First Solar’s Record Efficiency May Best China Solar Panels

First Solar Inc. (FSLR), which achieved record efficiency for a thin-film solar cell, will incorporate the advance into its manufacturing technology next quarter to outpace cost reductions by Chinese rivals and compete against fossil fuels without government aid.

First Solar developed a cell that converts 17.3 percent of sunlight into electricity and applying those techniques may yield conversion rates of 15.3 percent in mass production, said Chief Technology Officer David Eaglesham. That compares with 11.7 percent the company averaged in the second quarter.

“There were about a dozen changes that we’ll be phasing into production,” starting in the fourth quarter, Eaglesham said in an interview at the company’s factory in Perrysburg, Ohio, on Sept. 2. He didn’t say when the improvements will be fully implemented.

First Solar is the world’s largest thin-film company and the reductions may make it the first in the solar industry to compete on price with fossil fuels without subsidies, said Mark Bachman, an analyst at Avian Securities LLC. That would be a victory for President Barack Obama, who is under fire for supporting Solyndra LLC, a competing company that received $535 million in U.S. loan guarantees before filing for bankruptcy on Sept. 6. First Solar has $5.35 billion in federal loan guarantees.

“First Solar is leading the pack,” Bachman said in an interview from Boston. “Tax credits will help for the next five years, and they can stand on their own after that.”

Industry Slump

First Solar shares fell $1.79, or 2.1 percent, to $83.91 in Nasdaq Stock Market trading, after a report from Goldman Sachs Group Inc. today predicted slow demand growth this year for solar panels. The company has fallen 36 percent this year, outperforming the 53 percent slump in the Bloomberg Industries Large Solar index. Solar companies tumbled as demand slowed and subsidies were pared in Germany and Italy, two of the biggest markets, and prices for panels dropped.

Already, First Solar has the lowest costs in the industry, producing so-called thin-film solar panels for 73 cents a watt. The higher efficiency levels will drive those costs down further, making the panels more attractive than traditional photovoltaics.

U.S. Energy Secretary Steven Chu has mostly avoided funding polysilicon-based panels, betting on thin-film to drive down the installed cost of solar power to $1 a watt by 2020, a 75 percent reduction from the current industry average. That would make solar cheaper than buying power from utilities that mostly consume coal and natural gas.

Thin Film Technology

Based in Tempe, Arizona, First Solar uses cadmium telluride as a semiconducting material, applying it in a film directly to glass in an automated process. Traditional PV products are made from polysilicon, which must be made in furnaces, sliced into wafers, formed into cells and assembled into panels.

Both technologies differ from Solyndra, which used a thin film made of copper, indium, gallium and selenium to conduct electricity through tubes of glass mounted to a metal frame. The process yielded panels that were attractive when polysilicon traded as high as $475 a kilogram in 2008. They were too costly to compete when the raw material sank to $50 last year.

Polysilicon Prices

Plunging polysilicon prices helped manufacturers in China slash their panel costs, said Anthony Kim, a solar analyst at Bloomberg New Energy Finance in New York. They typically have higher efficiencies than thin-film panels, and cost about 27 cents a watt more than First Solar’s products, said Jenny Chase, an analyst at Bloomberg New Energy Finance.

Trina Solar Ltd. (TSL) based in Changzhou, China, says it produced panels for $1.16 a watt in the second quarter, 43 cents of which came from the cost of silicon. JinkoSolar Holding Co., another Chinese company, had a cost of $1.07 per watt including 37 cents for silicon.

First Solar’s progress may make it able to offer solar panels at a price competitive with fossil fuels by 2016, when tax credits for solar projects expire, said Paul Clegg, an analyst at Mizuho Securities USA in New York.

“First Solar can probably still make money if the tax credit expires in 2016 but their margins will be lower,” Clegg said. “There are so many variables: where will gas prices be, where will oil be?”

First Solar’s effort to increase efficiency will boost the amount of electricity each panel generates and reduce the total cost of energy over the life of the product. The efficiency record for a cadmium-telluride cell reached in July equates to about 15.3 percent for a full-size panel, Eaglesham said. He wouldn’t say when those panels will be available.

He plans to reach that by better managing the light that comes through glass panels, reducing electrical losses and improving factory throughput, as well as some other techniques that the company has chosen not to disclose.

“Just better optical management plus electrical losses isn’t enough,” Eaglesham said. “We did something else that we can’t discuss but everyone on the floor is buzzing about it.”

To contact the reporter on this story: Christopher Martin in New York at cmartin11@bloomberg.net

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.