A panel discussion at Thin Film Solar Summit (San Francisco, CA, Dec. 2-3) gave attendees a dose of reality: financing in the world of thin-film PV isn’t a short-term play. The reality, according to Neal Dikeman, partner with VC firm Jane Capital Partners, is that only one or two thin-film projects have brought product to market in 30 years, and it’s a $100M-$200M dollar up-front investment “just to play the game and see if your product really works.”
Silicon Valley investors have mistakenly bet on “really great teams” while the technology is still at a science experiment stage, he argues — investors are beginning to realize this, he thinks, and that the industry is sitting on the back end of about 5-10 years of $100M bets. “We’re going to see a bunch of write-offs coming up,” he warns.
The challenge that has caught startups in this sector time and time again, Dikeman explained, is underestimating the engineering scale-up and production on a tens-of-MW scale. “People always assumed that if the technology worked and the team was good, that the rest was just engineering…and so far, that has never proven to be the case,” he observed, noting that there have been several hundred (thin film) companies that have tried and only two succeeded. “The challenge has been that the engineering scale-up has been much harder than the science experiment.” Citing the “black art” aspect to thin-film projects, he observed that for factories in the 30MW-40MW range, what matters is getting the same yields, distributions, and performance out of the second plant as was achieved in the first. “You can take the same people, same technology, same equipment, same materials, and you’ll get something different between the two plants,” he said. “I don’t think that’s changed.”
Lest he dash the hopes of conference attendees, Dikeman acknowledged that while thin-film PV technology has to come down the cost curve, it is the only hope for making solar more than a niche subsidized business. “We have to deliver $1/Watt at the module level, not the cell level, in order for anyone downstream to have a serious business,” he urged. “Otherwise, we’ll be living off the investment tax credits and rebates over the next few years.”
But don’t hold out hope for a disruptive technology to solve the cost-curve challenge. “There is no disruptive technology in energy, only disruptive policies that make certain technologies look disruptive after the fact,” Dikeman told the audience. He believes that the big cost-changing improvements that will come in the next few years will be manufacturing process improvements, and he’s excited by the entrance of companies such as Oerlikon and Applied Materials, as well as some of the large semiconductor manufacturers. “We need [that] manufacturing scale,” he said.
At the end of the line — what model works?
Analysts at the summit also tackled the question of how utilities will drive the PV industry, and how some clear trends will benefit the industry. “The one technology that the American consumer wants to buy is solar; it’s a ready market,” said Bill Roth, green business coach for Entrepreneur.com and president of NCCT, “but the one thing standing in their way is sticker shock.” So it’s crucial to help move the transaction to the point where these consumers who wants to say “yes” can close, and Roth noted that an integrated model will enable the purchase to take place. He offered up as an example other commodity providers of energy, such as the oil companies, that are vertically integrated. “While the technology and science are critically important and they have to work, integration enables the purchase,” he explained.
Dikeman countered that the PV industry hasn’t been able to figure out exactly the overhead and operating cost of a distributed utility over a wide range of contracts. “It is very unclear to me what the fully loaded cost of solar is at any kind of scale being distributed,” he said. “There are no very large fleets out there from which you can get data, and a lot of costs are hidden due to subsidies and tax equity.”
However, Dikeman noted that Japan was always reasonably vertically integrated, and he’s waiting for vertical integration to come to the US and Europe. For a hundred years in the energy business, the money has been made upstream from owning the asset/the resource — so, solar on a serious scale means owning a piece of very sunny land next to water and right next to a transmission line and a load, he observed. “The guy who owns the land with the best resource is the one that makes the money,” said Dikeman. “Everything else will be commoditized. The person owning the land with the best resources will make the most money.” — D.V.