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Energy Conversion Devices (ENER) |
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WIKI ANALYSIS
Energy Conversion Devices (NASDAQ: ENER) is a global manufacturer of thin-film flexible solar laminate products for the commercial rooftop market. It specializes in solar power, computer, and battery technology. The company operates several wholly- and partially-owned subsidiaries, though its largest is United Solar Ovonic (Uni-Solar).
The company's solar power business uses amorphous silicon to make thin-film solar panels. The solar industry has suffered from a cost per watt that is significantly higher than coal and nuclear energy. Though thin-film technology is supposed to cut production costs by using less silicon, Uni-Solar's cost per watt is on par (or higher) than many of the industry's current players, while its energy efficiency is poorer than even other thin-film producers like First Solar. Additionally, falling silicon commodity prices have reduced ENER's sales because a key selling point for ENER's thin film panels is that they are low-cost alternatives to silicon-heavy panels. There is evidence that silicon prices will continue to fall, which would continue to make ENER's thin film panels less economically attractive. However, legislative support for renewable energy, stemming from concerns about climate change and rising oil prices, has encouraged investment in alternative energy. Though government subsidies are declining in key markets such as Germany and France, there is still strong growth in solar demand in the U.S., Italy, Japan, and China.
ENER's subsidiary, Ovonyx, has developed phase-change memory technology that has become the talk of the IT community. It has been touted as up to thirty times faster than the current memory standard, and has the added bonus of being able to store active data without energy. The company's technology has already been licensed by a number of IT giants, like Intel and Samsung.
Company Overview
Energy Conversion Devices manufactures and sells thin-film solar laminates that convert sunlight to energy using proprietary technology. Its role in the solar power value chain is in the manufacture and distribution of solar cells, panels, and modules. ECD's UNI-SOLAR brand products are unique because of their flexibility, light weight (a third of the weight of competitors' products), ease of installation, durability, and real-world efficiency.[1] ECD's energy generation capacity is 178 megawatts and, at capacity, the company can produce 18 miles of solar cells daily.[2] ECD also pioneers other alternative technologies, including a new type of nonvolatile digital memory technology for cell phones, digital cameras, and computers that is significantly faster and less expensive than that of competitors.[1]
Energy Conversion Devices operates a number of subsidiary alternative energy and information technology businesses, though its main business is United Solar Ovonic. United Solar Ovonic (Uni-Solar) is a wholly-owned subsidiary of ENER. It is a manufacturer of thin-film amorphous silicon photovoltaic cells, used to convert sunlight to electricity.
Photovoltaic Manufacturing Capacity
| Fiscal Year | Year End Capacity (MW) |
|---|---|
| 2006 | 28 |
| 2007 | 58 |
| 2008 | 148 |
| 2009 | 178 |
| 2010 | 300 |
Another major ENER business is Ovonyx, of which the company owns 31% on a fully diluted basis. Ovonyx commercializes and licenses its proprietary phase-change silicon memory technology to be used in non-volatile IT memory applications. Phase-change technology could eventually replace modern NOR flash, DRAM, EEPROM, and NAND memory. Ovonyx already has licensing agreements with Intel, Samsung, STMicroelectronics N.V., Hynix, and Qimonda.
ENER owns a number of other companies, operating in fields ranging from fuel cells to hydrogen storage to high-efficiency batteries. ENER's battery business is operated through its 50% ownership of Cobasys. Cobasys is a joint venture between Chevron and Energy Conversion Devices. Cobasys is a designer and manufacturer of Nickel-Metal Hydride batteries to be used in transportation and stationary applications.
| 2009 | 2008 | 2007 | 2006 | |
|---|---|---|---|---|
| Revenue (thousands) | $316,293 | $255,861 | $113,567 | $102,419 |
| Product Sales (thousands) | $294,992 | $237,191 | $96,014 | $84,431 |
| Royalties (thousands) | $6,355 | $5,306 | $3,323 | $4,246 |
| Revenues from Product Development Agreements | $13,409 | $11,440 | $11,934 | $10,046 |
| Revenues from License Agreements | $1,537 | $1,253 | $1,047 | $1,322 |
| Net Income (loss) | $12,456 | $3,853 | $(25,231) | $(18,596) |
Business Segments
United Solar Ovonic (95.8% of 2009 revenue[4], 91.9% of 2009 operating income[4])
ENER's United Solar Ovonic segment designs, manufactures and sells photovoltaic laminates that generate energy by converting sunlight into electricity.[5] ENER sells most of its laminates to commercial roofing materials manufacturers, builders and building contractors, and solar power installers/integrators who incorporate PV laminates into their products for commercial sale.[5] The company estimated that it will reach 1 gigawatt of production capacity by 2012.[5]
At the InterSolar Europe Conference, United Solar Ovonic discussed its plans to raise conversion efficiency to 12% by 2012 with a cost-per-watt of less than one dollar.[6] In the following years, the company is targeting 20% conversion efficiency. United Solar Ovonic's plans include enhancing the laminate which will improve conversion efficiencies to 8.2%, High Rate Deposition which targets 10%, and HybridNano Technology targeting 12%.[6]
Ovonic Materials (4.2% of 2009 revenue[4], 8.1% of 2009 operating income[4])
ENER's Ovonic Materials segment designs and manufactures materials and products based on the company's materials science technology.[5] Ovonic Materials is currently commercializing NiMH materials and consumer battery technology. NiMH batteries are rechargeable energy storage solutions offering high power, long cycle life and maintenance-free operation.[5] The company sells NiMH battery technology to its licensees.[5]
Other Ovonic Materials Emerging Technologies
- Ovonic Solid Hydrogen Storage Technologies: ENER is developing hydrogen storage solutions in a solid metal matrix at low pressures using a family of efficient metal hydrides.[5]
- Ovonic Metal Hydride Fuel Cell Technologies: Fuel cells are environmentally-clean power generators in which hydrogen and oxygen are combined to produce electricity, with water and heat as the only byproducts.[5] ENER's Ovonic metal hydride fuel cell technology is a proprietary approach that combines the best features of both fuel cell and battery technologies.[5]
- Ovonic Biofuel Reformation Technologies: ENER's Ovonic reformation technology produces pure hydrogen in a safe process from multiple biofuel and biomass sources at lower operating temperatures than commercial processes without the generation of carbon dioxide gas.[5]
Trends and Forces
Growth Strategy
Energy Conversion Devices is pursuing an aggressive growth strategy that it hopes will drive sales as solar cell technology becomes more widespread. ECD plans to expand its vertical markets to include residential, government, distributed power for utilities, and landfill covers.[2] In North America, ECD plans to extend its materials distribution channels with large, industry-leading partners such as Carlisle Companies (CSL).[2] ECD plans to partner with CertainTeed to launch new photovoltaic products.[2]
In July 2009, Energy Conversion Devices announced that it would acquire its former customer Solar Integrated Technologies for $16.3 million.[7] SIT was forced into financial straits as the solar bubble burst and European demand for solar products evaporated. The acquisition moved Energy Conversion Devices further downstream and gives the company direct exposure to its end markets.
An example of ENER's business model transition from small-scale projects to large-scale, multi-rooftop projects is a project to provide 2.4 megawatts of Uni-Solar laminates for rooftop installations on ProLogis warehouses in Oregon.[8]
Potentially lucrative market for solar panels in residential roofs
Average homeowners are now able to afford solar panels for the roofs of their homes. Government rebates and increasing demand for solar panels have created a potentially lucrative market for Energy Conversion Devices in residential rooftop solar panels.
Energy Conversion Devices is poised to benefit from the growing residential solar panel trend since it manufactures thin film solar panels. These solar panels are amorphous because silicon crystals do not form during their manufacture. This manufacturing process is also a tenth the cost of regular crystalline cells. The efficiency of the thin film solar panel, however, is only 7 to 10%, so it requires up to 2.5 times the roof area to produce the same amount of energy as crystalline panels.[9] Thin film panels are therefore less useful in inner city areas where roof space is at a premium. They are well suited to hot and partly shaded conditions, though, whereas crystalline cells are more effective in cold conditions.
Rising silicon prices benefit ENER
ENER manufactures thin film silicon panels that serve as an alternative to the silicon-heavy panels of its competitors. As silicon prices rise, silicon-light panels become more economically attractive and the cost advantages of ENER's thin film technology are amplified.
Due to high demand for solar PV around the world, silicon prices are again rising. Record demand for solar photovoltaic cells in Europe is driving up the price of silicon, which benefits ENER and its silicon-light designs.[10]
Legislative Support for Solar Panels in Europe Wavers
Governments worldwide have implemented legislation to encourage alternative energy production, due to political pressure from public concerns about climate change and energy independence. However, due to fiscal concerns, several European countries are restricting their investments in solar energy which will have a significant impact on ENER's revenue in the short term. For example, solar incentive structures in France and Italy caused financing sources to put projects on hold.[11] In response to the legislative changes in Europe, ENER has restricted its output to 25 megawatts and has incurred restructuring and factory under-utilization charges.
Though some European governments have wavered in the support of solar energy, many countries continue to support the technology. Emissions caps and clean energy mandates that are supported by subsidies and tax cuts make solar energy relatively cheaper. This means that corporations and utilities companies may turn to clean energy sources to generate electricity for manufacturing facilities and power plants, directly benefiting solar power companies like Uni-Solar. Without government support, however, solar companies would have difficulty vending their products, as solar energy is currently much less cost effective than coal or natural gas; while the average natural gas plant costs $1,200 - $1,600 per kilowatt installed,[12] Uni-Solar's panels, when fully installed, cost around $6 per watt, or $6,000 per kilowatt installed.[13]
Phase-Change is the Next Big Advance in Computer Memory
Ovonyx, ENER's semiconductor division, has designed a commercially viable way to produce phase-change computer memory, a method of information storage that is faster with higher total capacity than the previous memory technology, FLASH. The potential for phase change technology is tremendous, especially given growing file sizes associated with increasing network speeds and the advent of digital natives who will be demanding more interactive computer technologies. Ovonyx has already leased its technology to a number of international information technology majors: Intel (a partial owner of Ovonyx), Samsung, Elpida, Hynix, Qimonda, and ST Microelectronics.
Despite the tremendous potential of ENER's phase change product, there is a major risk involved. Ovonyx's technology uses a substance called chalcogenide. This substance, while allowing the complex phase changes necessary for memory storage, is made with tellurium; one of the rarest substances on Earth, tellurium is a minor industrial byproduct in the production of copper. Demand for tellurium has been driven in recent years by the growth of Uni-Solar's competitor, First Solar. Furthermore, common consumer goods like CD-RWs, DVD-RWs, and the newly developed Blu-Ray-RW use tellurium. Rapidly rising future tellurium prices could make phase change just too expensive for normal consumers - a major part of flash memory's sales in past years.
Competition
On the phase-change memory front, Energy Conversion Devices has few competitors, since it invented the technology and is now leasing it out to other IT companies. Its technology, however, will compete with the current standard, flash memory. Companies that produce flash media include SanDisk, Silicon Motion Technology, and Lexar Media.
Energy Conversion Devices is a growing member of the solar market, though it isn't yet a major player. It's hoping that its costs will fall enough that, once the silicon shortage has been solved, it will out-compete other manufacturers on a cost-per-watt basis. Some of its major solar competitors, with 2005 market share[14], include:
- SunPower (SPWR) - One of the fastest growing solar companies, with one of the most efficient cells around
- Sharp Electronics (24%) - The largest photovoltaic cell manufacturer in the world.
- Suntech Power Holdings (4%) - A Chinese photovoltaic cell company that is muscling its way into world solar markets.
- JA Solar Holdings, - A Chinese PV company that only sells monocrystalline solar cells; it lets its customers take care of building the modules and systems.
- Solarfun Power Holdings - Another Chinese PV company that operates 90% in Europe and makes most of its money by selling modules, rather than individual cells.
- Kyocera (8%) - A Japanese electronics company that is also a major manufacturer of solar cells
- Q-Cells (9%) - A privately owned, German solar manufacturer
- First Solar - A thin cell solar panel manufacturer that uses cadmium telluride instead of silicon for its cells.
- BP (5%), Mitsubishi (6%), and Sanyo (7%) - Not primarily photovoltaic cell manufacturers, but heavy market competitors nonetheless.
- Evergreen Solar - A solar company that produces string ribbon PV cells and operates at all production levels from silicon wafer to power system.
- EMCORE - A Concentrated Photovoltaic System manufacturer that uses Gallium arsenide PV cells and got its start in the solar business making power cells for satellites.
- Energy Conversion Devices - This company uses amorphous thin-film silicon in its ultra-thin, albeit low-efficiency solar cells.
| Manufacturer | Conversion Efficiency |
|---|---|
| SunPower(Polysilicon) | 23.4%[15] |
| Suntech Power Holdings(Polysilicon) | 18%[16] |
| Sharp (Polysilicon) | 13%[17] |
| Kyocera (Polysilicon) | 18.5%[18] |
| Solarfun (Polysilicon) | 17.2%[19] |
| JA Solar Holdings (Monosilicon) | 17.7%[20] |
| Trina Solar(Mono & Polysilicon) | 16.6%[21] |
| Evergreen Solar (String Ribbon) | 15%[22] |
| EMCORE (GaAs Concentrated Solar System) | 37%[23] |
| Energy Conversion Devices (Amorphous Silicon Thin Film) | 8.5%[24] |
| First Solar (CdTe Thin Film) | 10.5%[15] |
| DayStar Technologies(CIGS Thin Film) | 14% [25] |
| Ascent Solar (CIGS Flexible Thin Film) | 9.5% [26] |
References/Links
- ↑ 1.0 1.1 Energy Conversion Devices Inc. F3Q09 (Qtr End 31/03/09) Earnings Call Transcript
- ↑ 2.0 2.1 2.2 2.3 DB Presentation FINAL CleanV2.pdf Presentation: Deutsche Bank 2009 Alternative Energy/Clean Tech Conference
- ↑ ENER 10-k 2009, Item 6, "Selected Financial Data" p. 48
- ↑ 4.0 4.1 4.2 4.3 ENER 10-k 2009 "Results of Operations" p. 30
- ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 ENER 10-k 2009, Item 1 "Our Business Segments" p. 1
- ↑ 6.0 6.1 MarketWatch: "UNI-SOLAR Unveils Technology Roadmap for Conversion Efficiency of 12 Percent and Cost-Per-Watt of Less Than One Dollar By 2012" June 9, 2010
- ↑ Morningstar: "Energy Conversion Devices Acquires SIT" July 22, 2009
- ↑ AZO Cleantech: "ProLogis and Portland General Electric Select Energy Conversion Devices to Supply 2.4 MWp of Uni-Solar Laminates"
- ↑
- ↑ Renewable Energy World: "Silicon Prices Climb Higher" August 25, 2010
- ↑ BusinessWeek: "Energy Conversion Devices stock tumbles" March 11, 2011
- ↑ Mechanical Engineering Power 2003: "Bubble Buster"
- ↑ ENER F1Q08 Earnings Call Transcript, Page 5
- ↑ CIBC Initiating Coverage, SOLF, January 29th, 2007
- ↑ 15.0 15.1 [http://www.renewableenergyaccess.com/rea/news/story?id=46286
- ↑ Forbes - Sun King; SunPower's New Solar Panel Is 22% Efficient
- ↑ SharpUSA Product Brochure
- ↑ Kyocera - Solar Timeline
- ↑ Solarfun Website
- ↑ http://jasolar.com/Web/products-en.asp
- ↑ TSL 20-F 2007 Pg. 7
- ↑ ESLR 2007 Earnings Call Transcript, Page 1
- ↑ EMCORE.com: Terrestrial Solar Cells and Receivers"
- ↑ ENER F1Q08 Earnings Call Transcript, Page 5
- ↑ DSTI 10-k 2007 Pg 1
- ↑ Ascent First Quarter 2008 10-Q Pg 23
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