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Darwin Effect Cuts Photovoltaic Prices, Abound Solar Says

Abound Solar Inc., the photovoltaic-panel maker using technology favored by General Electric Co. (GE) and First Solar Inc. (FSLR) of the U.S., said bankruptcies that are culling higher-cost rivals will help cut module prices to $1 a watt.

“This is Darwinism at work in business,” Julian Hawkins, senior vice president of sales and marketing at the closely held U.S. manufacturer, said in a telephone interview. “It’s probably a good thing in the long run.”

Solyndra Inc. on Aug. 31 became the third U.S. solar-equipment maker to fail in a month as declining panel prices and a slowdown in global demand forced weaker companies to team with competitors or close shop. Competitors were basing their businesses on the assumption they could sell panels at $2 per watt or more, which was unsustainable, Hawkins said.

Abound Solar, based in Loveland, Colorado, makes thin-film panels coated with cadmium telluride, a technology also used by GE and First Solar, the world’s biggest thin-film maker. They’re cheaper to produce than traditional panels using silicon-based cells whose biggest producers include China-based Suntech Power Holdings Co. and LDK Solar Co.

“We’re already competitive and will be more so as we ramp up production,” Hawkins said. By the end of 2012, Abound expects to treble capacity to 200 megawatts, “where we start nearing the $1-per-watt level,” he said.

The average spot price for the rival silicon-based solar modules dropped last month to about $1.40 for each watt of capacity. Global prices are not commonly reported for thin-film panels.

Pricing Below Silicon

“One dollar-a-watt is probably about what a thin-film manufacturer like Abound will have to be offering in 2012 in order to sell large volumes,” said Jenny Chase, lead solar analyst for Bloomberg New Energy Finance.

Thin-film modules like Abound’s currently sell at a discount of about $0.26 per watt and they require more space and equipment to install, she said.

The London-based researcher expects crystalline silicon modules in 2012 to average $1.17 per watt. “Abound will have to sell at about $0.91 per watt in 2012, which is going to be as difficult for it as $1.17 per watt is for the best crystalline silicon companies,” Chase said.

An expected doubling of demand from India and a cheaper technology that’s less exposed to raw material costs will allow Abound Solar to avoid the problems facing Solyndra, a recipient of a $535 million U.S. government loan guarantee, as well as Evergreen Inc. and SpectraWatt Inc., which also sought protection from creditors, Hawkins said.

Mergers, Acquisitions

The solar-equipment industry has begun its biggest consolidation in two years with $3.3 billion of mergers and acquisitions announced so far this year. The benchmark Bloomberg Industries Large Solar Energy index fell 2.2 percent today to 29.05 as of 1:48 p.m. London time, the lowest since March of 2009, according to Bloomberg data.

Tempe, Arizona-based First Solar says it can make modules for $0.75 per watt and aims to reduce the cost of production to as little as $0.52 a watt by 2014. First Solar doesn’t reveal its average selling price.

Abound Solar’s average module efficiency will rise to 11.1 percent by the end of 2012 from 10 percent, he said. Better panel efficiency means sunlight can be converted into more electricity, a key factor in reducing the cost of solar power to a level that’s competitive with other energy sources.

Cheap Glass

The company sources cadmium-telluride from three suppliers, including 5NPlus Inc., Hawkins said. Those raw materials could double in price without making any “fundamental difference” in the cost of its modules, he said.

“Glass is the biggest part of our cost structure,” he said. “That’s a fairly stable commodity that’s widely available.”

Abound Solar expects to ship half its 45 megawatts of in sales this year to India where $3.2 billion of solar plants are due to be built by January.

Last week, India announced the rules for its second national auction of solar licenses that exempts project developers who use thin-film technology from having to buy solar panels domestically.

With the new auction issuing permits for another 350 megawatts of plants, Abound Solar expects volumes in India to double to 50 megawatts in 2012, he said.

To meet that demand, the company is installing two new production lines at its Longmont, Colorado, plant to raise capacity to 200 megawatts by next year, he said. At the end of 2012, it plans to start setting up a new plant in the state of Indiana to boost capacity to 840 megawatts by 2013.

“As we build out Indiana, we’d have to look at raising capital,” and an initial public offering may be one option, Hawkins said.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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