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Jin Bin Liu

ASTI AT A GLANCE

P/E ► -7.34   EV/EBITDA ► -10.4   ROA ► -12.2% AVG ROE ► -13.8% AVG Debt to Equity ► 0.0994 LOW Current Ratio ► 6.81 AVG Interest Coverage Ratio ► -76.3 AVG

 

 

 

 

 

 

Ascent Solar makes solar cells from copper-indium-gallium-diselenide thin-film semiconductors (CIGS). CIGS has proven to be more efficient than the other thin-film technologies, Cadmium Telluride and amorphous silicon. Although thin-film technologies have proven to be cheaper to produce than the standard poly-crystalline silicon silicon panels, they are less efficient and require more space to produce the same quantity of electricity. Ascent Solar plans to produce solar power systems for terrestrial, space (to power satellites), and near-space applications, but as of 2008, only terrestrial solar cells were in production. The company uses its PV modules to produce building integrated photovoltaic systems (BIPV), electronic integrated photovoltaic systems (EIPV), and commodity solar panel systems.^[1] BIPV systems have solar modules incorporated directly into building and construction materials, while EIPV systems have solar modules incorporated directly into portable electronic devices.

As traditional sources of energy are getting more expensive, more difficult to access, and more harmful to the environment, governments are turning to sources of renewable energy like Ascent Solar's photovoltaic systems, giving homeowners and utilities incentives for adoption like tax breaks and renewable energy mandates. Solar power is not yet competitive with conventional forms of electricity, however, and relies on federal and state incentives. Advances in technology are expected to make solar power competitive with coal-based power, perhaps even within the decade.^[2] Ascent Solar has responded by expanding into regions where solar energy is in great demand and is well-subsidized, like Europe and Japan. Also, the company is not affected by silicon shortages that hamper the rest of the PV market because it uses a technology that does not require silicon.

Business Financials

Ascent Solar manufactures photovoltaic (PV) modules, which convert light into electricity, by applying a thin film of CIGS, copper-indium-gallium-diselenide semiconductors, onto a plastic substrate. These modules can be used to generate power for buildings, the power grid, and/or spacecraft (like satellites). The company began production of its PV modules after its 1.5 MW facility was completed in early 2008. As of June 2008, Ascent Solar is in strategic partnerships with four international companies. Beginning in 2008, Ascent Solar and Norwegian-based Hydro Building Systems are manufacturing a building integrated photovoltaic (BIPV) system called Brise Soleil. The Brise Soleil devices are supposed to reduce energy use by providing shading and cooling and also storing energy using photovoltaics.^[3]. In Japan, Ascent Solar will develop both BIPV and electronic integrated photovoltaic (EIPV) systems with ITOCHU Corporation. The company will also acquire raw materials and factory machinery from ITOCHU.^[4] Ascent Solar will develop EIPV systems with ICP Solar Technologies, Inc.^[5]and BIPV systems with Canadian-based Icopal SAS^[6]. Ascent Solar plans to use the distribution networks of all its partners, since they are already established in their respective markets.

Ascent Solar completed its 1.5 MW production line in December of 2007 and its initial PV modules achieved conversion efficiency rates as high as 9.6%. The company plans to add production lines to raise production capacity to 30 MW by the end of 2009, to 60 MW by the end of 2010, and to 110 MW by the end of 2011. ^[7]

By the end of 2007, Ascent Solar had not yet earned revenue from its PV modules. Its revenues came instead from research and development contracts funded by the government. ^[8] Ascent Solar did not have R&D contract revenue in 2006. R&D expenses and general and administrative expenses made up the bulk of Ascent Solar's expenses in 2006 and 2007.

Trends and Forces

Government Support for Renewable Energy is Vital to the Growth of the Solar Industry

The manufacturing costs for a CIGS-based PV module is expected to be around $1 per watt compared to $2.1 per watt for new coal plants.^[9] Ascent Solar expects to manufacture at $1 per watt after its 30MW production line is completed at the end of 2009. ^[10] Despite the advantage in lower manufacturing costs, the large upfront costs of installing a solar system make solar energy more expensive than paying for other forms of electricity. The average retail price of electricity for residential customers was $0.10/kWh ^[11] in 2006, compared to an estimated $0.38/kWh for solar power, not accounting for government incentives.^[12]

Government rebates are essential in making solar power competitive with electric utilities. Governments are subsidizing clean, renewable energy due to the rising prices of traditional forms of energy like coal and oil and also in response to growing concerns about the environment. The US government offers a tax credit of 30% (capped at $2000 for residential consumers) for solar energy investments.^[13] However, this tax credit is set to expire at the end of 2008 and the Senate was unable to reach an agreement to extend the tax credit during meetings in June of 2008. Many renewable energy companies have suspended projects indefinitely until the future of the tax credit is certain.^[14]

The "Million Solar Roofs"^[15] program in the state of California aims to create 3000 MW of solar electricity by 2017. As a part of this program, the "California Solar Initiative" was launched in 2006, offering more than $2 billion in incentives over the next decade to consumers of solar power.^[16]

• Republican Presidential Nominee John McCain seeks to reduce carbon emissions to 40% of 1990 levels by 2050. McCain supports a cap-and-trade system to reduce emissions. Companies will be given emission permits, which can be sold for cash.^[17]
• Democratic Presidential Nominee Barrack Obama seeks to reduce carbon emissions to 20% of 1990 levels by 2050. Obama also supports a cap-and-trade system, but his system will auction off the permits instead of allocating them to select companies. He also plans to invest $150 billion in clean energy over the next decade and to double funding for energy research and development. Obama expects 25% of the electricity used in the US to come from renewable sources by 2025.^[18]

Ascent Solar can only thrive in environments where government subsidies make the company's cells cost-competitive with traditional forms of energy. Ascent Solar has responded by entering into strategic partnerships with companies that have an established presence in areas where the development of solar power is encouraged, namely Europe and Japan.^[19] In 2007, the three leading markets for photovoltaic installations were Germany (1328 MW), Spain (640 MW), and Japan (230 MW). ^[20] As solar technology continues to develop and its costs reduce even further, the solar industry will become less dependent on government subsidies.

Homes with Solar Panels Sell at Higher Prices

Ascent Solar plans to manufacture its solar cells on long sheets of plastic substrate that will be stored and packaged in rolls. The company’s roll formats are ideal for integration with various construction materials, precluding the need for wires, cables, connectors, etc. required for silicon-based solar power panels. The roll format can also reduce the number of separate modules needed by up to 90% while covering up to 35% more area. In fact, Ascent Solar expects to be able to reduce the cost to produce electricity to a mere $0.05/kWh with its PV modules.^[21] Despite falling housing values and a tough market for new home builders, houses that are built with integrated solar systems are flying off the market - at twice the rate of grid-based houses.^[22] Coupled with legislative rebates, housing manufacturers have more incentive to install photovoltaic systems to their construction plans. For example, the California Solar Initiative offers incentives starting at $2.50 per watt for systems up to one megawatt in size.^[23]

CIGS vs Silicon

Most solar power companies use polysilicon for their products. Since 2004, there has been a worldwide polysilicon shortage. This shortage has been caused by a lack of silicon refining capacity. With the advent of solar power and its rapid growth, demand for polysilicon has increased greatly, leading to its undersupply as production capacity is not enough to meet demand. This undersupply has led to rising prices for solar equipment which in turn raises the price of silicon-based solar power. Solar-grade silicon prices have risen from $24 per kg in 2003^[24] to $450 per kg in 2008^[25]. Unlike traditional solar industry companies, Ascent Solar is not affected by rising silicon prices because it uses photovoltaic (PV) technology based on copper-indium-gallium-diselenide semiconductors, CIGS, instead of silicon wafers. The CIGS coatings are usually on the scale of microns or even angstroms, 100 times thinner than a typical silicon wafer.^[26] The National Renewable Energy Laboratories attained a record-high 19.9% efficiency with a CIGS solar cell early in 2008. ^[27] The record efficiency at 19.9%, however, was achieved in laboratory conditions and has yet to be matched in after-production state.

Competition

Polysilicon production remains the dominant form of solar cell manufacturing while thin-film production accounts for about 12% of total photovoltaic production.^[28] While thin-film module efficiencies are not yet competitive with polysilicon modules, the thin-film alternatives have the edge in raw material costs and production speed.

Ascent Solar is still a relatively small player in the solar market, and sells a technology type that is younger than most other solar power technologies. Ascent Solar competes against manufacturers of various technology types, including traditional silicon-based solar cells and the many thin-film alternatives. The competitors include:

• DayStar Technologies (DSTI) - Uses CIGS technology coated on glass panels.
• First Solar – Manufactures solar modules using a thin-film technology (cadmium telluride).
• Global Solar Energy, Inc. – Major producer of thin-film photovoltaic CIGS solar cells. Products available as foldable chargers or glass modules.
• HelioVolt Corporation – Uses CIGS technology and specializes in BIPV modules.
• MiaSol'e – Applies CIGS technology on stainless steel foils.
• NanoSolar, Inc. – Uses CIGS technology. Products available as panels and in roll formats.
• Sharp Electronics - The largest silicon-based photovoltaic cell manufacturer in the world.
• SunPower (SPWR) - One of the fastest growing solar companies, with one of the most efficient cells around.
• Suntech Power Holdings - A Chinese silicon-based photovoltaic cell company that is muscling its way into world solar markets.
• United Solar Ovonic - This company uses amorphous thin-film silicon in its ultra-thin, albeit low-efficiency solar cells. United Solar Ovonic, or Uni-Solar, is a wholly owned subsidiary of Energy Conversion Devices, Inc.

References

1. ↑ Ascent Solar, 10K, December 31, 2007 Item 1. P.5
2. ↑ Solar electricity to reach cost parity with coal-based power by 2010
3. ↑ Ascent Solar, Hydro Building Systems to Develop New Solar Product Line
4. ↑ Ascent Solar and ITOCHU Corporation to Pursue Strategic Relationship - February 28, 2008
5. ↑ ICP Solar and Ascent Solar Sign Cooperative Development Agreement - April 1, 2008
6. ↑ Ascent Solar and French-based Icopal SAS Sign Cooperation Agreement - April 15, 2008
7. ↑ Ascent Solar, 10K, December 31, 2007 Item 1. P.5
8. ↑ Ascent Solar, 10K, December 31, 2007 Item 7. P.34
9. ↑ Nanosolar is gunning for coal
10. ↑ Ascent Solar, 10K, December 31, 2007 Item 7. P.32
11. ↑ Average Retail Price of Electricity to Ultimate Customers by End-Use Sector
12. ↑ Solar Electricity Prices
13. ↑ Solar Economics – Government Incentives
14. ↑ Congressional stalemate over renewable energy
15. ↑ Million Solar Roofs - Environment California
16. ↑ The California Solar Initiative
17. ↑ John McCain's Strategy for Confronting Global Climate Change
18. ↑ Energy & Environment: Barrack Obama's Plan
19. ↑ Fast Solar Energy Facts
20. ↑ Marketbuzz 2008: The Leading Annual World Solar PV Industry Report
21. ↑ Products: applications
22. ↑ SPWR 1Q08 Earnings Call, Page 1
23. ↑ The California Solar Initiative
24. ↑ China Nuvo Solar Energy Inc., "Industry Information"
25. ↑ SeekingAlpha: "Solar Investors, Understand Silicon Supply"
26. ↑ Silicon vs. CIGS: With solar energy, the issue is material
27. ↑ Record Makes Thin-Film Solar Cell Competitive with Silicon Efficiency
28. ↑ Annual World Solar Photovoltaic Industry Report
29. ↑ Ascent Solar, 10K, December 31, 2007 Item 1. P.5
30. ↑ DSTI 10-k 2007 Pg 1
31. ↑ First Solar 2007 Q3 Conference Call
32. ↑ CIGS cell makers battle it out for efficiency crown
33. ↑ HelioVolt claims CIGS solar efficiency mark
34. ↑ New solar technology hits snags
35. ↑ Nanosolar Update – First Panels Now Shipping
36. ↑ SharpUSA Product Brochure
37. ↑ SunPower’s New Solar Panel Is 22% Efficient
38. ↑ Forbes - Sun King; SunPower's New Solar Panel Is 22% Efficient
39. ↑ ENER F1Q08 Earnings Call Transcript, Page 5