A gaggle of thin film startups are concocting formulas using either amorphous silicon or a combination of copper, indium, gallium and selenium (CIGS).

Thin films in general are able to convert 10 to 11 percent of the sunlight from the panel into electricity while the crystalline silicon variety can do mid-teens or higher. So if you want to install, say, a 1 MW solar project, you will need more thin film panels than traditional PV panels and therefore more land. That’s a disadvantage that is forcing thin film makers to lower their prices, Mints said.

The average selling price for thin films was around $1.35 per watt in 2010, Mints said, down from $1.65 per watt in 2009 and $2.75 per watt in 2005.

On average, thin films are 12 percent cheaper than crystalline silicon solar panels, and that gap won’t go away soon. “I expect that (price difference) to continue until you have thin films with the same efficiencies” as the crystalline silicon variety, Mints added.

Thin film solar technologies attracted intense attention from investors several years ago when silicon prices were high. The startups promised to deliver goods at much lower prices than what their rivals were charging for crystalline silicon solar panels. But many startups have taken longer than they had expected in getting their technologies ready for mass production.

Meanwhile, silicon producers expanded production to ease the shortage problem and intense competition during the economic downturn in 2009 prompted solar panel makers to slash their prices by 50 percent. A number of crystalline silicon solar panel companies also have greatly expanded their factories to reach close to, or more, than 1 GW in annual production capacity.

Many thin film solar startups, on the other hand, are producing solar panels in just a single factory, often times smaller than 100 megawatts. Billions of dollars in venture capital have gone into nurturing these startups, and some of them are now lining up money to expand production. Last week, Stion said it was heading to Mississippi to build what will initially be a 100 MW factory. AQT Solar is going to South Carolina to build a factory with 30-40MW to start. SoloPower recently raised $51.58 million, and it wants to build a 75 MW factory in Oregon. In a meeting today,  Oregon officials are scheduled to consider a $20 million loan request from SoloPower to help pay for the factory. All three companies use CIGS in their products.

A few Japanese companies also are betting on thin films and plan to open huge factories. Solar Frontier, for one, is set to open a 900 MW factory for making CIGS panels this year. Getting new factory equipment up and running at full speed takes months, so how much Solar Frontier will produce this year remains to be seen. It currently has two factories totaling 80 MW.

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Photo courtesy of First Solar