The U.S. solar energy industry continued its double-digit annual growth rate in 2006. Fueling this growth were record high energy prices, the impact of state Renewable Portfolio Standards, increased focus on global warming, and the Energy Policy Act of 2005 (EPAct) which took effect in January 2006, providing tax credits for solar installations.
As demand for solar energy continued to grow, the solar energy industry was shadowed by the steep increases in the cost of raw materials like copper and high-grade silicon. Also putting upward cost pressure on solar energy equipment was the shortage of trained workers, as several new firms began competing with major manufacturers for the same work force. Also during 2006, solar companies from China and Germany exhibited a strong interest in entering the U.S. solar energy market.
Solar Thermal Collectors
Total solar collector shipments surged 29 percent in 2006 to 20.7 million square feet. Domestic shipments of solar thermal collectors rose more than 33 percent to 19.5 million square feet during the year. Forty-four companies were actively involved in shipping solar thermal collectors, an increase of 76 percent from 2005.
Low-temperature solar collectors continued to dominate the market in 2006, contributing 75 percent of total shipments. Medium-temperature collectors were responsible for approximately 6.5 percent of total shipments, increasing its market share substantially over 2005. But the largest gain in market share occurred in high-temperature collectors, which garnered an 18.5 percent share in 2006 after decades of negligible shipments.
The rapid growth included the collectors shipped to the Nevada Solar One solar thermal plant, whose 64 megawatts (MW) capacity makes it the largest solar plant to be built in the world in the last 16 years. The Nevada Solar One plant covers 400 acres in the El Dorado Valley (near Las Vegas, Nevada) and was built directly adjacent to the existing 480 MW El Dorado Energy combined cycle gas power plant. It has 760 parabolic cylinder concentrators with almost 219,000 mirrors that concentrate the sun’s rays onto over 18,000 receiver tubes to enable heat transfer from the sun’s rays to ultimately generate up to 134 million kilowatthours (Kwh) of electricity per year, enough to power 15,000 households annually.
In 2006, 78 percent of all collectors were produced in five states: New Jersey, California, Nevada, Florida, and Tennessee, with 53 percent of the total shipped from New Jersey and California alone. About 20 percent of collectors shipped were imported, mostly from Israel.
More than 73 percent of all collectors were shipped to the top five destinations: Florida, California, Nevada, Arizona, and New York. Florida and California accounted for nearly 46 percent of total shipments.
During 2005, 19.5 million square feet of domestic solar thermal shipments were sent to all 50 States within the U.S., plus the District of Columbia, Puerto Rico, and the Virgin Islands. The export market accounted for 6 percent of total shipments and was dominated by sales to Canada (42 percent of exports), Mexico (17 percent), and France (12 percent).
47% of total shipments were sent directly to wholesale distributors, more than 26 percent to retail distributors, 3 percent to exporters, 4 percent to installers, and about 20 percent to other end users. This closely mirrors the end-use distribution of shipments in 2005.
Total shipment revenue increased to $121.1 million in 2006, up sharply from $45.8 million in 2005. Average price per square foot for low-temperature collectors decreased slightly to $1.95 from $2.00 in 2005. The average price for medium- and high-temperature collectors also decreased from $18.77 to $17.47 per square foot.
However, the overall average price for total shipments increased more than 100 percent, from $2.86 per square foot in 2005 to $5.84 per square foot in 2006. The most significant cause of the rise was the surge in high-temperature collectors to the Nevada Solar One project. Shipments of high-temperature collectors surged from 115,000 square feet in 2005 to 3,852,000 in 2006. These collectors are designed for limited, specialized applications. As a result, their average prices are much higher and subject to wide fluctuations.
The residential sector continues to be the prime market for solar thermal collectors, totaling 15.1 million square feet, approximately 73 percent of the total shipments. This market sector primarily involves the use of low-temperature solar collectors for heating swimming pools and medium-temperature collectors for water heating in residential buildings. In 2006, collectors shipped to the residential sector increased 3 percent, compared to 2005.
A significant shift occurred between the commercial and utility sectors due to the Nevada Solar One plant. As a result, the utility sector became the second-largest market for solar thermal collectors in 2006, with 18.5 percent of total shipments. There is growing interest for utility-scale solar thermal power plants in the West (beyond the Nevada Solar One plant), where power supply is tight and prices are high.
There are other notable changes between 2005 and 2006 solar thermal collector shipments by end use sector. Although the pool heating sector maintains its position as the largest end use sector for solar thermal collectors, its 2006 market share declined to 74 percent from 94 percent of total shipment in 2005. The quantity of pool heating shipments remained relatively unchanged during 2006 at 15 million square feet.
Despite the increase in shipments for the hot water end use sector to 1.1 million square feet in 2006 from 0.6 million square feet in 2005, the Nevada Solar One project resulted in the electricity generation sector replacing the hot water sector as the second-largest end use for solar thermal collectors shipped in 2006. Shipments to this end use sector totaled 3.8 million square feet, nearly 19 percent of total shipments in 2006.
In 2006, 29 companies reported shipping 79,903 complete solar thermal collector systems, a 56 percent shipment increase compared with 2005. A completed system is a unit with a collector and all the necessary functional components, except for installation materials. It includes thermosiphon systems, integral collector storage systems, packaged systems, and system kits. This increase coincides with the increase in revenue from complete systems, slightly over 53 percent. Total revenue for the systems shipped in 2006 was $31.3 million compared with $20.4 million in 2005.
In 2006, there were 44 companies active in solar-related activities (manufacturing, importing, and/or exporting), a significant increase from the 25 operating in 2005. Of the 44 active companies shipping solar thermal collectors, 5 are planning to introduce new low-temperature collectors, 14 are planning new medium-temperature collectors, and 5 expect to introduce new high-temperature collectors in 2007.
In 2006, the industry remained highly concentrated, with the 5 largest companies accounting for 89 percent of total shipments. However, this percentage of the concentration was the lowest since 1998. Employment tripled during the year 2006, in part due to the construction of the Nevada Solar One project, the first concentrated solar power facility built in the U.S. in more than 15 years. A total of 37 companies were involved in the design of collectors or systems, 19 were involved in prototype collector development, and 19 were active in prototype system development. Twenty-seven companies had 90 percent or more of their total company-wide revenues in solar collectors, seven companies had 50 to 89 percent, four companies had 10 to 49 percent, and six companies had less than 10 percent.
Photovoltaic Cells and Modules
Photovoltaic (PV) cell and module domestic shipments continued their rapid expansion in 2006, in part caused by the new Federal incentive providing tax credits to homes and businesses that install solar systems. The tax credit went into effect in January 2006 as part of the Energy Policy Act of 2005.
The Federal tax credit will reduce taxes for qualifying taxpayers by the full amount of the per Kwh credit and is not based on income. Also affecting PV cell and module domestic shipments were the same factors that impacted growth in solar thermal panel shipments.
During 2006, domestic shipments reached 206,511 peak kilowatts, nearly 54 percent above the 2005 domestic shipments of 134,465 peak kilowatts.
Total shipments of PV cells and modules reached a new high of 337,268 peak kilowatts, nearly a 50 percent increase from 226,916 peak kilowatts in 2005.
Module shipments increased 56 percent to 320,208 peak kilowatts in 2006, while cell shipments decreased to 17,060 peak kilowatts from 21,920 peak kilowatts.
The number of active companies shipping PV cells and modules jumped to 41 in 2006 from 29 in 2005, an increase of 41 percent and the largest by far in a decade. This may be a sign of confidence from investors as well as the solar energy industry itself about the future of the solar energy market. This outlook is supported by the Renewable Portfolio Standard (RPS) policies of some western states (e.g., Arizona) requiring that a certain portion of the RPS be solar-based.
Solar energy companies raced to import PV modules/cells to meet soaring demand. Between 2005 and 2006, imports surged from 90,981 to 173,977 peak kilowatts. Exports also rose sharply, from 92,451 to 130,757 peak kilowatts.
In a dramatic market shift, installers replaced wholesale distributors as the largest business category for PV modules/cells shipped in 2006. Shipments to installers rose approximately 118 percent to 146,948 peak kilowatts, and represented 44 percent of total shipments in 2006 versus 30 percent in 2005. In contrast, shipments to the second-largest category, wholesale distributors, decreased 3 percent to 126,101 peak kilowatts in 2006 from 130,086 peak kilowatts in 2005.
While demand for solar continued to grow in 2006, the supply of high-grade silicon used to make PV cells continued to impact the solar industry. Two types of solar companies are expected to perform well in this market. First are the silicon-based solar manufacturing companies that have secured stable silicon supplies. Second are the companies that focused on thin-film solar technology (thin film solar modules use either a very thin coating of silicon or other alternative materials with no silicon).
Not surprisingly, thin-film PV cell and module shipments experienced the greatest percentage gain between 2005 and 2006, nearly doubling. Still, conventional crystalline silicon cells and modules shipments continued to dominate all PV technologies with 233,518 peak kilowatts shipped in 2006.
However, its market share continued to decline to 69 percent from 76 percent in 2005 and over 95 percent a decade ago. Within this category, single-crystal shipments rebounded to 85,627 peak kilowatts, or slightly more than 25 percent of total shipments in 2006, compared to 71,901 peak kilowatts in 2005. Cast and ribbon silicon shipments, the predominant PV technology, rose sharply to 147,892 peak kilowatts in 2005, or nearly 44 percent of total shipments, compared to 101,065 peak kilowatts in 2005.
Today, thin-film PV modules that use materials such as amorphous silicon (a-Si); cadmium telluride (CdTe); or copper indium gallium selenide (CIGS) are attracting much attention and are growing at an impressive rate, in part due to the shortage of silicon and high manufacturing costs associated with crystalline silicon cells. With the help of lower manufacturing costs and its versatility, thin film technology has ignited the competition with conventional crystalline silicon technology over the past couple of years.
However, thin film modules are typically much less efficient than crystalline silicon modules with 7 to 10 percent efficiency compared to silicon’s average 15 percent efficiency.
While there are a number of companies that are producing thin-film PV cells, the majority of these companies are small and/or startup. The thin-film shipment market share has steadily increased, from 12 percent of total shipments in 2004 to 24 percent in 2005 to 30 percent of total shipments in 2006.
Total revenue from photovoltaic module and cell shipments was $1.16 billion in 2006, nearly a 65-percent increase over the 2005 revenue of $0.70 billion in 2005 (Table 2.22).[2] The average price for PV modules (dollars per peak watt) increased nearly 10 percent, from $3.19 in 2005 to $3.50 in 2006. For photovoltaic cells, the average price decreased 6 percent, from $2.17 in 2005 to $2.03 in 2006.
The commercial sector was the largest market for PV modules and cells in 2006, followed by the residential and industrial sectors. Commercial sector shipments totaled 180,852 peak kilowatts and jumped at a rate of 102 percent from 2005 to 2006. The residential sector totaled 95,815 peak kilowatts in 2006, about 28 percent over the previous year. Electricity generation, which consists of both grid-interactive (those connected to the electric power grid)[3] and remote applications (those not connected), continues to be the predominant end use for PV cells and modules. In 2006, PV shipments to the electric generation market was about 86 percent of the total shipments, and was 51 percent more than in 2005. Shipments for other uses and into non-traditional markets also rose substantially in 2006.
Export shipments totaled 130,757 peak kilowatts in 2006, an increase of 41 percent from the 2005 level. The export market previously dominated by crystalline silicon modules/cells has been surpassed by thin-film modules/cells. Thin-film exports increased sharply to 69,718 peak kilowatts in 2006 from 32,000 peak kilowatts in 2005. The export market split was about 47 percent crystalline silicon and 53 percent thin-film modules/cells.
Shipments to Europe represented 83.5 percent of total U.S. exports, with Germany remaining the predominant importer of cells and modules, taking 80,583 peak kilowatts, or 62 percent of U.S. export shipments in 2006. Spain has replaced the Netherlands as the second-largest recipient of U.S. PV cells and modules, accounting for 15,241 peak kilowatts, or close to 12 percent of U.S. export shipments in 2006. Strong government financial support programs for renewable energy in these countries, especially Germany, are largely responsible for increased U.S. exports.
Shipments of complete PV systems increased nearly 81 percent from 37,115 systems in 2005 to 67,172 systems in 2005. The increase was heavily influenced by the innovative flexible, foldable, portable thin-film system. The total revenue of completed systems surged to $192.9 million, and total peak kilowatts jumped from 6,583 in 2005 to 28,099 in 2005.
Employment in the PV-related activities totaled 4,028 person-years in 2006, an increase of about 26 percent from 2005. However, the average employment per company was 98 person-years in 2006, compared with 110 person-years in 2005, as a number of new companies reported shipping PV cells and modules during 2006.
The PV industry is actively promoting new products. Fourteen companies expect to introduce new crystalline silicon products in 2007, and 6 companies plan to introduce new thin-film products to the industry during 2007. Four companies plan to produce new concentrator photovoltaic (CPV) products, three more than the previous year. Many companies engaged in the manufacture and/or importation of PV modules and cells reported that they are also involved in other photovoltaic-related activities. Of the 41 total companies, 16 companies were involved in cell manufacturing, 26 companies in module or systems design, and 18 were active in developing module prototypes.
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