Cost analysis of current PV production and strategy for ... · Pierre Verlinden, Zhang YingBin and...

Pierre Verlinden, Zhang YingBin and Feng ZhiQiang

Cost analysis of current PV production and

strategy for future silicon PV modules

Presentation to UNSW January 22nd, 2014

1. Trina Solar: A Global Solar Player

2. Where is the PV Industry going?

3. Cost Reduction Analysis

4. Future Challenges

5. Opportunities and Strategies

6. Sustainability

7. Conclusions

3

Company Snapshot

● Founded in 1997, in Changzhou, China

● $2,048 million 2011 net revenue2

● 22 offices worldwide

● Listed on the NYSE: TSL

● World’s largest PV manufacturing campus2

● Over 7.5 GW shipped since 20073

2012 SHIPMENTS – 1720 MW1

Est. 2013 SHIPMENTS – 2600 MW

1. Geographical breakdown, based on country record of sales, not end installation. Data as of Dec 31, 2012 2. As of February 23, 2012

3. As of January, 2014

114,500 301,819

831,901 845,136

1,857,698 2,047,902

1,296,655

1,690,000

2006 2007 2008 2009 2010 2011 2012 Est. 2013

Germany, 33.10%

Italy, 6.10%

Spain, 1.30%

Other Europe, 7.50%

China, 13%

USA, 25.50%

ROW, 13.50%

Sales 2012

REVENUES (000’s)






6. Sustainability

7. Conclusions

6

A Steady Growth …

Various sources: Paul Maycock’s PV News, Photon International, Navigant

0.1

1.0

10.0

100.0

1,000.0

10,000.0

100,000.0

1,000,000.0

1970 1980 1990 2000 2010 2020 2030

Ship

men

t (M

Wp

)

Year

World PV Cell Production (MWp)

Worldwide PV Production (MW)

Assuming 25% growth

30% growth

40% growth

TeraWatt/year by 2025 +/- 5?

7

0%

10%

20%

30%

40%

50%

60%

70%

80%

1970 1980 1990 2000 2010 2020 2030

An

nu

al G

row

th

Year

5-year Compound Annual Growth

5-year annual growth

Assuming 25% growth

30% growth

40% growth

Industry History

1996 Birth of

PV Industry

42 years

of

gestation

1996-2008 PV Infancy

2008 to ??? PV

Adolescence

What are the conditions required for PV to reach adulthood?

8

5 Conditions Required for PV to reach “adulthood”

1. Cash-flow Sustainability Profitable and generate enough cash for growth

2. Subsidization-free market PV must become a “no-brainer” (an obvious choice) even

without subsidies

3. Material Sustainability No material supply issue up to TW/year level

4. Energy Sustainability PV must have a positive impact on the reduction of fossil fuel

consumption

5. Grid-management Sustainability PV must become a “Voltage source”, as well as a “Power

source”, in a smart grid environment, with efficient storage

• Every manufactured product exhibits a reduction in cost following a learning curve model

q is cumulative production

“learning by doing”

• Progress Ratio

• Learning Rate

Learning Curve Model

b

tt

q

qCC

0

0

bPR 2

PRLR 1

y = 51x-0.311

0.1

1

10

100

1 10 100 1,000 10,000 100,000 1,000,000 10,000,000

Mo

du

le A

SP (

US$2011/W

)

Cumulative Production (MW)

1975-2012 Module price in 2011 $US$ 1975

1990

2000 2003 2008

2011

Cost at 30% Gross Margin

2017 to 2019

Will ASP keep going down? Will ASP follow a parallel line? Will ASP go up?

Learning Rate = 20%

1975-2012 Module Prices ($2011)

Various sources: Paul Maycock’s PV News, Photon International, Robert Johnson, Paula Mints, Navigant, Bloomberg New Energy Finance

Silicon Feedstock Supply

Silver ?






6. Sustainability

7. Conclusions

12

Price, Cost and Cumulative Production

• Between 2008 and 2012, the price of PV modules has plummeted. But what really happened to the cost of manufacturing?

Year ASP (2011US$)

Cumulative Production

(GW)

Cost from Learning Curve

Model

Real Cost

Begin. 2008 4.0 13.0 100% 100%

End 2012 0.73 150.3 46.7% ?

Δ=5 years -81.75% Ratio = 11.56 -53.3%

b

tt

q

qCC

0

0with b = -0.311

13

Manufacturing Cost of Multi-Crystalline Si PV Modules

Casting4%

Wafer17%

Cell23%Module

35%

Si 21%

2012 Multi-Si costCasting5%

Wafer15%

Cell9%

Module17%

Si 54%

2008 Multi-Si cost

-70.1%

11.70%

28.80% 32.60%

75.20%

61.60%

29.90%

51.60%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%

Cost Ratio 2012/2008

LC Model 46.7%

ASP 18.25%

14

Major Material Cost 2012 compared to 2008

55.60%

19.10%

28.80%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Crucible Graphite Total Casting


LC Model 46.7%

ASP 18.25%

Casting

15


31.00%

22.60%

14.50%

32.60%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

SiC PEG Steel Wire Total Wafering


LC Model 46.7%

ASP 18.25%

Wafering

16


105.80%

32.30% 26.90%

75.20%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Front Ag Back Ag Back Al Total Cell Process


LC Model 46.7%

ASP 18.25%

Cell Processing

17


89.24%

57.60% 47.71% 43.89% 43.47%

61.60%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00%

100.00%


LC Model 46.7%

ASP 18.25%

Module

18

Other Major Costs: 2012 compared to 2008

65.00%

35.00% 37.00%

133.30%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

Overall Electricity Cost

Cell Fab Electricity

(MWh/MW)

Water consumption (Cb. M/MW)

Labour Cost


LC Model 46.7%

ASP 18.25%






6. Sustainability

7. Conclusions

20

1. Increase EBITDA to be able to invest for growth

2. Energy Pay-Back Time (EPBT)

Cash Flow and Energy Sustainability

(%)EBITDAACB

ASPGrowth

yearsinEPBTGrowth

_

1

*ASP = Average Sales Price ACB = Average Cost to Build EPBT = Energy Pay-Back Time EBITDA = Earning Before Interest, Tax, Depreciation and Amortization

Material Sustainability: Silver Production and Usage

10

100

1,000

10,000

100,000

2000 2005 2010 2015 2020 2025 2030

Silv

er

An

nu

al P

rod

uct

ion

an

d U

sage

(t

on

s/Ye

ar)

Year

Worldwide Annual Silver Production and Usage by Applications

Silver usage for PV (tons)

Production (tons)

Industrial Applications (incl. PV)

Photography

Jewelry

Silverware

Coins & Medals

Other

Ref: Historical data from The Silver Institute, 2013

Estimation based on 25% PV annual growth

PV uses around 29 tons +/- 5 of Silver per GW

22

Yearly chart of silver price (2000 - 2013)

At US$45 per ounce, the cost of Silver in PV represents US$0.035 to 0.049/W

Historical Price of Silver






6. Sustainability

7. Conclusions

24

Customer decisions will now be based on two main factors: 1. Product Reliability

2. Levelized Cost of Electricity (LCOE)

Impacted by:

a) Cost of installation, Interest rate, Operation and Maintenance, …

b) Energy Production Rate, Energy Rating kWh/(kWh/m2) or Energy efficiency

Temperature coefficients, Low-Irradiance efficiency, etc.

c) Annual performance degradation and hardware lifetime

Decision Factors: Quality and LCOE

1. Improve Product Quality 2. Innovations to reduce LCOE

INDUSTRY STRATEGY MOVING FORWARD

TOTAL COST

PRODUCED ENERGY

25

LCOE is the only Value for the customer

High Energy Production

Rate

High Reliability

Low Cost of Installation

O&M

Low LCOE and High Value for

Customers

TOTAL COST

PRODUCED ENERGY

LCOE = Levelized Cost Of Electricity

26

Cost of overall PV System

22%

9%

28%

34%

7%

PV System Cost (US$/W)

PV Modules

Inverter

Installation Labor

Cables, Racking,

DC, AC breakers, interconnection cost

PV Modules + Inverter ~ 1/3 of total cost Except for DC, AC breakers and interconnection cost, the rest of BOS cost is proportional to area, and is highly dependent on efficiency.

27

Levelized Cost Of Electricity (LCOE)

• Target of US$0.06/kWh places PV in the same league as bulk electricity production by gas-fired power plants

• The easiest way to reach this target is by improving the efficiency while we keep reducing manufacturing cost

• Even temporary cost increase combined with efficiency improvement reduces LCOE

Now

28

Levelized Cost of Electricity - What is the cost of reliability?

7

8

9

10

11

12

13

14

15

16

0.0% 0.5% 1.0% 1.5% 2.0%

LCO

E (¢

/kW

h)

Performance Degradation (%/Year)

LCOE - Phoenix, AZ - Total Installed cost US$3.46/W

5 years

10 years

15 years

20 years

25 years

30 years

29

How to combine High-Reliability and Low LCOE?

• Reliability is expensive. PV companies cannot offer the highest quality module at the lowest cost for every part of the world.

• Cost reduction may have an impact on reliability or quality.

• But the PV industry can: Offer a highly reliable product that is adapted to a

particular climate,

Design a cell that has a better energy efficiency at a typical irradiance,

Optimize reliability and the energy production rate for each typical climate,

Focus on reduction of LCOE instead of $/Watt

Educate

30

Irradiance profile for 4 different climates

• Total Irradiation – Temperate (Berlin) 1130 kWh/m2

– Desert (Alice Springs) 2420 kWh/m2

– Tropical (Singapore) 1625 kWh/m2

– Mountain (Lhasa ) 2370 kWh/m2

31

Definition of Particular Climates

50th Percentile Irradiance (W/m2)

Rel

ativ

e H

um

idit

y R

H%

Desert Regions (Sunny & Dry)

Tropical Regions (Hot & Humid,

Sunny in winter, cloudy in summer)

Temperate Regions (Cloudy & Cold)

Mountain Regions (Sunny & Cold, High UV, Snow,

Freeze)

Cold Hot

32

Smart PV: a way to reduce LCOE with Power Optimizer

Active Energy Management Enhanced Commissioning Predictive Failure Analysis Panel-Level Monitoring

Power Optimization MPPT per Panel 3.2% more energy on day 1 Mitigate system aging Improved Roof Utilization

Module Integrated Smart-Curve Technology Located within J-box

Safety Module level off-switch Fire safety Arc-fault detection Theft prevention

Up to 20% Additional Energy

TOTAL COST

PRODUCED ENERGY

33

20.54% Mono-Si Solar cell in Pilot Production

Higher Efficiency

Less Area

Less installation cost

Less O&M cost

Lower Temperature coefficient

Lower LCOE

34

Double Glass : The Most Durable Module

More Reliable Performance • No PID • Less degradation after Thermal Cycling, Humidity Freeze, Damp Heat

More Durable • No “snail tracks” • No delamination or degradation of backsheet • No yellowing

Faster, Lower-cost of Installation • Frameless modules do not require grounding, leading to faster installation and lower component and labor costs • Less soiling

Sleek, Clean Appearance - Frameless design for more seamless array appearance

Greater Inventory Flexibility - Certified to 1000V for both UL and IEC

Enhanced Safety - UL and IEC Fire Class A certified

Electrical and Mechanical Characteristics •PMAX 240-255W •15.1% efficiency •60 cells •IEC1000V, UL1000V Dual Rated






6. Sustainability

7. Conclusions

8018

4543 3529 2982 2870

0

2000

4000

6000

8000

10000

2008 2009 2010 2011 2012

Water consumption (m3/MW)

Energy Sustainability

801

569

360 282 277

0

200

400

600

800

1000

2008 2009 2010 2011 2012

Electricity Consumption (MWh/MW)

320.1

242.2 239.4

0

100

200

300

400

2010 2011 2012

Carbon emission (Ton/MW)

#1 in SVTC Solar Scorecard in 2012 and 2013 for

Responsible Manufacturing

37

Low Carbon Footprint and Short Energy Pay-back Time

• The British Standards Institution (BSI) verified Trina's low carbon footprint of 781.8kg per KW produced for the entire module manufacturing process from raw material acquisition to packaging as environmentally friendly according to PAS 2050 and ISO 14067 standards

• Over 25 years of operation, that is less than 19g of CO2 per kWh (Assuming 1600 kWh/kW/year in sunny area)

1000 900

580

85 25 21 19 15 0

200 400 600 800

1000 1200

http://www.bsigroup.com/






6. Sustainability

7. Conclusions

39

Conclusions

1. The “Great Price Decline” of PV is over. Recovery will take time.

2. Between 2008 and 2012, ASP has dropped by 81.75%, while manufacturing cost has dropped by 70.1%, mostly driven by Si price. Non-Si Cost has dropped by 48.4% only. Learning Curve Model predicted a Cost reduction by 53.3%.

3. Major Cost reductions have been achieved in some areas: Silicon feedstock, casting, wafering, Back-side electrode (Al and Ag)

4. Minor Cost reductions have been achieved in: Cell Processing and Module Assembly

5. Cost increases have been observed in: Labour and Front Ag

40

Conclusions (2)

6. Challenges for the PV Industry: Regain Profitability and Increase Gross Margin

Sustainable Growth

Enough Gross Margin to grow

Low EPBT

Develop Ag-free cell process to avoid the next Supply Constrained Market

7. Opportunities Focus on Reliability and LCOE

Develop highly reliable products with high Energy performance for particular climates and particular regions

8. Reducing the Energy Payback Time and Carbon footprint are key to a sustainable PV industry

www.trinasolar.com

CHINA

SINGAPORE

JAPAN

CANADA

CHILE

U.S.A.

U.K.

GERMANY

FRANCE

ITALY

SPAIN SWITZERLAND

AUSTRALIA

Cost analysis of current PV production and strategy for ... · Pierre Verlinden, Zhang YingBin and...

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