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 High oil and gas prices, a fear of climate change, and political support for alternative energy sources have fueled the emerging solar market. Tax credits and subsidies like Germany's Feed-In-Law help to make solar technology more cost competitive, but prices remain high as there is a shortage of refined silicon; the principal input for silicon-based solar panels..[4] The average long-term contract price of polysilicon increased approximately 20% from $50-$55 per kilogram in 2006 to $60-$65 per kilogram delivered in 2007, with market prices sometimes spiking as high as $400 per kilogram.[5] SolarWorld’s main competitors are other silicon-based solar panel manufacturer’s, including SunPower, Kyocera and Suntech Power Holdings as well as solar wafer manufacturers PV Crystalox and LDK Solar (LDK) . [edit] Business FinancialsGerman based SolarWorld operates in all aspects of the solar production market including the procurement of raw silicon, its processing into silicon wafers and the final production into solar cells and panels. The company's headquarters and largest production site is located in Freiberg Germany. The company also has several other production sites in Germany, along with ones in the US, Spain, South Africa and is beginning operations of a plant in South Korea as part of a joint venture, SolarWorld Korea Ltd.[6] A majority of the company's German operations are under the names of fully owned subsidiaries, Deutsche Solar AG and Deutsche Cell, as well as the company's raw silicon processing group, Sunicon, while the international facilities operate under the SolarWorld name.[7] SolarWorld earned 698.8 million Euros in revenue in 2007, up 35.6% from 515.2 million in 2006. [8] This includes 9.2 million Euros that were from discontinued operations with the company’s sale of Swedish subsidiary Gallivare PhotoVoltaic AB in early 2008. [9] The company had an operating income of 168 million Euros, or 24% of the companies revenue in 2007, up from 10.9% in 2006.[9] SolarWorld earned 51% of its revenue from sales within Germany in 2007, with an additional 27.7% coming from sales within Europe.[1] In 2008, the company expects to more than double its module sales in the expanding US and Asian markets, hoping to earn over 60% of its 2008 revenue from sales outside of Germany. [10] SolarWorld placed a billion Euro bid for GM's Opel in November of 2008, showing the company's desire for expansion into other industries.[3] The company made the bid in an effort to enter into the automotive industry by supplying "green" vehicles to European consumers. The company hoped to use the Opel plants and automotive knowledge of Opel's employees, along with the company's own expertise in solar electric systems, to produce high efficiency engines, hybrids and electric vehicles for the future.[3] It is a bold move by a growing company and reflects the determination of the company to not only expand into growing markets, such as the US and Asia, but to also expand beyond the traditional solar panel industry. [edit] Business Segments[edit] Modules and Trading (75.5% of 2007 Revenue)[11]The sale of solar panels and modules through SolarWorld's trading segment make up a majority of the company's revenue, accounting for 75.5% of the revenue in 2007. The silicon wafer and solar cell segments of the company operate primarily to supply the required cells for panel and module production. This allows SolarWorld to avoid the supply issues faced by other solar panel manufacturers, and eliminates the need for long-term supply deals. At the end of 2007, the company had an annual production capacity of 140 to 185 MW for modules.[2] [edit] Silicon Wafers (20.6% of 2007 Revenue)[11]Germany is SolarWorld's primary market for solar panels, but plays only a small role in the company's sale of silicon wafers. Although a majority of the company’s total revenue came from sales within Germany,[1] only 10% of the silicon wafer’s sold were to companies within Germany.[10] The faster growing markets represented the vast majority of wafer sales for SolarWorld, with 43% being sold to companies in Asia, 39% to other countries in Europe and 8% going to the Americas.[10] All of the recycled and processed silicon that the company produces is used to produce its silicon wafers, of which 50 percent were kept by the company for cell and panel production in both 2006 and 2007.[12] The remaining 50% were sold to external sources. As of the end of 2007, the company had an annual production capacity of 245 to 385 MW for silicon wafers.[2] SolarWorld looks to increase the volume of its silicon wafer sales to over 750 MW in 2010. [13] [edit] Solar Cells (3.9% of 2007 Revenue)[11]The purpose of the solar cell segment is primarily to supply SolarWorld with the cells that are needed for its solar panels, and not to earn profit on its own. In 2007, the segment's internal sales reached 264 million Euros, dwarfing the external sales revenue of 27 million Euros. As of the end of 2007, the solar cell segment had an annual production capacity of 185 to 205 MW.[2] The company produces cells that are on par with the rest of the silicon solar industry, having cell conversion efficiencies that average 15% and go as high as 17%.[14] [edit] Trends and Forces[edit] The 2008 Financial Crisis Will Slow Solar's ExpansionCompanies of every industry are feeling the effects of the financial crisis of 2008 as budgets shrink and it becomes more difficult to obtain loans and investments. These conditions are especially dangerous to industries, like solar, that are expanding so rapidly (41% per year from 2001-2008[15]) and require large sums of money to do so. The tighter lending practices will not only make it harder for solar companies to expand at such high rates but also threaten to decrease demand as their customers struggle to obtain funding for the expensive projects. Despite the financial crisis, SolarWorld continues to pursue aggressive plans for expansion, as is evident with the company's billion Euro bid for the purchase of GM's Opel in November of 2008.[3] [edit] Continued Worldwide Silicon Shortages Will Hurt SolarWorldSilicon, a necessary input to most solar panels, is one of the most abundant elements on Earth, but refined silicon has been in short supply. As solar power has increased in popularity, raw silicon producers, who previously catered only to the semiconductor market, were unable to meet the surge in demand. Although demand remains high, the shortage will not last much longer as producers expand their mining capacity. Hemlock Semiconductors began operation of its new facility in June of 2008, a facility that is expected to produce as much as 36,000 metric tons per year by 2011. This alone dwarfs worldwide silicon production in 2005, which totaled only 26,000 metric tons.[16] For silicon solar panel vendors like SolarWorld, higher silicon prices mean higher production costs and lower margins as the costs are passed onto consumers. In the silicon PV industry, the cost of the silicon accounts for approximately 45% of each module’s manufacturing cost.[17] The price of silicon has increased with the average long-term contract price of polysilicon increasing from $50-$55 per kilogram in 2006 to $60-$65 per kilogram delivered in 2007, with market prices sometimes spiking to as much as $400 per kilogram.[18] In order to dampen the effect of fluctuations in the raw silicon market, SolarWorld has entered into joint ventures with silicon supply companies and has focused its attention on improving processes for silicon recycling.[19] [edit] SolarWorld Stands to Benefit from Chinese GrowthSolarWorld already sells 43% of its silicon wafers to customers in Asia and is expanding its production capabilities in South Korea to better position itself in the growing market.[10] According to the International Energy Agency (IEA), China's energy demand will surpass that of the United States soon after 2010, based on what it considers a conservative growth rate of 6.0% per year. [20] Chinese energy demand is expected to grow by 3.2% every year and double between 2005 and 2030, with potentially higher growth rates resulting in even greater energy demand.[20] To meet the growing needs, China will need to add 1,300 gigawatts to its electric generating capacity by 2030, more than the total installed capacity in the United States in 2008.[20] To meet this demand, China will need to invest 3.7 trillion dollars in energy infrastructure to meet the energy needs in 2030.[20] By 2010, on route to these goals, China hopes to build solar installations that will generate around 300 megawatts of solar power for the country.[21] [edit] Environmental Concerns, High Oil, and High Gas Prices Make Solar Panels More AppealingWith the drastic oil price fluctuations seen in 2008 and the increased public attention to the environment, there has been a strong push for the development of reliable economic alternatives, especially in the renewable energy sector. The push for clean energy has benefitted the solar industry, which has averaged 41% growth per year from 2001 through 2008, and is projected to continue in the future.[15] 90% of solar panels, like the ones produced by SolarWorld, are silicon based, [22] and although thin-film technology is growing in popularity, the needs of the rapidly expanding solar industry provide ample opportunity for silicon-based manufacturers to continue their growth. In 2007 alone, there was 2,826 MW of PV solar installations, over a GW more than the 1,744 MW installed in 2006.[23] With the expansion of the industry and increased investment, PV solar energy has made great strides in the last five years as the panels have become more efficient and costs of production have decreased. According to the Department of Energy’s Solar America Initiative, with continued investment PV solar power will likely become a competitive source of commercial electricity by 2015.[24] [edit] Government Incentives Spur the PV Market and Help SolarWorldSolar is not an economic choice in today’s energy market due to the large initial investments that are required and the efficiency of available panels. The large initial installation costs and uncertainty about the panels’ longevity deter most electric generators from investing in solar power plants. Other, more conventional electric sources have proven to be more predictable and cost effective. As a result, commercial and private PV systems have become reliant on subsidies and other government incentives to make them economical. These incentives have been spurred by rising energy prices, fears of climate change, and desires for energy independence. In Germany, SolarWorld’s largest market, the Feed-In-Law provides subsidies for solar generated electricity that began in 2004 at 45.7 euro cents/kWh for ground and 57.4 euro cents/kWh for building installations, set to decrease at a rate of 6.5% and 5% per year, respectively.[25] In early June of 2008, the German government changed the 2004 law to have a 10% decrease in 2009, and a 7 and 8 percent decrease the following years. This sets the subsidy levels for 2009 installations at about 34.2 and 48.8 euro cents/kWh.[26] Spain, another significant player in Europe’s solar market, has seen similar cuts in its Feed-In-Law, suggesting other countries may follow suit.[27] Although the lower subsidies will do less to incourage growth, the decreases have been less than anticipated, and the subsidies will continue to make solar more competitive in the energy market.[26] [edit] Competition and Market Share[edit] Solar ModulesThe following companies compete with SolarWorld in the sale of solar panels, along with their relative market share as of the end of 2005. As of the end of 2007, SolarWorld had an annual production capacity of up to 185 MW of solar modules.[2]
[edit] Solar WafersSolarWorld AG - The company had a multicrystalline wafer market share of 19% in 2006.[42] Deutsche Solar AG, a division of Solar World AG, had an annual production capacity of 350MW of silicon wafers at the end of 2007, and is expanding rapidly. By 2009, Deutsche Solar expects to have over 750 MW of annual capacity, with other divisions of Solar World adding an additional 320 MW annually.[43]
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