|Table of Contents|
|Intro and Overview|
|Trends and Forces|
|Key Trends and Forces|
The movement to address global warming has convinced governments and their citizens to begin exploring viable and sustainable energy solutions. In addition to cleaner energy alternatives, the shrinking fossil fuel supply combined with the insatiable energy demands from developing countries, such as China, has dramatically driven up fossil fuel prices. China’s demand for fuel is projected to increase by 150 percent by 2020, a rate of 7.5% per year, seven times faster than the U.S. As these trends continue to take hold, alternative energy sources such as solar only become more attractive. Solar energy production produces little, if any, pollution or emissions, making it one of the cleanest sources of power. Increased popular education on these issues is creating pressure for governments and energy companies to regulate energy production. This movement is having a worldwide impact on energy regulation in the form of increased government subsidies for clean energy sources and global emissions caps.
The 9.0 magnitude earthquake in Japan on March 11, 2011 and the following tsunami caused four nuclear power plants in Northern Japan to fail, leading to radiation release and overheating in the reactors. Japan has closed 11 of its 54 reactors since the earthquake, with the government struggling to prevent a nuclear meltdown. As a result, confidence in the future of nuclear energy has been shaken, while confidence in solar energy and natural gas has renewed. With solar panel prices falling, the industry is becoming more competitive with conventional fossil fuels.
Tellurium, a major component in First Solar's panels (which are made of Cadmium Telluride), is one of the nine rarest elements on Earth. Though First Solar claims it has identified enough tellurium reserves to provide for future growth, the company needs about 110 to 130 metric tons of tellurium for one gigawatt worth of solar panels, at about 3 microns CdTe film thickness. Statistically it has been reported that 160 to 215 metric tons of Te are mined each year. This means that First Solar requires 51% to 81% of the world supply of Te. If a tellurium rush should occur due to quickly increasing demands from the electronics industry as well as rapid expansion of First Solar's own business, there is no guarantee that global supply of this element, which is rarer than platinum, will hold up, and the ensuing rise in global tellurium prices would probably destroy First Solar's profit margin.
First Solar does not use tellurium directly, they use the high purity cadmium telluride compound, provided by 5N Plus Inc. and another supplier. But they recently acknowledged that they try to buy tellurium themselves to pass to CdTe suppliers, as well as try to establish a strategic inventory. This might show that the company is anxious about a possible global tellurium shortage.
From January 2008 through mid April, the price of tellurium increased by a factor of 2.44, rising from 860 yuan/kg to 2100 yuan/kg. Furthermore, since 2004, tellurium has risen from $10/kg to $300/kg. These stratospheric price levels (and their projected growth) are indicative of a trend similar to those affecting oil prices: growing demand from companies like First Solar and Emcore are forcing the commodity's price up. Unfortunately for First Solar, it was the low cost of tellurium that gave it a cost advantage over silicon PV. If tellurium continues to rise (and with the advent of Emcore's phase-change memory hardware, it's likely that it will), First Solar will lose its cost advantage completely.
Without government support, solar companies would have difficulty selling their products, as solar energy is less cost effective than coal and natural gas. Governments worldwide have implemented legislation to encourage alternative energy production, due to political pressure from public concerns about climate change and energy independence, but the financial crisis of 2008 and 2009 has hastened the decline of subsidies in large markets like Germany and Spain, the world's largest and second largest solar markets, respectively. Examples of legislation benefiting the industry by making it more profitable, and therefore more likely to grow include:
As the financial crisis has strained government budgets and crashed the price of oil, once a strong motivator for developing renewable energy, support for solar power has, in some places, decreased. Examples include:
The Restriction of Hazardous Substances directive enacted by the European Union in 2003 took effect on July 1st, 2006. Though the RoHS bans only a small number of substances (six), cadmium, an extremely toxic carcinogen that can cause kidney and breathing problems, is one of them. Unfortunately for First Solar, cadmium is a key component of the company's panels (47% composition), and though there is a short list of products exempt from the RoHS, solar panels are not included. In response to this First Solar argues that Cadmium-telluride renders cadmium inert drastically reducing the contamination risks of cadmium alone. For cadmium telluride to breakdown, according to the National Renewable Energy Laboratory, it must be heated to 1,041 Celsius. This is good news for First Solar since most roof fires are reported to burn at 800-900 degrees. In addition to these studies, to ease concerns over the potential danger of panel disposal, the company has developed a reclamation plan for used panels.
Fortunately, solar panels, are also not on the list of restricted products, creating a potential loophole for First Solar. The company will have to apply for an exemption in order to avoid a potential crackdown by EU authorities, but if such exemption is not granted, the negative results for the company could be tremendous, considering that Europe is its primary market.
Solar Thermal is a technology that harnesses solar energy to create heat used to drive turbines for electricity generation. This technology has been primarily harnessed by large-scale utility plants and represents a source of competition for Cadium PV cells. The energy conversion efficiencies range from 20%-40% depending on the type of setup and equipment used in the field. The primary advantage of solar thermal is the heat storage capabilities. Heat storage allows a solar thermal plant to produce energy at night or overcast days. The advantage is that the power generation becomes reliable and can be sold for higher prices. Also, the utilization of the generator is higher which reduces cost. (Read More about First Solar's competition...)